February 19, 2014, By Bruce Kelly, Investment News
Retention plan includes stock ownership and as forgivable loan program
In a highly anticipated move, RCS Capital Corp. said that it intends to create a retention package for the 9,000 registered representatives and investment advisers, many of whom it has inherited from a series of acquisitions.
RCS Capital and related entities have been on a buying binge of broker-dealers over the past seven months, completing one acquisition while four others are pending and on track to close by midyear. Such broker-dealer acquisitions can prove highly sensitive and contentious as reps and advisers question the new ownership.
It is customary to offer reps and advisers some sort of compensation for them to stay on the job for a number of years.
Nicholas Schorsch, who five years ago began shaking up the nontraded real estate investment trust industry, is the executive chairman of RCS Capital. He is also chairman and chief executive of REIT sponsor American Realty Capital, which distributes its products through dozens of independent broker-dealers.
The package to attract and retain financial advisers has two facets: a stock ownership plan and a business development loan program, according to the filing with the Securities and Exchange Commission, which was filed Feb. 13.
“We intend to implement a stock ownership plan for our financial advisers under which financial advisers will be eligible for the grant of options or stock which will vest over a period of time and will be designed to encourage financial advisers to remain on our retail advice platform,” the company said in the filing. “In addition, as another mechanism to encourage financial advisers to remain on our retail advice platform, we intend to establish a business development loan program under which we will make loans to financial advisers to help them develop their businesses, which will be forgivable under some circumstances if the financial advisers attain milestones.”
Last June, RCAP Holdings said that it was purchasing First Allied Holdings network, which includes 1,370 reps and advisers, later valuing that deal at $207 million.
In October and November, respectively, RCS Capital said that it agreed to buy Investors Capital Holdings Inc., with 550 reps, and Summit Financial Services Group Inc., with 310 reps. Those two deals remain pending.
RCS Capital and Mr. Schorsch made their biggest splash last month when they announced their intention to acquire Cetera Financial Group, with 6,600 reps and advisers, for $1.15 billion.
The next day, RCS Capital said that it agreed to acquire a much smaller broker-dealer, J.P. Turner & Co., with 325 reps, for $27 million.
During a conference call with analysts last week to discuss earnings, RCS Capital executives said that they had seen no meaningful attrition of reps and advisers from the broker-dealers either acquired or in the acquisition pipeline.
No specific details of the retention plan have yet to be disclosed, said company spokesman Tony DeFazio.
Industry recruiters, always watchful for advisers moving after an acquisition, said that RCS Capital’s retention plan was constructive for both the firm and the advisers.
“Anything that shows you are embracing the adviser is a huge positive,” said Larry Papike, president of recruiting firm Cross-Search.“Stock ownership is a good one, and a business development loan program is also compelling, particularly as the industry is faced with an aging rep force and succession planning becomes more important,” said Jonathan Henschen, an industry recruiter.