Cetera's Super OSJ Growth Continues Attracting Advisors

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Add another notch to the super-OSJ belt.

In the most recent example of the growing importance of the large regional advisory hubs known as offices of supervisory jurisdiction, Transcendent Advisor Networks, a Cetera Advisor Networks super-OSJ, has signed on Gough Financial, a $300 million Wichita, Kan., advisory firm.

Transcendent's origins also underscore the surging popularity of super-OSJs.

Doug Propeck, a 21 year veteran of Axa Advisors left his job as the company's Kansas City branch manager last year to head Transcendent as a Cetera "regional director" firm with an eye to spinning it off as an independent super-OSJ in three to five years.

"I saw a great opportunity," Propeck says. "Super-OSJs are offering advisors who are in transition the feel of a traditional firm that can work closely with them and give them a great platform."

Transcendent is working with a dozen advisors now and the Overland Park, Kan., firm hopes to nearly triple that number by next summer, recruiting in its home state, Missouri, Illinois, Nebraska, Iowa, Oklahoma and Arkansas, Propeck says.


Grassroots demand is helping to drive the super-OSJ phenomenon, according to Aite Group wealth management analyst Bill Butterfield.

"Advisory firms want to go to the next level beyond mere compliance, supervision and oversight, Butterfield says.

"Not every advisor coming out of a captive channel wants to start [a] business from scratch. Super-OSJs can provide an enhanced level of local support and be a bridge between the broker-dealer and advisor. And there's a level of intimacy where you're not just a rep number at the national BD; you can call into office where people know you."

The formula has been working for Cetera Advisor Networks, the division of Cetera Financial Group that specializes in serving super-OSJ firms.

With 38 super-OSJs on board who manage $78 billion in assets and work with approximately 2,500 advisors, Cetera Advisor Networks has nearly doubled its revenues to about $600 million in two years, according to Douglas King, the division's president and CEO.

"Advisors who want to be independent don't necessarily want to go it alone," King notes. "They want to join super-OSJs and bounce ideas off other advisors, share best practices and participate in study groups. We can give the OSJs a dedicated resource center, additional training and a state of the art advisory platform and operational support."


Cetera's success, however, has been tempered by the travails of its parent company, RCS Capital.

Last year saw the resignation of RCS chairman Nicholas Schorsch, who also had to contend with an accounting scandal at one of his other firms, American Realty Capital Properties. This year RCS has seen a plunge in second quarter earnings, a search for a new CEO following an executive shake-up, a sell-off of the company's wholesale division and Cetera CEO Larry Roth's resignation from the board of directors.

Not surprisingly, RCS's stock has been in a tailspin this summer, hovering around all-time lows of under $2 a share.

Because Cetera advisors are branded locally, the turmoil surrounding RCS has had "little or no impact" on clients, King maintains. RCS's troubles have been "distracting," he concedes, especially concerns about the stock price.

Advisors were curious about Roth's resignation form the board, King says, but after hearing him address the issue they were "very comfortable with the decision."

Propeck says he remains confident that Cetera's prospects are strong. "It's very well capitalized and making a profit," he says. "Focusing attention on this side of the business is good for us. I think the Street is misinterpreting the opportunity that we have."


While Cetera advisors and super-OSJs haven't been thrilled about RCS, they're not bailing out either, Butterfield says.

"They wish [the bad news] wasn't happening, but I haven't heard anyone say, 'Boy, I'm really worried about RCS, I'm going to look somewhere else,'" he says. "I think the advisors are more concerned about what they don't know right now, but they're satisfied with the service level they're getting and I'm not aware of any changes coming from the parent company. And advisors and super-OSJs don't make the decision to switch BDs lightly."

To be sure, it's not for a lack of offers from other broker-dealers.

"Recruiting is fierce," Butterfield says. "There's also plenty of competition among super-OSJs themselves for smaller advisors, sometimes even for advisors working with the same broker-dealer. Super-OSJs aren't all cookie-cutter, and they're going to need to be strategic and serve different markets to survive and grow."

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