Cetera Financial Group, one of the financial services industry's leading independent broker-dealer networks, was a bright spot in an otherwise disappointing first quarter for its parent, RCS Capital.
Cetera's assets under management climbed to $46 billion for the first quarter, up 32% from $35 billion for the same period last year. Adjusted EBITDA soared 50% to $36 million and revenue rose 8% to $504 million.
Cetera reported a 97% retention rate and a total of 9,539 independent advisors, but net new advisory assets slipped 37% to $724 million.
RCS Chief Executive Michael Weil cited Cetera's "solid results," in a statement, singling out the IBD's recruitment and retention record and "incremental earnings growth."
RCS NUMBERS PLUNGE
Overall, RCS did not fare as well, reporting a net loss of $13.5 million, an 82% plunge from the same period last year and an 11% fall in operating revenue to $602 million. Adjusted net income dropped 54% to $17 million and adjusted EBITDA fell 56% to $28 million.
Earnings for RCS' wholesale distribution, investment banking and investment management divisions were all disappointing. All three divisions reported revenue losses, led by a 61% fall in investment banking, 50% for wholesale distribution and 5% for investment management.
'UNPRECEDENTED RECRUITING ENVIRONMENT'
Cetera closed the acquisitions of VSR Group and Girard Securities, adding 478 advisors and $21 billion of assets under administration.
In a conference call with analysts, Cetera CEO Larry Roth cited an "unprecedented recruiting environment" in the advisory industry and expressed confidence that Cetera's value proposition was "resonating" with advisors producing between $250,00 and $750,000 a year.
Not only are Cetera's recruits coming from smaller B-Ds, Roth added, but a "very significant number" are also exiting larger firms owned by private equity or insurance companies who, he asserted, are not investing "too heavily in the business."
In a statement, Roth highlighted the IBD's technology initiatives, including Pentameter, a practice management and business consulting process tool that he said "provides advisors with an innovative, centralized reporting dashboard enabling them to effectively assess the strengths and weaknesses of their practices, set goals and develop business plans."
Weil also weighed in on the fiduciary standard controversy.
"We need to work with the Department of Labor to adopt a rule that allows retail investors and their financial advisors access to all of the investment products and tools to reach their financial goals," he said. "We look forward to working with the Department of Labor and others in the industry during the comment period and throughout the entire process."
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