Believe it or not, it's been less than a year since real estate investor Nicholas Schorsch and his business partners started making headlines for their M&A moves in the independent broker-dealer space. (They've been in the news a lot over the past 11 months.)
In June 2013, RCAP Holdings said it planned to buy First Allied Securities and the Legend Group from Lovell Minnick Partners, a private-equity group. RCAP Holdings owns Realty Capital Securities, a wholesale broker-dealer and affiliate of American Realty Capital Properties.
Now, the Realty Capital organization has four more IBDs under its umbrella (though the deals are pending): Cetera Financial Group, Investors Capital, J. P. Turner and Summit Financial Services. This means it has close to 9,000 independent advisors serving about 2.5 million investors.
(RCAP announced on Tuesday a major shift in its IBD leadership structure: CEO Valerie Brown of Cetera will step down, and Larry Roth, who moved from AIG's Advisor Group less than a year ago, will be CEO of the entire IBD network. – Ed.)
Schorsch, who serves as executive chairman of RCS Capital, sees this retail strategy as a natural extension of his wholesale business. "In 2007, my partners and I perceived an opportunity to build an open architected, wholesale broker-dealer to distribute best-in-class investment solutions," he said in a press release last year.
"We believe that the challenges and opportunities we witnessed in the wholesale distribution channel exist in the broader retail network as well, and we see value and opportunity for growth in a paradigm shift toward a sustainable direct relationship between the mass affluent investor and their independent financial advisor," he explained.
Also in 2013, Realty Capital Securities recruited Larry Roth from Advisor Group, the 6,000-rep independent broker-dealer network owned by AIG, to become its CEO. "At Realty Capital Securities, the focus is on taking institutional investments and bringing them to Main Street," said Roth in an interview.
Back in 2007 and 2008, Schorsch and his business partners, including William Kahane, "saw the opportunity, and they acted on it—when many might have been afraid, they jumped in," Roth noted. "When it comes to business, it's all about timing and talent."
As a manager, Schorsch is very supportive of those he works with and is big-picture oriented, according to the Realty Capital Securities CEO: "He understands what businesses we need to be in and that all the investments in our programs need to do well. He expects everyone to work hard. If you make a mistake, he may or may not mention it. He's a perfect gentleman."
That's not quite the image of some other real estate tycoons, though Roth wouldn't comment on them. Schorsch "is a family man, who works hard and tries to eat dinner with his wife [Shelley] every night," he noted.
"He's a driven and very inspirational leader," Roth explained. "He leads from the front and doesn't ask others to do what he doesn't do himself. As I get to know him, I realize people love to work for and with him."
