Believe it or not, it’s been less than a year since real estate investor Nicholas Schorsch and his business partners started making headlines for their M&A moves in the independent broker-dealer space. (They’ve been in the news a lot over the past 11 months.)
In June 2013, RCAP Holdings said it planned to buy First Allied Securities and the Legend Group from Lovell Minnick Partners, a private-equity group. RCAP Holdings owns Realty Capital Securities, a wholesale broker-dealer and affiliate of American Realty Capital Properties.
Now, the Realty Capital organization has four more IBDs under its umbrella (though the deals are pending): Cetera Financial Group, Investors Capital, J. P. Turner and Summit Financial Services. This means it has close to 9,000 independent advisors serving about 2.5 million investors.
(RCAP announced on Tuesday a major shift in its IBD leadership structure: CEO Valerie Brown of Cetera will step down, and Larry Roth, who moved from AIG’s Advisor Group less than a year ago, will be CEO of the entire IBD network. – Ed.)
Schorsch, who serves as executive chairman of RCS Capital, sees this retail strategy as a natural extension of his wholesale business. “In 2007, my partners and I perceived an opportunity to build an open architected, wholesale broker-dealer to distribute best-in-class investment solutions,” he said in a press release last year.
“We believe that the challenges and opportunities we witnessed in the wholesale distribution channel exist in the broader retail network as well, and we see value and opportunity for growth in a paradigm shift toward a sustainable direct relationship between the mass affluent investor and their independent financial advisor,” he explained.
Also in 2013, Realty Capital Securities recruited Larry Roth from Advisor Group, the 6,000-rep independent broker-dealer network owned by AIG, to become its CEO. “At Realty Capital Securities, the focus is on taking institutional investments and bringing them to Main Street,” said Roth in an interview.
Back in 2007 and 2008, Schorsch and his business partners, including William Kahane, “saw the opportunity, and they acted on it—when many might have been afraid, they jumped in,” Roth noted. “When it comes to business, it’s all about timing and talent.”
As a manager, Schorsch is very supportive of those he works with and is big-picture oriented, according to the Realty Capital Securities CEO: “He understands what businesses we need to be in and that all the investments in our programs need to do well. He expects everyone to work hard. If you make a mistake, he may or may not mention it. He’s a perfect gentleman.”
That’s not quite the image of some other real estate tycoons, though Roth wouldn’t comment on them. Schorsch “is a family man, who works hard and tries to eat dinner with his wife [Shelley] every night,” he noted.
“He’s a driven and very inspirational leader,” Roth explained. “He leads from the front and doesn’t ask others to do what he doesn’t do himself. As I get to know him, I realize people love to work for and with him.”
That’s quite an accomplishment considering that, according to Roth, the group works hard seven days a week. Plus, some top executives have to get on a call each Sunday night at 8 p.m. to “start the week.”
Thanks to this work ethic and his business skills, Schorsch received the Ernst & Young Entrepreneur of the Year 2003 Award and the Ernst & Young Entrepreneur of the Year 2011 Lifetime Achievement Award for real estate.
First Allied CEO and President Adam Antoniades said Schorsch “sees himself as a strategic operator who’s there to serve as an asset to the group’s managers, to empower them to move on the business model, to take obstacles out of their way and to find solutions.”
That role is important because Schorsch “works at a pace and speed that are intense,” said Antoniades. “I have never experienced anything like it before.”
Schorsch, 53, grew up in Philadelphia and started working in his family’s scrap-metal business while he attended Drexel University. He later ran and sold the business, he says, for a $50 million profit—at age 23. He did more work in the metal business, before branching out into more diverse operations and then, in the late 1990s, into real estate.
This “can do” attitude, said Antoniades, is related to Schorsch’s belief that you can’t let business growth be limited by what you may perceive as old, traditional design parameters. “As the partners discuss it, time is the only element of success you can’t have more of,” the First Allied leader shared.
“He uses an expression, ‘Don’t let today be your best day,’” added Roth. “We all hope we can do more and contribute more than we did the day before. No one is on autopilot. People expect a lot of you are and very respectful. It’s really fabulous.”
To Antoniades, Schorsch’s leadership is best defined by a basketball analogy he’s heard used by the Realty Capital group: “It may be easy to make a basket by hanging around the hoop. Schorsch gives you the ability to take a three-point shot during the game.”
(Check out Investment Advisor’s full IA 25 for 2014 list on ThinkAdvisor.)