January 9, 2012

Cetera Financial to Acquire Genworth FIS Broker-Dealer

Firm that focuses on tax professionals as advisors will become fourth BD at Cetera

Cetera Financial Group announced Monday that it would acquire the independent broker-dealer Genworth Financial Investment Services Inc. (GFIS), from Genworth Financial. The proposed acquisition is scheduled to close in approximately 90 days, pending regulatory approvals.

Valerie BrownIn an interview on Monday with AdvisorOne, Cetera CEO Valerie Brown (left) and Genworth FIS President and CEO Enrique Vasquez declined to disclose the financial details of the acquisition, but Brown said that “this is a straightforward transaction; GFIS is a solid, high-quality business.” 

However, in a statement released yesterday on its web site, Genworth revealed that it sold GFIS to Cetera for $78.5 million, plus an earnout provision that could provide Genworth with "additional future compensation based on achieving certain revenue goals over a one-year period." Proceeds from the transaction, Genworth said, will be used for general corporate purposes, and said the sale will allow it focus on its core turnkey asset management businesses within Genworth Financial Wealth Management (GFWM).

GFIS, whose reps tend to be tax and accounting professionals who also provide investment advice to clients, will become the fourth broker-dealer for Cetera, the former ING Advisors IBD network that was acquired in February 2010 by Lightyear, a private equity firm headed by former Paine Webber and UBS America executive Donald Marron.

The other BDs in the Cetera network are Financial Network Investment Corp., which  has about 1,800, mostly smaller reps; Multi-Financial Securities Corp., which has 1,000 reps; and PrimeVest Financial Services, a self-clearing BD that focuses on serving more than 600 financial institutions. 

In the interview, Brown pointed out that Cetera was acquiring both the GFIS broker-dealer and its RIA, and that the acquisition benefited Cetera and GFIS in terms of scale. Saying Cetera was well capitalized, and noting that they shared the same clearing firm, Pershing, she said, “We wanted a partner that allows us to cement our commitment to serve the multiple faces of independence. Tax and accounting professionals are extremely well positioned” in this challenging marketplace, boasting both deep knowledge of financial services and the trust of their clients. She noted as well that Cetera and GFIS share a commitment to the fee-based side of the BD business. 

Vasquez echoed that commitment, saying that GFIS’ 1,800 reps had $13 billion in assets, of which $4 billion was on its fee-based platform. He praised Brown for her knowledge and leadership, and said the partnership “will provide us with the scale to grow and continue to grow” particularly in the large but “fragmented” tax and accounting market.

“Our advisors are not your typical salespeople,” he said. From a platform perspective, he continued, “as we look to grow with more sophisticated advisors, the platform will help.”  The company will continue to be based in Schaumburg, Ill., and will continue, said Vasquez, “to maintain a strong relationship with Genworth Financial Wealth Management and offer their competitive suite of insurance and wealth management products.” Genworth is already a major supplier to Cetera’s existing BDs for those same products.

In an interview with AdvisorOne almost a year ago, Brown suggested that there would be further consolidation in the independent BD space, due to rising costs from compliance and technology investments and shrinking margins.

Brown said that Cetera was “committed to the continued success” of its existing broker-dealers’ reps, and noted that “many of our leaders are very much involved in the industry, with FSI, SIFMA and IRI,” which was one reason why Cetera recently announced it would subsidize all 3,500 of its reps’ membership in FSI.

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