Cetera CEO Larry Roth

After a tumultuous period, the Cetera Financial Group of independent broker-dealers says it is now a stand-alone entity and industry veteran Robert Moore is helping lead the company as nonexecutive chairman.

“We have completed Cetera’s transformation to an independent privately held organization,” said CEO Larry Roth, in an interview with ThinkAdvisor. “We are recapitalized and have a new board of directors. It’s fantastic!”

“Today, we have a clear go-forward ownership structure, a healthy balance sheet, significant additional capital to continue investing in advisor-support resources and a battle-tested management team energized to help our advisors and institutions grow,” explained Roth.

Its parent company, formerly RCS Capital and recently renamed Aretec (or Cetera spelled backward), has wrapped up its bankruptcy proceedings and now serves as a non-operating holding company – with Cetera as its sole operating business.

“I am personally so excited that Robert Moore accepted the position on our board,” said Roth. “I have known him for many years. There is no hesitation when I say there is no better person for the role. His passion and proven ability to think and act strategically are unparalleled in the industry.”

For his part, Moore – who was president and CFO of rival IBD LPL Financial (LPLA) before becoming CEO of asset manager Legal & General Investment Management America – says he is glad to be on the Cetera team.

“I’m pleased to be working with Larry and his team, who have proven themselves through a time of adversity,” said Moore in an interview. “It is an honor and privilege to work alongside them … With the team assembled, I feel the conditions for success are better than ever.”

Last week, the firm said that it will likely merge VSR Financial Services into Summit Brokerage Services and bring Investors Capital Corp. into Cetera Advisors. Several months ago, it disclosed plans to sell the Legend Equities Corp., which is focused on the retirement-plan market for educators. 

As for what lies ahead for the company in light of the Department of Labor’s new fiduciary standard, Roth says his is upbeat.

“The timing is quite good. As a private firm with $150 million of fresh capital and a laser focus, we are very well positioned with DOL,” the CEO stated. “We are focused and read.”

“All the ingredients have been put into place [for Cetera] to be a leader in the industry at a time of significant change,” Moore added. “And we now have the leadership to address the needs of advisors and the seismic shifts in the industry.”

According to Roth, the company held conference calls with advisors and employees about Wednesday’s news. “Everyone is very enthusiastic,” he said.

As for advisor movement, “Retention and the advisor-force count have been stable throughout the bankruptcy filing period,” according to Roth. “We are well within what we expected and are doing much better than anticipated.”

Past Problems

Earlier this year, RCS Capital filed for bankruptcy protection in Delaware. At the time, Cetera said it planned to spend some $50 million on programs to retain the roughly 9,000 independent advisors affiliated with its network of broker-dealers who are eligible for such funding. RCS Capital had close to $2 billion in assets and roughly $1.4 billion in debts, according to a Bloomberg report.

In early January, RCS Capital said it had obtained $150 million to restructure its finances from a group of key investors. Also, private equity firms Carlyle Investment Management and Fortress Investment Group, along with asset manager Eaton Vance Management, are letting the company forgo debt payments. These entities are poised to see the money they are lending to Cetera turn into equity shares in the group of independent broker-dealers.

The Cetera-branded broker-dealers have likely offered retention deals only to reps who have $250,000 or more in average yearly fees and commissions, said Jon Henschen, a recruiter and head of Henschen & Associates, several months ago. Advisors and others in the industry have said the deals are roughly equivalent to 6% of an advisor’s trailing-12-month production level and will be paid in stock; these reps also will be eligible to receive another 2% of their yearly production in cash, according to Henschen.

In 2014, Lightyear Capital sold Cetera for $1.15 billion to RCS Capital, which at the time was led by Executive Chairman Nicholas Schorsch. Later in the year, an entity in the nontraded REIT space Schorsch was involved with became embroiled in an accounting scandal and related troubles, which spilled over onto RCS Capital. (He is no longer involved in the management of RCS Capital or Cetera.)