The way Nicholas Schorsch sees it, the sweet spot for financial advice is the mass-affluent market.
With approximately 30 million households holding $8 trillion in assets, the segment is ripe for the taking, says Schorsch, executive chairman of RCS Capital, whose recent spate of acquisitions have brought him considerable attention. "We're directly focused on retail," he says. "The mass affluent has no access to the endowment model, which is what has performed the best since the financial crisis."
Translation: The industry isn't offering enough service to upper-middle-class consumers - and he plans to fill the gap. For RCS advisors - whose number is set to surge after a spate of deal-making activity - the market opportunity centers on households with $300,000 to $3 million in investable assets, Schorsch told the editors of Financial Planning.
RCS has been on a buying spree, adding a string of independent broker-dealers. Earlier this year, RCS agreed to buy industry heavyweight Cetera Financial Group for $1.15 billion, as well as much smaller J.P. Turner; last year, it bought First Allied, Investors Capital and Summit Financial Services Group.
Still on his shopping list: an investment research firm, as well as RIAs, family offices and perhaps more independent B-Ds, Schorsch says.
It's an expensive set of bets - but if it pays off, it won't be the first time Schorsch has seized what he sees as a compelling market opportunity. He entered the business world at age 23 by selling his family's metals business for $50 million, then made a fortune in commercial real estate and created American Realty Capital, the country's largest sponsor of nontraded REITs.
RCS' main focus this year will be organic growth. "We want advisors to double their business," Schorsch says.
He argues that a rising economy, a wider range of products and improved productivity - resulting from newfound scale, smart branding and experienced leadership - will help advisors hit that goal. "Scale matters," Schorsch says, adding that as RCS grows, "costs for capital needs, products and clearing are much less. We'll also be able to provide advisors with more research, education and technical support."
The company plans to integrate back-office functions but keep its brands intact, Schorsch says. Senior management at the various units will also remain the same, he adds, although Cetera CEO Valerie Brown will also direct RCS' retail strategy, working closely with Adam Antoniades, CEO of First Allied.
Schorsch says leadership continuity is key to RCS retaining top advisors from its various IBD units. And indeed, the company's ability to attract and retain productive advisors will be critical to organic growth. Schorsch says RCS won't get into bidding wars, but expects the company's diversified product offering to attract top talent: "There's a lot of profit yet to be had."
Charles Paikert is a senior editor of Financial Planning.