Cetera Financial Group continues to build its broker-dealer network, this time with plans to acquire an independent broker-dealer that focuses on tax and accounting.
Cetera Financial said last Monday that it is acquiring Genworth Financial Investment Services Inc., which has nearly 2,000 independent representatives and financial advisers, most of whom are tax and accounting professionals.
Genworth Financial Investment Services, which will have a new name in the coming months, is the independent-broker-dealer subsidiary of insurer Genworth Financial Inc.
According to a statement on Genworth Financial's website, Cetera Financial paid $78.5 million, plus an earn-out provision, for the broker-dealer. The earn-out is based on the broker-dealer's hitting certain revenue goals over a one-year period.
Genworth Financial said that it expects to record a $15 million after-tax gain related to the sale of the broker-dealer.
The acquisition, which is slated to close in 90 days pending regulatory approval, increases by more than half the head count of registered reps and investment advisers affiliated with the three broker-dealers under the Cetera Financial umbrella. The other broker-dealers are Financial Network Investment Corp., which has 1,800 reps and advisers, PrimeVest Financial Services Inc., with 1,400, and Multi-Financial Securities Corp., with 1,000.
ADDING REPS
Cetera Financial has been busily adding reps of late.
Last month, it said that it had an exclusive recruiting agreement for the advisers at Pacific West Securities Inc., which is scheduled to shut down by March 1. That firm had 290 reps and advisers.
Genworth Financial Services, which produced $105.9 million in gross revenue in 2010 and ranks as the 16th-largest independent broker-dealer in the business, will remain a stand-alone B-D, said Valerie Brown, chief executive of Cetera Financial.
“Tax and accounting professionals are well-positioned in the retirement crisis,” she said.
“More than ever, tax professionals are in a good position for quarterbacking” clients' investment needs, Ms. Brown said.
“In this industry and with the current economic environment, to stay leading-edge to your clients, you need a wealth management partner to stay in front with technology,” she said.
Staying on top requires “scale and focus,” Ms. Brown said.
Tax and accounting professionals aren't typically large-producing brokers but are coveted in the industry for their relationships with clients. Indeed, private-equity fund Parthenon Capital Partners said in June that it was buying H.D. Vest Financial Services Inc., the largest broker-dealer that employs primarily tax professionals and accountants.
Last year, 244 of Genworth Financial Investment Services' reps and advisers produced between $100,000 and $499,000 in fees and commissions, while just 13 produced more than $500,000, according to the most recent InvestmentNews survey of broker-dealers.PROVIDING SCALE
Enrique Vasquez, chief executive of the Genworth broker-dealer, said that the acquisition gives the firm and its advisers needed scale.
“Our business needs scale to continue to invest in the platform, and Cetera provides that,” he said. “Look at their advisory platform and technology — they are industry-leading and complement the turnkey solutions we have today.”
Genworth Financial, meanwhile, recently has been cutting back on noncore business.
A year ago, company management said that the insurer was ending sales of retail and group variable annuities.
The insurer also suspended sales of its linked-benefit product, which was a combination of an annuity product with long-term-care features.
bkelly@investmentnews.com
