Cetera, Freed From RCAP Bankruptcy, Set to Charge Ahead

“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.)