Broker-dealer experts have wondered which deal real estate investor Nicholas Schorsch and RCS Capital Corp. (RCAP) were likely to add to the "done" list in the final months of 2013, and Schorsch answered that question early Monday: Summit Financial Services Group (SMMF) for $49 million.
When asked why RCAP has grabbed up Summit and Investor's Cap, "The reasons are fairly simple," Schorsch said in an interview with ThinkAdvisor. "They're both terrific companies, and both are public … which means there's a lot of transparency around their performance and transactions … More important, they are a good fit for us, given their [reach] up and down the East Coast."
Industry experts had expected that NEXT Financial would be, well, next on the list; they note that NEXT could still be bought this year, since there are about six weeks left on the calendar.
"They're on a tear," said Jon Henschen, a recruiter who specializes in placing reps with independent broker-dealers. "They bought First Allied, brought in Larry Roth from the AIG-owned Advisor Group, acquired Investor's Capital [for $52 million] and now are buying Summit. This is a lot of purchases in a short amount of time."
According to RCAP, Summit has more than 300 financial advisors in 230 offices and over $7.5 billion of assets under management.
How is RCAP able to win over new BDs? "They promise to buy the BD and leave things alone, which can be very attractive," Henschen said.
Plus, at publicly traded firms like Investor's Capital (ICH) and Summit, advisors get stock options based on production. "So reps should be getting a piece of the pie" from these deals, the recruiter said.
With former IBD executive Roth at the helm of Realty Capital Securities, the nontraded REIT broker-dealer and wholesaler arm of RCS Capital, the acquired BD could see some changes. "He could help consolidate or advocate for consolidating some back-office operations," Henschen noted, but wouldn't want to tinker too much with Summit's reputed high level of advisor support.
