After announcing its sale to private equity group Genstar Capital last week, Cetera Financial Group says it is working on equity plans for its roughly 8,000 affiliated advisors. Industry watchers say this move — and the overall deal with Genstar — should prove positive for Cetera.
According to CEO Robert Moore, the firm believes that “advisors deserve more than a traditional retention bonus,” which … is “an outdated way to do things.”
“Genstar is working on equity plans to foster that alignment and to engender broad-based and meaningful ownership that [goes beyond] … top producers,” Moore said in an interview.
Traditional retention deals that include forgivable loans, he says, are less than ideal, since that money does not “go to work on improving the practice nor on the broader alignment with us to drive the company forward.”
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In other words, advisors should have “a clear stake in the upside and potential” in the firm’s new ownership structure and in their own businesses, Moore explained. “We’re talking about having a very compelling way to take our advisors and our relationships with them to an entirely better level.”
Details on the equity-share program will be explained at the firm’s national conference, set for late August in San Antonio.
“We are also working to extend this innovative approach to recruits,” the executive said, “and we are not aware of any firm doing that.”
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Industry watchers seem to be supportive of Cetera’s approach.
“I think it is a smart move,” said Tim Welsh, head of the consulting firm Nexus Strategy, in an interview. “Equity provides the golden handcuffs longer than a short-term bonus.”
Recruiter Jon Henschen explained in an interview that some type of equity plan “would be much more attractive than getting nothing. Any stock reward related to the new partnership, so that advisors can have skin in the game, is positive.”
Both also are upbeat on Cetera’s sale of a majority stake to Genstar.
“It’s great news for Cetera, because Genstar is the right partner. It is really experienced in wealth management,” Welsh said, “with a great track record of basically doubling assets at Mercer Advisors.”
Genstar’s partnership means Cetera has the backing of a pro-growth, well-funded ally, he adds.
“I see this as the right partner and the right finance arrangement,” Welsh explained. “It’s much better than [a sale to] LPL Financial, which could have meant slashing and burning.”
In other words, a move that involved another broker-dealer, like LPL, might lead to departures of advisors and teams over issues like new fees and commissions, repapering and related disruptions.
Carson Wealth, for instance, recently joined Cetera from LPL, and that affiliation probably would have come to an end if Cetera had been sold to the rival group of broker-dealers.
“They definitely dodged the LPL bullet,” Welsh said. “This M&A is less intrusive … and has a much lower impact than it Cetera had been sold to other BD.”