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January 06, 2017 at 09:40 AM
Investors Capital President and CEO Tim Murphy is now working as an advisor for a hybrid RIA affiliated with his former rival LPL Financial.
Murphy, who was with Investors Cap since 1994, led the independent broker-dealer through its $52.5 million merger with troubled RCS Capital (RCAP), which later emerged from bankruptcy as Cetera Financial Group. Cetera later chose to close Investors Cap and move some its registered reps to Cetera Advisors.
According to several industry sources, Murphy and other Investors Capital stakeholders accepted a large amount of stock in RCAP — 84% of the purchase price — as part of the deal, which hurt them financially.
“I heard that he took most of his share from the sale of the IBD in RCAP stock, and that did not work out well for him,” said recruiter Jon Henschen in an interview. “That stock became worthless. In hindsight, cash is king.”
Summit Brokerage Services, led by Marshall Leeds, struck a deal for more cash — 82% of the purchase price — when that firm was sold to RCAP, according to one industry veteran who wished to remain anonymous.
Murphy’s recent move to Integrated Financial Partners was not announced in a press release or mentioned in his LinkedIn profile, but it is present in his Financial Industry Regulatory Authority BrokerCheck record.
“Tim has done it all in our industry, and we are thrilled to have him here at Integrated Financial Partners,” said President Paul Saganey, in a statement. “I have known Tim for many years, and when he shared with me his desire to be an advisor, we all felt our CPA Partnership Program would be an ideal way for him to make the transition.”
Murphy’s move to work as an advisor is, of course, a big shift from his role as head of Investors Capital, the firm he was with since 1994.
“Advisors very much liked the firm and its family atmosphere, and they were extremely disappointed when it was sold to RCAP [in 2014],” explained executive recruiter Mark Elzweig in an interview. “Rumors began circulating that maybe Murphy and others could find a way to buy back the IBD and take it private. That was obviously an unrealistic scenario.”
At the time of the deal, Investors Capital had about 500 affiliated advisors; Integrated Financial Partners has roughly 130.
“We wish Tim well in his new role but beyond that, as a matter of policy, we do not publicly comment on individuals who are no longer affiliated with our firm,” said a Cetera Financial Group spokesperson.
Lessons for Reps, Execs
In Henschen’s mind, the troubles apparently faced by Murphy suggest it is worthwhile “to temper your enthusiasm for stock.”
“It comes down to diversification and practicing what BDs and advisors preach: do not rely too heavily on a single stock,” the recruiter said.
As for Murphy’s move to Integrated Wealth, “He is at a place where he can get reestablished in the industry,” explained Henschen.
The former CEO is not alone in his troubles, according to Elzweig.
“A number of Investors Capital [advisors] complained that they had lost a lot of money on RCAP stock,” the New York-based recruiter said. “Cash is always preferable to stock in an acquisition deal, because with cash you know what you are getting. There’s no real risk. By and large, it’s a much safer strategy to take cash rather than stock, unless you are doing a deal with a firm like Goldman Sachs.”
