Moore's Exit Raises Deeper Questions at Cetera

Cetera’s actions in conducting a search seem to indicate that they are looking for public-company experience or CEO experience that they can add to the firm’s talent mix. “Let’s test the marketplace first,” Nash explained, “by going through the search process. Adam isn’t going anywhere.”

Firms like LPL have brought in lots of outside talent, he adds. And Raymond James Financial, for instance, did a search when its CEO, Tom James, began making his retirement plans.

“RJ had terrific experience to take on Cetera, having served as No. 2 under Mark Casady at LPL,” said Chip Roame, head of Tiburon Strategic Advisors.

Given that Genstar just recently acquired Cetera for $1.7 billion, “this is bad timing for” Moore’s departure, Roame explained. “That said, Ben Brigeman has been a Cetera chairman, Genstar advisor and longtime accomplished executive, so he seems to be a terrific bridge.”

Any bets on who will make the list of wanna-be Cetera CEOs? “I’d bet there will be many CEO candidates for this role,” the consultant said.

In a letter to ThinkAdvisor, Brigeman said Genstar had “full confidence in Cetera’s strategy and the strength of its management team,” citing 2018 performance that exceeded expectations and “record recruiting” in early 2019.

Advisor Anxiety?

Cetera has had a tough road over the past five years or so. It was bought by Genstar last year, about two years following the restructure of its operations.

These shifts happened after it became a stand-alone entity in the aftermath of the bankruptcy of former parent company RCS Capital (later renamed Aretec, or Cetera spelled backward).

RCS Capital, 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 non-traded REIT space that Schorsch was involved with became embroiled in an accounting scandal and related troubles, which spilled over onto RCS Capital.

Moore was tapped to be the group’s leader in September 2016.

“The Cetera advisors have to be getting whiplash from all of these major news stories impacting their company that they have no control over,” said Tim Welsh, head of the consultancy Nexus Strategy.

In Henschen’s mind, “No one likes the unknown, and this [development] adds a new unknown to what is happening at Cetera. You do not want it to go on for months.”

To attract advisors, Cetera has been paying “above the industry average” in terms of its upfront recruiting money — i.e., about 70 basis points on advisory assets for advisors with assets custodied at Pershing, according to the recruiter. “They have been spending more than rivals.”

The executive team at the IBD group needs to be sure technology and other promised improvements do not get held up. “There’s talk about things not being delivered in a timely manner,” he explained. “If advisors are not seeing things executed in a timely manner — and being delayed — that leads to frustration for the reps.”

Will advisors depart? “There may be some who do, because they are sick and tired of changes. But there shouldn’t be a mass exodus,” Nash said. “It comes down to how they execute daily, and Adam will be crucial in this respect.”

Advisors are hesitant to switch BDs given the paperwork and other headaches involved. “But there are breaking points,” the consultant said.

“Adam has to do some hand-holding, be in front of and talking to advisors to show that the firm cares.” That will keep advisors around, Nash added. “He’s done that well over the past few years, so most advisors have stayed. There’s been a trickle that have left, but most have remained because of the management team.”

— Related on ThinkAdvisor:

• Cetera Shares 2018 Recruiting Results, Sort Of
• Broker-Dealers to Make Big Push in 2019
• BDs ‘Gearing Up, Committing Dollars and Hiring Staff’ in 2019