From the April 2010 issue of Investment Advisor • Subscribe!

Broker/Dealer Briefing: Cetera Ready to Grow

The former ING broker/dealers are committed to the hybrid model, says Valerie Brown

If there's one thing that advisors cannot stand, it's uncertainty. So imagine that you were a representative affiliated with one of the ING broker/dealers over the past year or so: uncertainty was your constant companion. That may have all come to an end, however, with the February 1 announcement that Lightyear Capital, a private equity firm based in New York, had completed its acquisition of the three independent broker/dealers that formerly constituted the ING Advisors Network--Financial Network, Multi-Financial, and PrimeVest--and renamed the group Cetera Financial, though each individual B/D will retain its name.

Lightyear's chairman and CEO is Donald Marron, who headed Paine Webber for 20 years and then was chairman of UBS America after the brokerage firm's merger with PaineWebber; he is chairman of Cetera's board. The CEO of Cetera Financial group is Valerie Brown, who replaced John Simmers as CEO of ING Advisors Network last year after Simmers's retirement,

We caught up with Brown and with new hire Barnaby Grist, formerly of Schwab Institutional, in a telephone interview in late February.

First, Brown explains that the Cetera name--from the Latin for "other"--is a reflection of "our commitment to our field organization as well as to their clients, to put them first." Now operating as a "truly independent" shop, Brown said "we can be more nimble and responsive," but also that "we're committed to keeping those three broker/dealers as the separate and distinct value propositions they have been in the marketplace." The benefits of the Lightyear acquisition are in the scale of the three broker/dealers, but more importantly in "strong access to capital that will fuel our growth in recruiting," in helping advisors to buy books of business to expand their practices and helping those who are ready to retire to sell their books, and by investing in the shared platform "more deeply than we have historically."

When asked if Lightyear, the parent, would finance the acquisition, Brown answers that Cetera itself will be doing the financing. "The whole issue around capital scarcity," she says, "has been removed with the acquisition."

Brown acknowledges that for the now former ING broker/dealers "it was a tough row last year because of the public nature of our strategic review," but she says the leadership of Cetera and the three rep forces feel "that's behind us; that's history."

Brown says Cetera is "committed to the hybrid model, and we believe in consumer choice." Grist, who joined Cetera as executive VP of wealth management in early February, said that commitment was "probably the single biggest reason for my decision to join Cetera; advisors need access to every product out there; sometimes in the fee-only model you have one hand tied behind your back; there are clients who strongly prefer the transaction based model; and if you're fee only, there are some products that are simply unavailable; the reality is if you want to provide the best service to clients, you need to provide them with the broadest range of products."

As for growth, Brown says that in 2010 "we are not having difficulty finding interested parties" and so she suspects that this will be a "good year for Cetera collectively in recruiting." Beyond attracting individual reps, Brown expects that there will be continued consolidation in the independent B/D space, and that Cetera can participate in that consolidation in two ways. One is for smaller broker/dealers to become part of the regional directors system at Cetera's Financial Network B/D, which she calls "a great landing spot for those B/Ds who want to take care of their field organization, helping them run their business, and recruiting, but don't particularly want all the challenges in technology and compliance." The second opportunity, she says, is to add "larger broker/dealers to our family. That's not on the near-term plate, but we are open to that and we have the infrastructure to support it."

As for regulation and the fiduciary standard, Brown says Cetera "doesn't shy away from fiduciary as far as a standard, but it has to be a flexible standard that doesn't remove choice."


Group Editor-in Chief Jamie Green can be reached at jgreen@investmentadvisor.com
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