RCS Capital Corporation, a New York-based broker-dealer that has upended the independent B-D world with its aggressive acquisition strategy (ticker symbol: RCAP), continues to amass assets and advisors. Wednesday it announced it is purchasing VSR Group Inc., a $12.3 billion Overland Park, Kan., advisory firm.
RCAP already has 9,000 advisors and $200 billion in assets under advisement.
Separately, the publicly traded RCAP announced financial results Thursday, and provided an update on the integration of its recently acquired broker-dealers.
The VSR deal, details of which have not been released, includes VSR Group’s wholly owned subsidiary, VSR Financial Services Inc. The transaction is expected to close in late 2014 or early 2015. VSR is known to generate much of its revenues from alternative investments so it would make sense that RCAP would find it an attractive target. Last year RCAP announced the acquisition of Hatteras Funds, an investment company specializing in managing liquid alternative mutual funds.
The move continues the acquisition spree of RCAP and its executive chairman, Nicholas Schorsch. VSR will become part of RCAP’s independent retail advice platform, known as Cetera Financial Group, which includes Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities, the Legend Group, Investors Capital Corporation, J.P. Turner & Company and Summit Financial Services Group.
VSR has more than $12.3 billion in assets under administration and 264 producing independent financial advisors with an average production of $380,000 per advisor.
"The acquisition of VSR will be another important addition to the RCAP retail advice platform," said Michael Weil, president of RCAP in a statement. "In recent years, VSR has been ranked in the top three in average production per financial advisor, according to IBD surveys, and we expect this combination to further strengthen RCAP's revenue streams. This transaction underscores our commitment to expanding the scope and depth of our financial services platform by acquiring top-tier independent broker-dealer platforms.”
Revenues for the second quarter totaled $884.2 million, up 31 percent from the first quarter, the company announced Thursday. Net income turned positive, at $9.4 million, reversing a loss of $7.4 million in the first quarter.
The firm recruited 272 advisors during the quarter, but lost 238 for a net gain of 34.
RCAP is making progress on integrating its acquired firms, and finding cost savings and synergies, said Larry Roth, chief executive officer of Cetera Financial Group, on a call with analysts.
A crucial part of boosting profit margins is squeezing vendors for price cuts and better revenue-sharing deals.
RCAP is targeting a run rate of $57 million to $65 million annually of what the company calls “revenue and expense synergies” by the end of the year.
The firm is “close to an agreement” with its clearing firm, Pershing LLC, on unspecified pricing cuts, said Brian Nygaard, chief operating officer. “We’ve had very constructive conversations [about] how to take the traditional pricing scheme of Pershing and reconfigure it.”
Roth expects additional savings and revenue in 2015 from new deals struck with technology and product vendors.
Despite the string of broker-dealers acquisitions, RCAP still gets about 37 percent of its revenue from its booming business of wholesaling direct-investment programs, primarily non-traded REITs.
Equity capital raised from its wholesale unit increased to $2.6 billion in the second quarter, up from $1.6 billion in the first quarter. The firm is on track to sell $12 billion of direct investments by year end, executives said.
"Financial advisors more than ever are looking to direct investments as a way to offer capital preservation and current income,” Weil told analysts. “We still see great upside in the second half [of 2014] from liquidity events as well as new producers" selling the products.