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September 11, 2023 at 10:04 AM
What You Need to Know
- In Avantax, Cetera gets advanced tax and retirement capabilities for wealthy and mass affluent clients. But that's not all.
- The deal adds Fidelity as a custodial partner for Cetera, making it easier to buy other IBDs who use the custody platform.
- Former Cetera CEO Larry Roth says the strategic drive behind the deal looks 'very thoughtful and powerful.'
Cetera Financial Group is buying Avantax, formerly Blucora, in an all-cash transaction for $1.2 billion — a transaction that adds Fidelity as a custodial partner for Cetera. The news comes a month after Cetera wrapped up its purchase of Securian Financial Group’s retail wealth business, which it says brought it close to $50 billion in assets.
Dallas-based Avantax has some 3,075 financial professionals focused on tax and wealth management, as well as nearly $83.8 billion in assets under administration and $42.6 billion in assets under management.
Currently, San Diego-based Cetera has more than 9,000 financial professionals with $341 billion in AUA and $121 billion in AUM. Thus, the combined entity — assuming that most Avantax advisors and staff move to Cetera — would include 12,075 financial professionals, $424.8 billion in AUA and $163.6 billion in AUM.
Fidelity Angle
Cetera CEO Adam Antoniades emphasized the custodial relationship Avantax has with Fidelity when highlighting the significance of the deal: “This acquisition will establish a strategic relationship between Cetera and Fidelity, which will enable Cetera to expand further into a multi-custodial platform, enhancing Cetera’s capabilities to provide tools and functionalities for its affiliated advisors,” he said in a statement.
How will the multi-custodial platform help Cetera? “It allows Cetera to more easily acquire other Fidelity-using independent broker-dealers,” Chip Roame, head of Tiburon Strategic Advisors told ThinkAdvisor in an email. “I bet there is lots more to come here!”
Cetera currently works with BNY Mellon Pershing for clearing and custody services, according to its most recent regulatory documents. It also has some self-clearing operations. In 2018, the firm sold a majority stake to Genstar Capital, which Roame says is “a savvy investor in the broader wealth and investment management market.”
With Cetera now poised to have a relationship with both Fidelity and Pershing, the firm would have a “powerful combination” of custodians “that should serve it well,” said Larry Roth, head of RLR Strategic Partners, who was CEO of Cetera from 2014 to 2016. “It seems that the strategic drive [behind] this deal is very thoughtful and powerful.”
More Growth Plans
A key force behind Cetera’s growth strategy is Cetera Holdings CEO Michael Durbin, who joined Cetera four months ago after spending over 14 years at Fidelity Investments as an executive and senior advisor.
