RCS, which bought Cetera Financial Group -- one of the advisory industry's largest networks of independent broker-dealers -- at the beginning of last year as part of a series of IBD acquisitions, reported a $122.6 million loss for the fourth quarter ended Dec. 31. That's an almost 100-fold increase from the loss of $1.4 million in the same period last year.
Net losses for the year rose to $146 million from a full-year loss of $25 million for 2013.
Revenue for the fourth quarter plummeted 27% to $504 million -- disappointing analysts, who had forecast revenue of $605 million. (Analysts also expected RCS to announce earnings per share of $0.22 for the quarter, but got a loss of $1.33 instead.)
RCS's outlook for 2015, meanwhile, did not offer much encouragement. In its guidance for the year ahead, RCS forecast adjusted net income per share, excluding one-time items, of $1.43 to $1.59 -- below the $1.63 a share projected in a Thomson Reuters poll of analysts.
The company did report a couple of bright spots, however -- many of them tied to its IBD business.
Retail advice assets rose 6% to $214 billion over the year, and retail advice revenue jumped 15% to $1.95 billion. That accounted for roughly two-thirds of RCS's total full-year revenue of almost $2.8 billion, a 7% increase.
The advisor recruitment and retention picture was more complicated. Despite a stream of negative publicity and some grumbling in the ranks, the company said its retention rate for advisors was 97%. Yet while the company said the number of advisors in its retail operations edged up 1% year over year to more than 9,000, it also reported the departure of 116 "net attrited" advisors in the fourth quarter.
Cetera CEO Larry Roth said in a statement that the IBD made structural changes to the organization, including establishing a group of shared service and business development and marketing programs "designed to help our advisors build growing and increasingly profitable businesses."
DISTRIBUTION REVENUE FALLS
Wholesale distribution revenue for the fourth quarter at RCS was hit hard by other IBDs' suspension of sales of nontraded REITs sponsored by both RCS and other companies associated with Nicholas Schorsch -- who resigned from his roles at RCS and American Realty Capital in December.
Distribution revenue fell by half for the fourth quarter, plummeting to $92 million on $946 million in total direct investment sales. That's down from $186.6 million on $2.1 billion in total direct investment sales for the year-ago quarter.
Despite the problems with nontraded REITs, RCS's wholesale distribution business finished the year with nearly 1,600 active selling agreements, up from 1,151 from the prior year. The company was also able to raise nearly $10 billion in total equity for the year.
"The long-term fundamentals of our business have never been stronger, while demand remains robust for both independent financial advice and the broad array of investment solutions we distribute," RCS chief executive officer Michael Weil said in a statement. "The company is well-positioned to capitalize on favorable economic trends in the U.S. which should drive our growth for many years.
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