RCS Capital Corp. and clearing giant Pershing have reached an agreement in which Pershing
will remain the main clearing firm for RCAP's growing network of independent broker-dealers.
During an investor conference on Monday, RCAP chief operating officer Brian Nygaard addressed the company's effort to meet various cost savings and synergies that it had outlined earlier this year. In a March filing with the Securities and Exchange Commission, RCAP stated it could wring out “$4.3 million to $6 million in clearing expense efficiencies.”
While not going into specifics about the agreement, Mr. Nygaard said at the Barclays Global Financial Services Conference in New York that RCAP had “a new relationship” with Pershing that was akin to becoming a self-clearing broker-dealer.
“We have developed a new relationship … with Pershing,” Mr. Nygaard said. “Essentially, we are looking to capture the advantages that would put us in an economic situation where you can arguably say the economics are consistent with what they would be had we been self-clearing.”
According to InvestmentNews data, RCAP is Pershing's largest retail broker-dealer client. The six RCAP broker-dealers that use Pershing as a clearing firm had a total of $163.7 billion in total account assets at the end of last year. When RCAP purchased the Cetera Financial Group network of broker-dealers earlier this year, some speculated that the network would become self-clearing in order to increase profitability and efficiency. However, that would have required RCAP to make large investments in staff and systems.
“We have developed a new pricing arrangement with Pershing, which we refer to as synthetic clearing, and we think provides us with the advantages on the economic side,” Mr. Nygaard said. “But maybe more critically if you look at what it takes in this industry to support self-clearing, you recognize a lot of the investment goes into establishing a core operating platform that is basically a commodity. We would rather take those available investment dollars and use them to build … capabilities that actually add value at the adviser level.”
An RCAP spokesman, Matt Goldstein, said the company was unable to elaborate on Mr. Nygaard's comments about “synthetic clearing” because the deal with Pershing has not yet officially closed.
Paul Patella, a spokesman for Pershing, did not return a call to comment.
