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Cetera CEO open to ‘transformative deals’ after recruiting 800 advisors

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Following a year of major changes, Cetera Financial Group is open to more “transformative deals” in 2019, its CEO says. The network struck the largest M&A deal in the independent broker-dealer space in 2018.

The six-firm, 7,700-advisor IBD network also notched record recruiting in terms of gross dealer concessions in the fourth quarter following the purchase of a majority stake in Cetera by private equity firm GenStar Capital for a reported $1.7 billion, according to CEO Robert “RJ” Moore.

Neither Moore’s firm nor Lightyear Capital-backed Advisor Group have confirmed reports of discussions regarding a potential sale of a majority ownership stake in the four firm, 5,000-advisor IBD network. However, Cetera is considering deals for smaller IBDs, tuck-in acquisitions and larger firms, Moore says.

“We have access to capital and we have access to capabilities that essentially give us the entry point to whatever type of transaction that we would find beneficial to our company,” says Moore. “And we can do that at scale.”

Advisor Group’s private equity backer helped it make deals last year to acquire two firms and act as the preferred affiliation partner for a third one, boosting the firm’s headcount by approximately 2,500 advisors. Lightyear has retained Barclays to advise on a potential sale, three sources told PE Hub last week.

While Advisor Group issued a statement saying it wouldn’t respond to “continued speculation,” the company says Barclays has been its advisor on a debt offering since August. Advisor Group CEO Jamie Price denied an earlier report in Financial Advisor magazine about “serious talks” with Genstar.

“We are not in discussions with Genstar or Cetera,” Price said. “It is well known that private equity firms are interested in this industry. Given the success and momentum of our company, it is not surprising that this would lead to speculation and rumors.”

Firms’ head counts show how they’re responding to a challenging time in which experts predict the number of advisors to fall in coming years.
September 17

Representatives for Barclays declined to comment, and Moore declined to discuss any specifics about potential acquisitions.

Moore and Mimi Bock, president of Cetera Advisors and First Allied Securities, cite a half dozen new committees for advisors plus an engagement council meeting regularly with the network’s board as both unique in the industry and a product of the Genstar deal.

The recently-completed year brought several changes to Cetera, including the sale of its majority stake about two years after its parent firm came out of bankruptcy protection. The network also divided its six IBDs into traditional and specialty channels, and hired Bock from LPL Financial to lead two of its firms.

In addition to the councils aimed at dialogue between advisors and management, the Genstar deal has led to major technology spending, an equity participation plan for advisors and capital investments for recruiting and other growth plans at individual practices, Bock says.

“We actually want our partnership to be aligned where our interests are the advisors’ interest and the advisors’ interests are ours,” Bock says. “These are not million dollar investments, but they make a huge difference to an advisor who is looking for some cash flow to grow.”

Cetera is also teaming up with its largest offices of supervisory jurisdiction — or “regions” in the company’s parlance — to carry out marketing, training and recruiting programs. Pete Bush’s Horizon Financial Group, Ron Carson’s companies and Dan May’s AdvisorNet Financial are all participating.

“It is so exciting to see how much interest advisors are showing in our organization because of the help Cetera's business development team is delivering,” May said in a statement. “I honestly don't think we've ever been this busy talking to new advisors.”

The network recruited more than 800 advisors with $5.3 billion in client assets in 2018 under another ex-LPL veteran, Michael Murray, who joined Cetera last May as its head of business development. Moore declines to state the privately-held firm’s net recruiting metrics or any other specific totals.

In 2017, the company added 784 new advisors with client assets of $15 billion, a higher figure which Moore attributes to Carson’s transition. Cetera’s largest IBD, Cetera Advisor Networks, and bank and credit union-focused Cetera Financial Institutions grew the most through recruiting in 2018, he says.

The two firms, along with Cetera Financial Specialists, also tapped between 150 and 200 new entrants to wealth management through the company’s training programs last year. The Genstar deal is “being validated by the movement of advisors towards us,” according to Moore.

“We maintained our independence, we maintained our privacy and we picked up a partner with very strong access to capital,” he says. “The fact that we still have different communities and many firms is a compelling distinction for us.”

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