Cetera offers new home for exiting insurer's 500 reps
Foresters Financial is leaving the U.S. independent broker-dealer business — and Cetera Financial Group hopes to reap the benefits.
Cetera aims to add 500 financial advisors to its bank and credit union channel from the insurer, the latest to exit the sector. The 7,500-advisor network — which is backed by private equity firm Genstar Capital — agreed to buy select assets of Foresters’ U.S. brokerage and RIA, the parties said April 9. They are not disclosing terms of the deal, which is expected to close late in the second quarter.
A major Foresters team decamped to LPL Financial a few days before the deal was announced. To appeal to the rest of the Foresters advisors managing more than $12 billion in client assets at 40 branches, Cetera will offer transition assistance, according to President Adam Antoniades.
Notable growth in Foresters’ advisory assets and its training capabilities for new entrants to the industry made the assets attractive to Cetera, Antoniades says, noting Cetera expects to retain many of Foresters' home-office employees and executives.
“Our perspective is that we have more of an open architecture platform, and these advisors can benefit from gaining access to an expanded solution set and expanded technology,” he says. “We think that these advisors really are just perfectly positioned to leverage the tool set and the solution set that we bring to bear around organic growth.”
Chairman Ben Brigeman, a member of Genstar’s strategic advisory board, began serving as interim CEO of Cetera last month after Robert Moore stepped down due to health reasons. Genstar paid a reported $1.7 billion for its majority stake in the Los Angeles-based firm last year.
In contrast to Advisor Group’s decision to fold Signator into its largest IBD, the assets and advisors from Foresters will come into Cetera’s bank and credit union-based IBD, Cetera Financial Institutions. That brand is the marketing name for Cetera Investment Services.
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Toronto-based Foresters follows other insurers who have recently exited from the IBD sector amid higher expenses and lower margins. Canadian firm Manulife and its subsidiary John Hancock sold Signator Investors to Advisor Group in one of last year’s biggest deals.
Foresters is also selling its asset management unit. Representatives for Foresters declined to comment beyond the press release announcing the two transactions. The company says there are 39 million under-insured households in the U.S., plus more in Canada and the U.K.
“With the announcement of today’s transactions, we will focus on innovation, new product development and the growth of our brand and market share in our core life insurance business,” Foresters CEO Jim Boyle said in a statement.
Cetera will maintain its existing distribution relationship with Foresters after the deal as well. The acquiring firm will use an “automated custody change” to transfer assets onto its IBD subsidiary’s self-clearing platform, according to Antoniades.
The firm expects to keep Foresters’ current structure otherwise intact as a distinct division within Cetera Investment Services, he says, expressing confidence Cetera can retain a significant portion of advisors and the “vast majority” of the branches.
He directed questions about the departing team to Foresters, which had no comment. Portland, Oregon-based Firenze Wealth Management founders Carrie Mullins and Sara Tanner and three other advisors left Foresters for LPL on March 29, according to FINRA BrokerCheck.
The team manages roughly $390 million in brokerage, advisory and retirement-plan assets. Firenze joined Good Life Companies, an LPL office of supervisory jurisdiction and enterprise supporting its collaborating group of advisors.
“LPL’s culture fits with our values and we believe they are the best choice to help us provide our clients with objective advice in the independent model,” Tanner said in a statement. “With LPL we get access to best practice solutions that can promote our growth, and our partnership with Good Life supports our commitment to community outreach.”
M&A deals often result in advisors choosing alternate paths than to the acquiring firm, however. Cetera’s six IBDs recruited a combined 194 advisors from National Planning Holdings after LPL acquired the NPH network’s assets in 2017.
In addition to the existing Foresters staff making the transition, Cetera Financial Institutions Executive Vice President of Business Development Sean Casey will lead the Foresters division and report to President LeAnn Rummel.
As Cetera’s third-largest IBD and a member of its so-called “specialty” channel, Cetera Financial Institutions’ 1,654 producing representatives generated $284 million in revenue in 2017, according to Financial Planning’s most recent FP50 survey of the largest IBDs.
Cetera will support the transition of the Foresters reps, but unlike traditional M&A deals, the firm won’t offer retention bonuses, Antoniades notes. He calls the deal a “further testament” to Genstar’s growth investments in Cetera and said it would keep Foresters’ culture intact.
“We don’t want to disrupt the dynamics that exist within the advisor community,” Antoniades says. “It looks and feels very consistent with the business model that's in place at Cetera Investment Services already.”