Moore's Exit Raises Deeper Questions at Cetera

News February 20, 2019 at 02:45 PM
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Robert "RJ" Moore. Robert "RJ" Moore.

Cetera Financial Group's news that CEO Robert "RJ" Moore is stepping down for health reasons is raising lots of questions from industry insiders.

The development comes less than four months after the private-equity firm Genstar Capital acquired a majority stake in Cetera, which has more than 7,000 affiliated independent advisors, and a series of changes and much-publicized issues in recent years.

"They have weathered so many storms, and it seemed like they finally had bluer skies ahead. Now there's another storm," said industry consultant Jeff Nash, CEO of Bridgemark Strategies.

Industry consultants and recruiters are asking what's next for leadership, as well as for retention and recruiting at the group of independent broker-dealers.

"Who will they bring in?" asked recruiter Jon Henschen. "You need a visionary, charismatic leader who is good at building consensus and rallying advisors together."

According to the independent broker-dealer group, Moore does not have a terminal illness. Chairman Ben Brigeman will take over as CEO on an interim basis on March 31, while the executive search firm Heidrick & Struggles helps the independent broker-dealer group permanently fill the position.

"Why not [Cetera President] Adam Antoniades, who has a lot of those qualities?" Henschen said. "I would have thought they would move Adam in [to the CEO role] given his deep understanding of the industry and Cetera's competitors."

The IBD group is not disclosing details about its CEO search. It said in a statement: "The board has complete confidence in the capabilities of Adam Antoniades in his role as president, in which he is primarily focused on driving forward Cetera's aggressive growth goals, as well as overseeing strategy and innovation for the organization."

Still, Henschen says, Antoniades has been in an executive role "throughout all the battles — he's got the background and is good at talking with advisors, so I thought they would promote from within."

Antoniades has been president of Cetera since April 2014 and of First Allied Securities since 1994. "Maybe he is not interested because of time demands," Henschen said.

But Nash thinks there is more to the situation. "They could add him as a candidate to the pool" of potential CEOs, he explained. "There is a lot of talent in the marketplace, so it makes sense they did not automatically move him into that role."

Could Cetera be looking for an executive with experience leading a publicly traded broker-dealer? Not necessarily, according to Nash.

"LPL Financial President and CEO Dan Arnold did not run a public company before he was tapped for the CEO slot," the consultant said. "He had very little experience as the CFO of a public company [at LPL] and then became president and later CEO."

While Nash sees Antoniades as an executive who "certainly knows the advisors and the company" he helps lead, "I see the logic in looking around to find a better CEO who can turn the company around."

Cetera's actions in conducting a search seem to indicate that they are looking for public-company experience or CEO experience that they can add to the firm's talent mix. "Let's test the marketplace first," Nash explained, "by going through the search process. Adam isn't going anywhere."

Firms like LPL have brought in lots of outside talent, he adds. And Raymond James Financial, for instance, did a search when its CEO, Tom James, began making his retirement plans.

"RJ had terrific experience to take on Cetera, having served as No. 2 under Mark Casady at LPL," said Chip Roame, head of Tiburon Strategic Advisors.

Given that Genstar just recently acquired Cetera for $1.7 billion, "this is bad timing for" Moore's departure, Roame explained. "That said, Ben Brigeman has been a Cetera chairman, Genstar advisor and longtime accomplished executive, so he seems to be a terrific bridge."

Any bets on who will make the list of wanna-be Cetera CEOs? "I'd bet there will be many CEO candidates for this role," the consultant said.

In a letter to ThinkAdvisor, Brigeman said Genstar had "full confidence in Cetera's strategy and the strength of its management team," citing 2018 performance that exceeded expectations and "record recruiting" in early 2019.

Advisor Anxiety?

Cetera has had a tough road over the past five years or so. It was bought by Genstar last year, about two years following the restructure of its operations.

These shifts happened after it became a stand-alone entity in the aftermath of the bankruptcy of former parent company RCS Capital (later renamed Aretec, or Cetera spelled backward).

RCS Capital, led by then Executive Chairman Nicholas Schorsch, bought Cetera for $1.15 billion from Lightyear Capital in 2014. Later that year, an entity in the non-traded REIT space that Schorsch was involved with became embroiled in an accounting scandal and related troubles, which spilled over onto RCS Capital.

Moore was tapped to be the group's leader in September 2016.

"The Cetera advisors have to be getting whiplash from all of these major news stories impacting their company that they have no control over," said Tim Welsh, head of the consultancy Nexus Strategy.

In Henschen's mind, "No one likes the unknown, and this [development] adds a new unknown to what is happening at Cetera. You do not want it to go on for months."

To attract advisors, Cetera has been paying "above the industry average" in terms of its upfront recruiting money — i.e., about 70 basis points on advisory assets for advisors with assets custodied at Pershing, according to the recruiter. "They have been spending more than rivals."

The executive team at the IBD group needs to be sure technology and other promised improvements do not get held up. "There's talk about things not being delivered in a timely manner," he explained. "If advisors are not seeing things executed in a timely manner — and being delayed — that leads to frustration for the reps."

Will advisors depart? "There may be some who do, because they are sick and tired of changes. But there shouldn't be a mass exodus," Nash said. "It comes down to how they execute daily, and Adam will be crucial in this respect."

Advisors are hesitant to switch BDs given the paperwork and other headaches involved. "But there are breaking points," the consultant said.

"Adam has to do some hand-holding, be in front of and talking to advisors to show that the firm cares." That will keep advisors around, Nash added. "He's done that well over the past few years, so most advisors have stayed. There's been a trickle that have left, but most have remained because of the management team."

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