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The 'Quantity Game' in AUM, Advisor Recruiting Is Over: Cetera Exec

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What You Need to Know

  • A shift in focus at Cetera has resulted in the kind of recruitment wins that matter most, its recruitment chief says.
  • The firm saw a significant rise in advisors joining it last year from wirehouses and larger broker-dealers.
  • Its latest recruitment win: Scottsdale, Arizona-based InTouch Wealth Advisors is now affiliating with Cetera Advisors.

As the first month of 2022 nears its end, one major trend that Cetera Financial Group is harnessing in the new year is “an acceptance that quality in financial professionals and assets is more important than quantity,” according to John Pierce, head of business development at Cetera.

The “quantity game, the headcount game, the total asset game” that was played in the past just isn’t as effective as it once was, he told ThinkAdvisor in a phone interview on Tuesday. “I think people have realized that there is a big difference when you focus on quality.”

Pierce joined Cetera in July 2019 and assessed the mix of assets that Cetera traditionally attracted in prior years, he recalled. While Cetera has an established track record of consistent recruiting, the company “realized that all assets are not created equal,” according to Pierce.

With that in mind, Cetera started a “gradual pivot to focus on advisory and brokerage business, while letting our competitors potentially overpay on suboptimal assets like annuities, TAMPs… and insurance,” he explained. “By shifting our focus, we recruited record high-quality assets” last year, which he said “continues in 2022.”

Tapping Wirehouse Talent

The shift to remote work during the pandemic, meanwhile, has made all advisors independent to some degree because everybody worked remotely in 2020 and many still do, at least some of the time, Pierce said.

“Because everyone is independent, it’s allowed all of us, including Cetera, to hire financial professionals from firms we maybe didn’t do before the pandemic,” he told ThinkAdvisor.

“Last year was a transformational year for us in terms of hiring from the wirehouses and the super-regional” broker-dealers, he said. “We had an influx of Morgan Stanley, UBS, Merrill Lynch, Wells Fargo, Raymond James advisors joining us last year. And they would join us typically in one of our larger” Office of Supervisory Jurisdiction locations, he said.

Those advisors, he explained, are often “not really willing … to take that big leap and be completely unconstrained: They want some guardrails. They want some help. They want people to help set up an office for them. They want to make sure they can get proper supervision.” That resulted in a “surge in advisors joining us from those firms last year,” he said.

In 2021, the “second largest bucket” of advisors who joined Cetera were from smaller independent firms who wanted to join another independent firm, he noted.

Rising Costs

“Because Cetera’s got five different communities, we really have a lot of different choice,” he explained, pointing out: “We see a trend of financial professionals that are smaller independents who are recognizing the regulatory costs are going up, supervision costs are going up. Smaller firms don’t have the ability to invest in technology like Cetera, or infrastructure.”

Those advisors often “can’t keep up with what I see as a clear future trend, which is an increase in regulatory, legal and compliance oversight and, if you can’t invest in that, you won’t be in business long term,” he said.

Behind those advisors, the third-largest group of advisors who joined Cetera last year were RIAs who he said were “throwing their hands up” after realizing there’s “nothing free in life.”

Cetera saw “some pure RIAs come in” saying they wanted the freedom of independence by affiliating with Cetera advisors but supervision from a home office to avoid many of the high costs of doing business that were coming out of their own pockets, he explained.

The Latest Recruiting Win

Cetera’s announcement Tuesday that Scottsdale, Arizona-based InTouch Wealth Advisors is now affiliated with Cetera Advisors as part of the Cetera network firm Wilde Wealth Management was just the latest example of Cetera’s recruitment strategy paying off.

Cetera recently said it attracted about $50 billion via its business development efforts in 2021, including more than $37 billion from an acquisition of certain assets from Voya Financial Advisors and $10 billion in organic recruiting.

Cetera said in June that it had completed its purchase of the independent financial planning channel of Voya Financial Advisors. That acquisition created Cetera Wealth Partners, which is part of the regional model at Cetera. More than 90% of the advisors and 93% of the assets under administration that were part of the Voya asset purchase transitioned to Cetera.

InTouch, founded in 2015, is led by industry veteran financial professionals Jason BenedettiGus Dekavallas and Larry Ritter. It was previously affiliated with MassMutual.

“Joining Wilde Wealth and Cetera empowers us to expand our independence while providing increased flexibility to our clients,” according to Benedetti. “We expect our business will thrive in many ways thanks to the backing and resources of a large network with a specialized community feel,” he said in a statement.

The move will help InTouch grow and serve clients “even more holistically by leveraging the top-tier technology, tools and resources now available through Cetera and Wilde Wealth,” he added.

(Pictured: John Pierce, head of business development at Cetera)