Calton & Associates Inc., a small broker-dealer and registered investment advisor, has been acquired by a group of executives, spearheaded by independent brokerage veteran John Simmers, that plans to use the firm as a launching pad for serving the small to midsize independent broker-dealer and hybrid investment advisor market.
Simmers says his group's new opportunity stems from dysfunction in the small B-D world. Smaller firms' profit margins are being sliced razor thin and they can't afford to hook up to the platform of a larger company. Calton, under new management, plans to offer a platform of services to those companies to help them stay competitive.
"The focus for our expansion into the independent space is really going after that $20 million to $100 million broker-dealer or investment advisor that is struggling right now, but wants to keep its brand, has a company that it believes in and wants to stay in business and be competitive," Simmers says. "To do that, it has to reduce its risk profile and has to increase its margin for profit."
Simmers, 61, co-founded and helped lead the independent broker-dealer known as Financial Network Investment Corp., which eventually became part of the ING Advisors Network. In his new venture, he has teamed up with Scott Sherwood; the two will serve as co-chairman of Calton & Associates Inc. to help it become an independent broker-dealer and hybrid RIA, offering an independent platform of services to outside firms. "We wanted to create a viable alternative for advisors to PE consolidators and serial acquirers," Simmers says.
Calton, which has been in business for more than 20 years, is managed by Dwayne Calton. The firm generates around $15 million in annual gross revenue and has $2 billion in assets under administration. Calton currently has about 180 advisors. After its acquisition, the group will change Calton's name to Innovation Equity Partners Financial, or IEP Financial.
In addition to Simmers and Sherwood, the new management team will comprise Dwayne Calton; Randy Ciccati, the former president and CEO of PrimeVest Financial Services; Keith Gregg, the former president and CEO of First Allied Securities; and Ramu Singh, the former chief operating officer of Rady Asset Management LLC.
Simmers says the group bought Calton because it didn't want to start from scratch. This way, they could cut down on costs, red tape and start-up time.
"We could start a broker-dealer; we all know how to do that," Simmers says. "But the process to get that is six to nine months minimum, and you get loaded with new restrictions and have higher capital.
"Calton is ideal from our perspective because it fits the mold of that smaller broker-dealer that can benefit from shared services," Simmers says.
Simmers says IEP Financial is getting calls from both wirehouse brokers and fee-only advisors. "Growth will come on the Calton side, not through an army of recruiters, but through relationships and word of mouth," he says. "We think that will produce great growth."