By Andrew Welsch
Cetera had a banner year in 2023. The network of broker-dealers boosted the number of financial advisors it works with by 50%, from 8,000 to 12,000, largely via acquisitions. Mike Durbin, the chief executive officer of Cetera Holdings, sees more room to grow -- and potentially more acquisitions in Cetera's future.
"As the market consolidates, we are in a position that we will be invited to take a look at anything that comes to market because of our record on transitions" Durbin tells Barron's Advisor.
Large brokerage businesses such as Cetera and rival LPL Financial are benefiting from continuing industry consolidation as smaller firms feel the pinch of rising technology and compliance costs and seek well-capitalized suitors. An influx of private-equity money has helped fuel the trend. (Cetera's private-equity backer, Genstar Capital, reinvested in the company last year.)
Last year, the company closed acquisitions of insurance company Securian Financial's retail wealth management business; Avantax, a tax-focused wealth manager; and The Retirement Planning Group, an RIA. Those deals added not just scale, but also more capabilities for Cetera's advisors and clients, according to Durbin, who joined the San Diego-based company a year ago. Cetera now has about $500 billion in assets under administration, Durbin says.
Cetera's acquisitions may also tee-up future deals. In February, The Retirement Planning Group acquired Dightman Capital Group, an RIA based in Overland Park, Kan., that had $61 million in assets under management, according to its Form ADV filed with the SEC. That was The Retirement Planning Group's first acquisition of another RIA since it joined Cetera.
Durbin says The Retirement Planning Group will pursue more deals because there are thousands of small RIAs that are looking to join a larger organization, either because they are burdened with the costs of running a small business or because they are looking for help with succession planning.
Cetera's acquisitions over the years have broadened its capabilities and given it multiple custodial relationships, which make it easier to make future acquisitions, Durbin says. "With the [Avantax] acquisition came a Fidelity custody and clearing relationship, and we want to not just keep that but build on it," he says. "It's not a traditional integration where we wanted to lift up that business and take it elsewhere."
The Retirement Planning Group will also help with internal succession planning for Cetera advisors who want to sell their practices to Cetera.
Cetera operates multiple broker-dealers in order to serve different groups including traditional independent advisors; enterprises, banks, and financial institutions; RIAs; and tax-focused wealth managers.
"Cetera is seeking to put in market the widest range of affiliation models advisors might need," Durbin says. This way it can appeal to a wider range of potential recruits and offer existing Cetera advisors more options for how to structure their practice, he says.
The company has been slowly consolidating the number of broker-dealers it operates. At its peak, Cetera had 11 broker-dealers, a legacy of past acquisitions. "We were down to four before we did the Avantax deal," Durbin says. Cetera has opted to operate Avantax as something of a standalone entity, which Durbin says has minimized disruptions for advisors and clients.
In addition, Cetera operates what it calls "communities" within its broker-dealer units. They're akin to affinity groups for advisors, bringing together like-minded practitioners. "That is how we make the big feel small," Durbin says.
An IPO could be in Cetera's future, Durbin acknowledges, but he says that with the recent reinvestment by PE backer Genstar, his focus is elsewhere. "We don't have to worry about that. We just have to execute."
Write to Andrew Welsch at andrew.welsch@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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May 01, 2024 08:00 ET (12:00 GMT)
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