Cetera Financial Group plans to acquire Genworth Financial Investment Services, a unit of Genworth Financial that partners with tax and accounting professionals who provide financial planning and investment advice to clients.
Financial terms of the acquisition were not disclosed. The proposed acquisition is scheduled to close within the next 90 days, depending on regulatory approval.
The GFIS unit, which includes about 1,800 advisors, will become Cetera’s fourth investment advisory and broker-dealer firm, including Financial Network Investment Corporation, Multi-Financial Securities Corporation, and PrimeVest, which services financial institutions. Cetera has a total of about 5,000 advisors.
“The thing that brought us together is the desire on both of our parts for continued growth, and supporting independent financial advisors as they help Americans through their retirement challenges,” Cetera CEO Valerie Brown said in an interview Monday with Accounting Today. “They say this is a tough time in planning for retirement. Bringing more tools and capabilities into the advisors’ hands is critical.”
She noted that Cetera wanted to acquire GFIS because of its focus on tax and accounting professionals.
“The accountant and tax professional is extremely well positioned to be the financial quarterback for their clients, and working with GFIS we think we can support them in doing that job even better than they do it today,” said Brown.
The acquisition also promises to help GFIS target larger accounting firms and give the accounting and tax professionals who work with GFIS access to more services.
“What we’re most focused on now is the small to midsized firm where you have two to nine partners,” said GFIS president and CEO Enrique Vasquez. “That’s where we think there’s a great growth opportunity for our business. But this is most of all about serving our existing client base, which is that solo practitioner, with the services we have today and enhancing it with the Cetera organization.”
GFIS and Cetera estimate there are 50,000 accountants and tax preparers providing some form of financial planning, but they believe there is room for many more to get involved in providing such services
The combined firm will have about $88 billion in assets under administration and approximately 6,800 financial advisors. GFIS will remain an independent broker-dealer and registered investment advisory firm, but the name of the firm will change after the transaction closes. It will continue to maintain a partnership with Genworth on investments and insurance, even though the unit will no longer be owned by Genworth. The unit was formerly owned by General Electric, but was acquired by Genworth in 1998. Genworth will continue to provide wealth management and asset management services to GFIS and its advisors.
The agreement is part of Genworth’s ongoing efforts to focus on where it has the strongest value propositions and strength in its capital flexibility and risk buffers to enhance its shareholder value, according to a Genworth spokesman.
GFIS isn’t the only accountant-focused investment advisory firm to change hands in the past year. Last June, H.D. Vest announced it was being sold by Wells Fargo to Parthenon Capital Partners (see H.D. Vest to be Acquired by Parthenon).
“In general in this marketplace—because of a lot of the pressures where the interest rates are low, the market is very volatile, clients are more anxious than in the financial crisis, and the regulatory environment has continued to place significant new requirements on the industry—it is becoming tougher to thrive unless you have scale in that broker-dealer RIA space,” said Brown. “What you are seeing is firms seeking scale so that they can have the financial wherewithal to invest and continue to support the business. That’s one of the benefits that Cetera brings to GFIS, and that is very important to our long-term sustainability in the marketplace. That scale allows us to continue to re-invest for technology and regulatory enhancements, as well as education for our advisors.”
Both GFIS and Cetera plan to be careful to limit any disruption in the business of their advisors during the transition. Brown pointed out that both firms use the same clearing provider, Pershing, and Cetera will maintain the current desktop used by GFIS advisors.
“We believe the disruption to the advisors’ current practice will be very minimal, if at all,” she said.
Cetera also plans to maintain GFIS’s current staff and headquarters in Schaumburg, Ill. “We are absolutely excited about the quality of the people here in Schaumburg,” said Brown. “This team and the advisors will have the opportunity over time to access a lot of the other capabilities that the Cetera partnership or marriage brings to the advisors and we will make those available when the time is right.”
GFIS currently has approximately 100 associates supporting its 1,800 advisors around the country. Cetera has 600-plus employees supporting 5,000 advisors, while its PrimeVest unit has 700 banks, credit unions and other financial institutions as clients.
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