Schorsch's RCS Rebrands IBD Unit, Stays With Pershing

The unit, renamed Cetera Financial, will include expanded marketing platform and consulting services

Roth leads the growing RCAP/Schorsch IBD empire. Roth leads the growing RCAP/Schorsch IBD empire.

RCS Capital (RCAP), which owns Cetera Financial Group and includes 10 independent broker-dealers and firms, said early Tuesday that it would rebrand its advisor-focused operations, expand its support services and continue to work with Pershing, which custodies assets managed by many of its 9,400 independent and other advisors.

“We are naming the retail-advice division Cetera Financial Group,” said Larry Roth, CEO of the business, in an interview with ThinkAdvisor. “We are not changing the brands of the independent broker-dealers.”

As for the custodial arrangements of its advisors, “Pershing has been an important partner and should be part of our strategy going forward,” Roth said. “We have no plans to disrupt the partnership.”

The news comes less than a week after RCS Capital said it was buying VSR Group, which has some $12.3 billion in client assets and 264 affiliated advisors. It also comes just less than a year since Roth left his leadership role at the AIG Advisor Group to join RCAP, which has Nicholas Schorsch as its executive chairman.

“This is a hugely important announcement. We had already announced the purchase of First Allied before I came on board,” Roth explained, “and we were very lucky to have attracted Cetera [in January]. This enabled us to do what we are announcing today. Cetera has built a very robust technology platform.”

Cetera’s operations include Cetera Advisors, Cetera Advisor Networks, Cetera Financial Specialists, Cetera Investment Services (marketed as Cetera Financial Institutions), First Allied Securities, Investors Capital, J.P. Turner and Co., the Legend Group, Summit Brokerage Services and VSR Financial.

All advisors affiliated with these brands will have access to Connect2Clients, a marketing portal and advice service for FAs developed by Cetera; Pentameter, First Allied’s practice management and business consulting platform; and best practices in service and support from Summit Brokerage Services and Investors Capital, for instance.

“We look at the best of what the independent broker-dealers have to offer and are taking these tools across our firms by year-end,” Roth said.

While acquisitions of more IBDs are likely to happen “opportunistically,” retaining advisors and improving fees and commissions (“same-store sales”) are the top priorities, the executive notes.

“We will work to be the best in the independent space when it comes to services for our advisors,” he said. We have eight consultants working with them [via one program] and will add people or identify others in the organization, so we can go to all advisors and help them grow their business.”

Roth isn’t inclined to share exactly how Cetera will catch up with larger rival LPL Financial (LPLA), of course, which has 13,840 affiliated independent reps.

For advisors who use Pershing or Fidelity as their clearing firm, for example, “We are going to continue to be a very attractive alternative if they want to move their business,” he explained.

“We understand that advisors first and foremost are entrepreneurs, who want to run their business in the best ways they see fit,” Roth added. “We do that with no disruption and will full, flexible support and service. That is the key way to differentiate ourselves.”

Q2 Results

Last week, RCAP said the retail-advice segment pro forma revenues grew 7% quarter over quarter to nearly $495 million.

“We are gaining traction and finding opportunities across all of our business lines,” RCAP President Michael Weil explained in a press release. “With over $475 million in cash and cash equivalents on hand, a broad but integrated strategic plan, and tremendous long-term market opportunities, RCAP expects to continue to redefine traditional retail investment advice and realize further value in diversifying its revenues, while at the same time finding synergistic opportunities to grow revenues and reduce costs.”

In the second quarter, RCAP’s assets under administration for the retail advice unit grew nearly $6 billion from the prior period to $214.2 billion.

(As of June 30, rival LPL Financial had some $465 billion in advisory and brokerage assets, about $167 billion of which are retail assets under custody and $78 billion of which are assets under custody for RIAs.)

 “We believe we remain positioned for the continuing growth of our retail advice platform, having acquired what we believe to be high-performing, high-quality companies with experienced and proven management teams,” Weill added. In addition, we expect our continued investment in technology and the use of sophisticated processes and procedures across the platform will provide clear advantages, including significant regulatory compliance benefits, as well as a positive impact to earnings.”

As for its wholesale distribution business, which includes the sale of nontraded real estate investment trusts and related products, RCAP says revenue for the second quarter was $325 million, up nearly 83% from the first quarter.

In July, RCS Capital shared plans to set up a crowdfunding investment platform with the assets — and management — it is acquiring from Trupoly, an investor relations portal.

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Check out RCS, Schorsch Jump Into Crowdfunding on ThinkAdvisor.

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