RCS Capital (RCAP) said late Wednesday that it was buying VSR Group, which has some $12.3 billion in client assets and 264 affiliated advisors, for an undisclosed amount. The transaction is expected to close in late 2014 or early 2015, when VSR will become part of RCAP’s independent retail advice platform, Cetera Financial Group, which will include 9,200-plus advisors after the deal.
According to RCAP CEO William Kahane, the group is on a tear to catch up with LPL Financial (LPLA), which has 13,840 affiliated independent reps.
“Our strategic acquisitions in connection with our retail advice platform, including the recent announcement of VSR Group, Inc., place us squarely in the No. 2 position of U.S. independent retail advice networks measured by financial advisors,” Kahane said in a press release on Thursday, when RCAP released its second-quarter results. (Nicholas Schorsch is RCAP’s executive chairman.)
RCAP’s Cetera Financial Group includes Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions and Cetera Financial Specialists, First Allied Securities, The Legend Group, Investors Capital Corp., J.P. Turner & Co. and Summit Financial Services Group. The unit is led by Larry Roth, the former chief of the AIG Advisor Group.
“We view the addition of VSR as a great example of an accretive ‘tuck-in’ acquisition for our retail investment advice platform,” said Roth, in a statement.
VSR’s advisors have average annual fees and commission of about $380,000 and have been in the industry for an average of nearly 11 years. About 40% of the group’s revenue comes from advisory fees, while 50% is based on commissions; roughly 60% of overall revenue is recurring, according to RCS.
(LPL Financial’s advisors had average yearly fees and commissions per rep of about $251,000 as of June 30; commissions per rep stand at roughly $155,000.)
“This transaction underscores our commitment to expanding the scope and depth of our financial services platform by acquiring top-tier independent broker-dealer platforms,” said RCAP President Michael Weil, in a press release. “We believe the acquisition is an excellent example of RCAP’s ability to identify and execute strategic acquisitions of independent retail broker-dealers that should leverage the size and scale of the existing RCAP infrastructure in order to generate and further enhance earnings.”
Q2 Results, Future Deals
RCAP said early Thursday that its pro forma revenues for the second quarter grew 22% from the first quarter to $825.7 million, while pro forma adjusted net income increased 12% quarter over quarter to $42.6 million, or $0.49 per share.