The independent broker-dealer marketplace is settling in to watch two of its leading networks, Cetera Financial Group and LPL Financial, duke it out for the assets of 900 wealth management registered reps and financial advisers sitting for the moment at Voya Financial Advisors, which Cetera said this month it was buying the rights to.
When Cetera announced the Voya transaction on Feb. 8, its CEO Adam Antoniades, told InvestmentNews that it intended to offer transition assistance to those advisers. Such transition assistance is commonly referred to as a “stay bonus” for advisers in the retail securities industry. Advisers have to stay with the acquiring firm over a period of years to collect the entire bonus.
Broker-dealer acquisitions present recruiting opportunities for rivals, and it sounds like Cetera will face stiff competition from LPL for at least some of those Voya advisers, according to several market sources contacted this week, including those inside and outside of Voya.
Cetera Financial Group is offering what some executives and advisers characterized as a standard range or package of transition money to the Voya advisers, while LPL, the largest independent broker-dealer, is continuing to flex its muscle.
Cetera’s offer is based on an adviser’s prior 12 months of fees and commissions, known as gross dealer concession or GDC, in the industry, while LPL’s transition package is based on a combination of assets and prior year’s revenues. LPL has been favoring making selective recruiting offers to advisers for the past couple years based on adviser assets, and that structure can be turn into more dollars for the adviser.
For example, an adviser with $100 million in assets is likely to generate in the neighborhood of $1 million per year of GDC. Cetera is offering transition money to that Voya adviser of 30% of GDC greater than $1 million, or $300,000, in a note over five years, according to several sources.
But that same adviser at LPL could see a transition offer of 70 basis points on assets, or $700,000, in a forgivable note over nine years, which translates into more than twice as much as Cetera’s top offer, according to several sources.
Cetera’s transition offer to Voya advisers rounds out in the following manner, sources said. Those advises who generate $500,000 to $1 million in GDC will receive transition assistance of 20 basis points of annual production, and those with $150,000 to $499,000 receive 10 basis points. Any Voya adviser producing less receives no transition money from Cetera.
A Cetera spokesperson did not comment about the details of the transition package for the Voya advisers. “Cetera is committed to providing Voya financial professionals a smooth transition, leveraging the legal and operational benefits of the acquisition framework,” the spokesperson wrote in an email.
“LPL offers a highly competitive transition package that is tailored to the adviser,” a spokesperson said.
Cetera Financial Group is a network of five broker-dealers with about 8,000 reps and advisers. LPL has more than 17,000 reps and advisers on its platform.
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