Cetera Charts Independent Path Following Completion of RCS Bankruptcy
Following the conclusion of the RCS bankruptcy earlier this week, Cetera Financial Group, a network of independent broker-dealer firms, has completed its strategic transformation process to become an independent, privately held organization with no ties to RCS founder and former chairman Nicholas Schorsch. Going forward, Cetera will be the only operating business under its parent company.
“We completed our transformation process on a very fast track and in strong shape, all while retaining the loyalty of the overwhelming majority of the advisors and institutions we serve,” said Larry Roth, chief executive officer of Cetera. “Today, we have a clear go-forward ownership structure, a healthy balance sheet, significant additional capital to continue investing in advisor support resources and a battle-tested management team energized to help our advisors and institutions grow.”
The key highlights of Cetera’s successful completion of its transformation process include:
• Infusion by new equity owners of additional $150 million in capital for continued investments in technology, advisor growth and practice management service enhancements.
• Effective immediately, Robert J. Moore will serve as chairman of the board of Cetera’s reorganized parent company.
• Larry Roth will continue to lead Cetera as its CEO and will serve as a board member.
Commenting on Moore’s appointment as chairman, Roth said, “Having known Robert personally and professionally for many years, I’m confident we couldn’t have chosen a better chairman. We have a great friendship and complementary skill sets, combined with a shared passion for the industry.
He added, “The entire management team of Cetera is very excited to work closely with Robert as we embark upon a fresh stage of success. Robert’s experience in successfully leading large firms to achieve new levels of profitable growth speaks for itself, and the clear separation of the chairman and CEO functions will set a new standard for accountability and conflict-free decision-making for the independent broker-dealer space.”
Moore said, “When I was first approached by Larry and the new equity owners of Cetera to serve as chairman, I immediately felt this was an excellent fit for me. I’ve always believed that many of our industry’s challenges and opportunities orient around a fundamental need to drive greater transparency and accountability at the Board level. Moreover, Cetera has placed its transitional issues in the rearview mirror, and is moving ahead with a clean slate, a revitalized organization, and major new advisor growth initiatives. I’m excited about Cetera’s model, its management team and employees, and most importantly, its advisors and institutions.”
Moore is the chief executive officer of Legal & General Investment Management America Inc., an institutional asset manager. Previously, he served as chief financial officer, and later, president of LPL Financial.
Roth concluded, “Across our network, we’ve demonstrated our ability to perform at peak levels throughout extremely adverse conditions, while continuing to innovate and enhance the wide range of industry-leading tools and resources that have made Cetera the platform of choice for advisors and institutions. The board, the management team and our entire home office staff are enthusiastic about all that we can accomplish together for our advisors and institutions in the years ahead. We’re confident that the best is yet to come for Cetera.”
Cetera’s independence represents the final chapter in the separation from RCS Capital (NYSE: RCAP), which announced its intention to file Chapter 11 bankruptcy earlier this year. The firm has been hit hard since October 2014 when it was revealed that another company controlled by Schorsch, American Realty Capital Properties, intentionally left a $23 million accounting error uncorrected. The misstep was the first in a series of scandals that rocked the Schorsch family of companies, which included Realty Capital Securities being charged with proxy fraud by the state of Massachusetts. In connection with those charges, RCS agreed to pay a $3 million fine and close its doors in December 2015.
Cetera is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions. Its network is comprised of 10 firms – four Cetera-branded firms (Cetera Advisors, Cetera Advisor Networks, Cetera Investment Services, and Cetera Financial Specialists) along with First Allied Securities, Investors Capital Corporation, Legend Equities Corporation, Summit Brokerage, VSR Financial Services and Girard Securities.
The DI Wire recently reported that Cetera will shut down VSR Financial Services and Investors Capital Corporation, with only a select group of advisers being integrated into the company’s other firms. The company is also expected to sell Legend Equities Corp., which focuses on retirement plans for teachers and employees of tax-exempt organizations.
