May 20, 2016
By Bruce Kelly, Investment News
People inside and outside the company say word of the new chairman has already given a lift to morale of advisers
The pending appointment of Robert Moore, an experienced broker-dealer executive, to serve as chairman of Cetera Financial Group, could help the embattled B-D restore its brand and has already given a lift to the morale of its advisers, according to people both inside and outside the company.
A source familiar with Cetera’s plans told InvestmentNews this week that Mr. Moore, the former president of the nation’s largest independent broker-dealer, LPL Financial, would be named non-executive chairman in the coming weeks as the board is revamped.
Cetera moved one step closer to implementing those plans Thursday after its parent company, RCS Capital Corp., or RCAP, won court approval for its bankruptcy plan. Under the plan, Cetera would operate as a privately held company controlled by the holders of RCAP’s debt.
“It’s been disconcerting for Cetera advisers with all the change taking place at the company,” said William Boland, senior analyst at the Aite Group. “What is he there to do? Restore the brand. Cetera isn’t all that different a business from LPL. They work with a lot of hybrid advisers. This is only a board seat, but his leadership is welcome.”
“I’ve heard very upbeat things from the rep base [about Mr. Moore joining the board], at least from those folks at the branch,” said one Cetera adviser, who asked not to be named. “They are very positive about what LPL offered and they know Cetera has to improve its game, so why not get someone who can move the pile forward?”
Mr. Moore resigned as president of LPL Financial in March 2015. He was expected to take over as CEO of LPL from Mark Casady, but did not get the nod from LPL’s board. Mr. Moore is currently the CEO of Legal & General Investment Management America, an institutional money manager. He is expected to continue in that role while serving as Cetera’s chairman.
Meanwhile, the consolidation of Cetera’s broker-dealers is beginning. Known for selling alternative investments like nontraded real estate investment trusts, VSR Financial Services Inc. will be merged into another Cetera firm, Summit Brokerage Services Inc., according to sources.
Summit reported $111 million in revenue last year, according to the most recent survey of broker-dealers by InvestmentNews. VSR Financial last responded to the survey in 2013, when it reported $107.3 million in revenue.
Likewise Investors Capital Corp. will be merged into Cetera Advisors. The former is home to 458 advisers and produced $98.8 million in revenue in 2015; the latter has 1,180 reps under its roof and last year produced $297.6 million in revenues. Both firms clear with Pershing.
“We will be selective with respect to the advisers invited from these firms to affiliate with our network’s other broker-dealers, in order to ensure the best fit possible with our company’s broader mission and values following the completion of our transformation process,” wrote Cetera spokesman Joseph Kuo in an email.
Consolidating operations at the Cetera broker-dealers has been expected as a way to reduce costs. J.P. Turner was merged into Summit last year, but only those J.P. Turner advisers invited to join Summit made the move.
Advisers and industry executives pointed to Mr. Moore’s time at LPL Financial as an indication that Cetera was serious about improving its business and its financial returns. They noted that LPL is self-clearing, which improves its profitability, while only one of Cetera’s firms, Cetera Financial Institutions, is self-clearing.
Mr. Moore joined LPL in 2008 and was its chief financial officer in 2010 when the company had its initial public offering and listed on the Nasdaq. Could a similar end-game be in Cetera’s future now that Mr. Moore is involved with the company?
“The Cetera group is big enough to bring public and [Mr. Moore] lived through that at LPL,” said Jonathan Henschen, an industry recruiter. “That would be a good project for him.”
Mr. Moore brings a wealth of experience in the financial services industry to Cetera, which, before its current consolidation, had been home to 10 broker-dealers and 9,000 advisers. Prior to LPL, Mr. Moore served as CEO and chief financial officer of ABN AMRO North America and LaSalle Bank Corp.
RCAP filed for bankruptcy protection in January. The company was bloated with hundreds of millions of dollars in debt following a broker-dealer buying binge by its former controlling shareholder, Nicholas Schorsch, who is no longer involved in running the company.
The purpose of RCAP’s Chapter 11 bankruptcy was to improve the company’s balance sheet, reduce debt and dump certain non-brokerage assets.
David Orlofsky, chief restructuring officer of RCAP and senior managing director of Zolfo Cooper, did not comment directly about Mr. Moore becoming chairman of the new company.
The company is putting in a new board, he wrote in a statement.
“Given Cetera’s strong value proposition, we’re confident that the new board will attract highly respected individuals,” Mr. Orlofsky wrote. “Beyond that, it would be premature to publicly discuss any details until board composition is finalized.”