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Schorsch’s Cetera Rolls Out Consulting Group for Advisors

By Janet Levaux

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Embattled real-estate mogul Nicholas Schorsch and his colleagues at RCS Capital (RCAP) and American Realty Capital Properties (ARCP) aren’t the only ones who need talk to lawyers and accountants these days.

Financial advisors at Cetera Financial Group, part of RCAP, need access to these professionals — but for all the right reasons, according the firm, which includes over 9,000 affiliated reps.

To address this need, Cetera launched its Advanced Planning Group for some of its top-producing advisors on Thursday, says Steve Dunlap, executive vice president of wealth management for Cetera. The full rollout should be wrapped up within about 12 months. (Some 10% of FAs are getting immediate access to the consultants.)

“There are often more complex issues involving legal matters, taxation, accounting and other issues that advisor face — like how to handle a charitable-remainder trust, an estate-planning issue or employee stock options. And these are [topics] that experts in legal issues, accounting and insurance can be there for them as knowledge resources,” Dunlap explained in an interview with ThinkAdvisor.

Best of all, advisors can tap these resources without worrying about the overhead.

“They know they can trust [the consultant], and the hourly meter is not running,” the executive explained. “This helps advisors deliver the best decision-making for investors. It’s internal consulting — or the advisor’s advisor.”

Cetera can offer this service to advisors thanks to its scale, he adds. “This is part of what our business model is all about. If an independent advisor wants to hire a lawyer, it doesn’t make sense to bring on as a staff member. We can do that for when [advisors have complicated situations],” Dunlap said.

The Advanced Planning Group is based in the Los Angeles area and includes eight professionals. This number is likely to increase as demand picks up, according to Cetera.

“Bit by bit, we will add resources as needed,” stated the executive, who adds that he started out in the business as an advisor with Legg Mason in the early ‘90s but is no longer a producing rep.

“I spoke with one advisor who called in and got back 17 pages of laws and codes to consider,” Dunlap explained. “He was blown away and said, ‘It’s such a great resource.’ He got all that he needed and more.”

Many advisors are likely to turn to these consultants in order to give clients “a true wealth management process,” he adds. “To do full financial planning for investors in a holistic way, you run into things that require such expertise.”

Complex Cetera Scene

Current legal, accounting and other issues effecting RCAP and ARCP are “not impacting our plans in wealth management,” Dunlap said. “This has been in the works for months.” Cetera Financial Group includes some 9,140 affiliated independent advisors. That figure will jump by about 500 reps when its acquisitions of Girard and VSR are finalized.

Last week, parent company RCS Capital executives said that its broker-dealer operations could potentially be spun off. Management is looking at multiple options in the face of a rapidly declining stock price and issues tied to sister company ARCP’s disclosure of accounting errors on Oct. 23.

That disclosure has led some broker-dealers and custodians to halt sales of products distributed by RCAP under the Cole and AR Capital brands. 

Also last week, ARCP moved to sue RCAP over its cancelled purchase of certain Cole Capital operations. (Schorsch is executive chairman of Realty Capital Securities, which conducts RCAP’s wholesaling work. In addition, he is chairman of ARCP.)

“Most suspended sales of Realty Capital Security products are expected to be reinstated by year end, said RCAP CFO Brian Jones, during a call with analysts.

The company, however, declined to name any specific broker-dealers that have ended their sales suspensions.  

— Check out Schwab, Fidelity Stop Sales of Schorsch-Led Nontraded REITs on ThinkAdvisor.