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Industry Spotlight > Broker Dealers

Cetera Financial's Future Owner Is Revealed

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Cetera Financial Group says its parent company is selling a majority stake in the firm to private-equity group Genstar Capital. Terms were not disclosed, but Cetera expected the deal to close by Sept. 30.

The news comes about five months after Cetera said it was working with Goldman Sachs on a review of its capital structure amid a whirlwind of industry chatter about a possible sale of the company to a larger broker-dealer or a rival financial-services firm.

Overall, Cetera has about 8,000 affiliated independent advisors.

(Related: What Is Going on With Cetera?)

“Working with Tony Salewski and the team at Genstar, we found a lot of alignment around … wealth management and what our leadership position can mean for the profession and opportunities to tap into for potential growth,” said Cetera CEO Robert Moore, in an interview with ThinkAdvisor. “We couldn’t be more pleased re what it portends for us.”

Some of Genstar’s present and past investments in the financial sector are Mercer Advisors, AssetMark, Ascensus, Apex Fund Services, Acrisure, ISS and Strategic Insight. Its board includes Ben Brigeman, who led Charles Schwab’s retail business, and Hal Strong, formerly vice chairman of Russell Investments.

(Related: Cetera Grabs LPL Recruiting Exec, Cooling Rumors of Sale to Rival)

Asked if Genstar aims to work with Cetera in order to put all or some of the business on the chopping block (as some other private-equity groups have done to broker-dealers), Salewski said: “There are no plans to sell part of this business or exit it quickly …, and we are investing in [it] for growth. It’s the right time for the marketplace … and for helping advisors deliver holistic financial-planning advice to clients, for which demand is only increasing.”

Cetera Financial includes the broker-dealers Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities and Summit Brokerage Services.

According to Moore, Cetera broker-dealers recruited 784 advisors in 2017. “We have gathered strong momentum …, and with Genstar hope to reignite and accelerate it. We see ourselves as the destination of choice for high-quality advisors,” he said.

Jeff Nash, head of the consulting group BridgeMark Strategies, says the Genstar news puts a lot of industry gossip about the firm’s future to rest: “Cetera always publicly said that they were going through their strategic review from a position of strength, and this outcome proves all the naysayers dead wrong about Cetera’s long-term viability,” he said in a statement shared with ThinkAdvisor.

Genstar’s equity stake, Nash adds, should prove to be “an enormous shot in the arm for Cetera in terms of its ability to more aggressively recruit financial advisors and financial institutions to its various member firms.”

Turning Another Page

Last year, Cetera moved to renegotiate its credit facilities, which followed the restructuring of its operations in 2016 — when it became a stand-alone entity after the bankruptcy of its former parent company, RCS Capital (later renamed Aretec, or Cetera spelled backward).

RCS Capital, which was led by then Executive Chairman Nicholas Schorsch, bought Cetera for $1.15 billion from Lightyear Capital in 2014. Later that year, an entity in the nontraded REIT space that Schorsch was involved with became embroiled in an accounting scandal and related troubles, which spilled over onto RCS Capital.

Schorsch has no more ties to Cetera or RCS Capital, nor does Larry Roth. Roth led Cetera’s broker-dealers from May 2014 to September 2016, when Moore was tapped as the group’s leader.


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