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Cetera Shuttering Broker-Dealer, Pushing Out Some Reps

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Cetera Financial Group says it has moved to close an independent broker-dealer it acquired in 2014, mainly due to issues regarding its main clearing partner.

“Cetera Financial Group is winding down J.P. Turner in order to enable advisors at that firm to more rapidly access the full range of services and support our network offers through Pershing,” said CEO Larry Roth in a statement shared with ThinkAdvisor late Thursday.

When it became clear that Pershing would not add J.P. Turner to its clearing platform, advisors decided it made sense for the roughly 300 J.P. Turner reps to move to Summit Brokerage Services, another BD acquired last year by Cetera’s parent firm, RCS Capital (RCAP).

“My understanding is that group’s advisor council moved to go to Summit after it was clear that they couldn’t move their account to Pershing,” said recruiter Jon Henschen in an interview. “In other words, the reps voted to go to Summit.”

According to Roth, the J.P. Turner advisors “voiced a strong desire to transition to the Pershing platform. After extensive review, it became clear that the most expeditious and seamless way for this to happen was to invite a significant number of these advisors to Summit Brokerage Services.”

A large number of the J. P. Turner reps, though, are not being ”invited” to make the move.

“We are talking about [Cetera] cherry picking advisors” based on yearly fees and commissions, or production, stated Henschen, who is head of Henchen & Associates. “I’m not sure of the exact cutoff, but it means they are probably keeping the best 150 [in terms of production] and have been taking compliance issues into consideration, as well.”

Those advisors who are being tapped to move to Summit should get some nominal transition money, according to the recruiter, maybe 5% to 10% of their trailing 12-month fees. The others, Henschen said, are reaching out to recruiters and other industry sources.

The situation, he added, is essentially being forced onto the IBD.

“In terms of compliance, J.P. Turner cleaned house over the last few years. They used to have 800 or so reps and got rid of about half of them with compliance issues,” the recruiter explained. “In other words, those who were problematic were let go. I feel like the reputation of J.P. Turner that Pershing was looking at was four or five years old.”

As for the issue of similar issues impacting other Cetera BDs, Henschen said the situation at J.P. Turner is “unique—and I don’t see it spilling over.”

Cetera also includes broker-dealers such as First Allied Securities, Investors Capital, VSR Financial and Gerard Securities; it has over 9,000 affiliated advisors.

“We emphasize that this transition is not part of a broader consolidation strategy, but rather, is intended to address a unique and clear demand from a significant number of J.P. Turner’s advisors,” Roth stated.