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May 29, 2018 at 06:10 AM
Cetera Financial Group has appointed Michael Murray, a former LPL Financial executive, to head its new business development efforts. The move, according to one industry consultant, seems to be a sign that LPL isn’t likely to buy the group of six independent broker-dealers.
“Mike Murray is a top-flight recruiting executive,” said Jeff Nash, CEO of BridgeMark Strategies and a former in-house recruiter at LPL. “Beyond the strategic advantages Mike brings, this probably provides at least some closure to Cetera advisors who are anxious about LPL potentially buying Cetera.”
When asked about Cetera’s future in light of the review of both its capital structure and strategic direction — announced in late February and the source of much M&A speculation — Cetera CEO Robert Moore explained in general terms that “the process is moving along smoothly.” Moore, who was president of LPL from mid-2012 to mid-2015, added that he is “excited at how [this work] is going, and the outcome we hope will drive relative to the objectives we set.”
For Nash, though, Cetera’s latest news should lead to significantly more doubt among advisors on the likelihood of an acquisition of the company by LPL. “You can’t exclude the possibility that Cetera will be sold, but Mike Murray’s decision to join Cetera shows that he obviously doesn’t believe LPL is seriously in the running to acquire the company,” the consultant explained.
As for Murray, who was LPL’s national sales manager for the West since 2002, his focus will be on efforts such as recruiting, advisor growth and “enhancing the advisor experience,” according to Cetera. The network of IBDs first announced this new business approach in September, when it named Michael Zuna chief marketing officer.
Murray “demonstrated the energy, passion, insights and experience we were looking for from someone grounded in how things are being done today and really looking at the future,” Moore said. “His role is not just about recruiting. It will include succession planning and … a whole range of activities designed to nest advisors into the best possible place” for their business and their clients.
As for what’s next, Cetera appears interested in further recruiting. “We’re definitely going to invest additional capital, time and effort to help Murray identify others to join and expand the business-development effort across the country,” Moore said. Cetera includes about 8,000 affiliated advisors with Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities and Summit Brokerage Services.
Financial Engines-Edelman News
Meanwhile, private equity firm Hellman & Friedman is buying robo-advisor Financial Engines for about $3 billion in cash and combining it with Edelman Financial Services, which it has held a majority stake in since late 2015.
“This is interesting on two levels, since Ric Edelman always has been out there talking about the digital future — how that’s coming faster than we think, and [the wealth industry] is not prepared,” said Tim Welsh, head of consultancy Nexus Strategy, in an interview. “Now, he’s backing up that prognosis in a big way.”
But the deal raises plenty of questions as well, Welsh adds. “What are the synergies? What does he get? Will there be separately run businesses?”
Financial Engines has some $169 billion in assets and works with some 750 employers to deliver digital-based retirement planning and related services tied to about $1.2 trillion in assets under contract; it bought the Mutual Fund Store, which included about 350 employees and advisors, for about $560 million in late 2015. Edelman Financial has some $22 billion in assets and does advisor-based financial planning.
Financial Engines works mainly in the 401(k) space, “and that’s low-margin fare,” the industry veteran points out. Individual retirement accounts are higher margin. “But it’s tricky rolling things together and rolling over accounts,” Welsh explained, pointing to regulators’ current investigations of Wells Fargo’s retirement rollovers, fund sales and related wealth operations.
Michael Kitces, author of the Nerd’s Eye View blog, says the move “is … a huge win” for both firms. “Simply put, for Financial Engines, this is about deepening their bench of HUMAN advisors, affirming they’re seeing positive results with humans from [the Mutual Fund] Store. For Edelman, it’s a massive ‘distribution’ opportunity to bring their [financial planning] advice to more consumers [without] relying on Ric,” Kitces explained on Twitter.
