Insurer's B-Ds may be Cetera's next target

Cetera Financial Group is pursuing an acquisition of one or more broker-dealers, and industry sources say that two firms owned by insurance giant MetLife Inc. are logical targets. MetLife currently owns four independent broker-dealers: MetLife Securities Inc., New England Securities Inc., Tower Square Securities Inc. and Walnut Street Securities Inc. Since the end of last year, that network, known as the MetLife Broker-Dealer Group, has seen departures and reassignments of top management, including former broker-dealer chief John Brett, leading some to conclude that the broker-dealers could be up for sale. “Over the past couple of years, MetLife has been open to having strategic conversations” about the broker-dealers, said a brokerage executive who asked not to be identified. “However, I don't know what [MetLife] has done recently.” Other executives and investment bankers said they had no direct knowledge of Cetera negotiating to buy the MetLife broker-dealers, but that the insurer has been open to engaging in strategic conversations about those firms, particularly Tower Square and Walnut Street. Industry sources also agree that Cetera is in acquisition mode. “Cetera is looking to buy quality firms at an attractive price,” said Steve Insel, a partner at Elkins Kalt Weintraub Reuben Gartside LLP. “Cetera is in the consolidation mode. It has the capital to buy larger firms that other consolidators lack.” Mr. Insel, who said he has worked on more than 30 mergers and acquisitions of broker-dealers and registered investment advisers, said he has no direct knowledge of Cetera's intentions. MetLife spokesman John Calagna said the company “won't comment on rumors and speculation.” Cetera spokeswoman Shayna Inman said: “Although we can't comment on any opportunities at this time, Cetera is focused on growth both through recruiting and through potential acquisitions.” Tower Square and Walnut Street have affiliated representatives and advisers that are desirable for an independent broker-dealer such as Cetera because they work as planners and RIAs. The reps affiliated with MetLife Securities and New England Securities work much more as sales agents for MetLife. Overall, the broker-dealer group has 8,460 producing registered reps, most of them at MetLife Securities, according to the most recent survey of independent broker-dealers by InvestmentNews. The group accounts for a small part of the insurance company's overall business. Industry executives and analysts routinely state that Cetera is looking to mimic the largest independent broker-dealer, LPL Financial LLC, which private-equity buyers acquired in 2005 and then listed publicly in 2010 after a multiyear buying binge. Cetera's network of independent broker-dealers was born in 2010 when private-equity firm Lightyear Capital LLC, run by former PaineWebber Group Inc. chairman and chief executive Donald Marron, bought three broker-dealers from Dutch insurer ING Groep NV. It acquired one other broker-dealer in 2012. Insurance carriers, hoping reps at independent broker-dealers would sell their products, in the late 1990s bought a number of such firms. Those aspirations did not come to fruition, as many independent reps and advisers did not want to become the sales arm for an insurance company. Since the financial crisis, many insurance companies have sold their independent broker-dealers in order to refocus on core insurance businesses. Historic low interest rates have particularly hurt the bottom line of many independent firms, which traditionally have made a good deal of money on the spreads from money market funds.