In a deal that is sure to rock the independent broker dealer world and maybe the entire industry, RCS Capital bought Cetera Financial Group for $1.15 billion. RCS scooped up First Allied, Investors Capital and Summit Financial last year and JP Turner this year. All told, the combined group will have 9,000 reps, $1.65 billion revenue with $145 billion in AUM from Cetera, making it the third- or fourth-largest IBD.
RSC’s CEO Nicholas Schorsch compared the new BD (free registration required) to Merrill Lynch or Raymond James. Schorsch is expected to use the new distribution to sell RCS’ non-traded REITs, a market that it dominates. One pundit likened the purchase to Nabisco buying Whole Foods to sell more Oreos.
In 2012, Schorsch’s real estate company raised $2.8 billion in equity and $8.3 billion last year, far outpacing the competition.
Cetera was owned by Lightyear, a PE firm run by Donald Marron, former head of UBS. The firm was created from the old ING and Genworth BDs, and recently bought Metlife’s Tower Square and Walnut Street. The purchase of Cetera was listed as the second-biggest IBD deal of the decade, according to Investment News.
What does the acquisition mean for retirement plan advisors? Omitted from Investment News' list of the biggest deals was the purchase of NRP by LPL, the largest IBD. That deal, which officially closed at the end of last year, could top $60 million including the initial payment. Based on their stellar recruiting, Bill Chetney and his group did very well on their earn-out. More importantly, though, LPL’s stock is riding high, partly fueled by successful recruiting of plan advisors. With Chetney re-upping as president of LPL’s retirement group, that trend should continue.
The new IBD formed by Schorsch may see retirement advisors as an important way not only to grow AUM and revenue, but also to distribute its non-traded REITs as more DC plans look to include alternative investments. In fact, when one of First Allied’s biggest retirement groups was about to bolt last year for lack of support, Schorsch personally reached out and convinced them to stay.
With access to capital, the ability to save money through self clearing and leverage with product manufacturers, look for the new Cetera to make waves in the IBD and retirement plan markets.
