Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > Behavioral Finance

Big News From Cetera, Financial Engines-Edelman and Raymond James

Your article was successfully shared with the contacts you provided.

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.

For the broader advisor community, the news “is yet another affirmation of the value of human advice over pure tech, but also a warning that there’s another big competitor trying to get your future clients before they ever retire,” added the blogger, who also is a partner and director of financial planning research for Pinnacle Advisory Group.

Others agree. “It’s a big bet on digital and commoditization of investments. It means intense price compression yet to come,” tweeted advisor Bryan Beatty.

Welsh refers to the news as “a merger of a robo-advisor and real advisors” and as a “reverse merger,” with Financial Engines poised to take on the dominant role. “Fintech is leading consolidation in the wealth management space,” the consultant explained. “There’s been lots of predictions about consolidation in wealth management and fintech … and this could be one of the largest deals to date [tied to] this trend… and a harbinger of more to come.”

Hellman & Friedman also owns stakes in LPL Financial, Franklin Templeton Investments, Nasdaq, Mondrian Investment Advisors and a number of other firms in the financial sector and other industries.

“Financial Engines is a pioneer in the high-growth financial technology sector,” said H&F Partner Allen Thorpe, in a statement. “We will work closely with Larry and the rest of the Financial Engines team and Ryan Parker and the Edelman team to bring these companies together into a unique business with an unparalleled mission to bring better financial help to millions of investors.”

The deal is expected to close in the third quarter of 2018. Financial Engines President and CEO Larry Raffone is set to become president, CEO and board member of the combined company, while Ric Edelman — Edelman’s chairman and co-founder — will serve as a board member and chairman of Financial and Investor Education for the new entity.

Earlier this year, Edelman said at an industry event that he has long embraced tech tools in his practice and outlines how advisors can embrace it in his latest book, “The Truth About Your Future.” About a year ago, he said the technologies that will most radically impact advisors aren’t robo-advisors, but “exponential technologies,” such as artificial intelligence, robotics, 3D printing, nano- and biotechnology, bioinformatics, big data, materials and science.

Raymond James’ Latest

Raymond James has promoted Jodi Perry to the new role of national director for its Independent Contractors Division. In this post, Perry now oversees five regions nationwide, including the Southeast area that she previously led.

As of March 30, Raymond James has 4,551 independent advisors in its Raymond James Financial Services unit — up from 4,221 a year ago. It also has 3,053 employee reps and total Private Client Group assets under administration of $695 billion. (RJFS includes both the Independent Contractors Division and the Financial Institutions Division, which serves advisors based in banks and credit unions.)

“We look forward to continuing RJFS’ long history of successfully supporting and attracting high quality, client-first focused independent financial advisors under Jodi’s leadership as national director,” said Scott Curtis, president of the independent channel, in a statement.

Perry began her career with Raymond James as an operations associate in 1994. She has since worked for the firm’s Asset Management Services and RJFS Business Development.

“I am honored to be selected as Raymond James Financial Services’ national director,” said Perry, in a statement. “It’s been my pleasure to work with and support our independent advisors as the Southeast regional director, and I’m excited to expand that support to all advisors in the Independent Contractors Division.”

Janet Levaux is editor-in-chief of Investment Advisor and Research on Wealth. She can be reached at [email protected].


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.