After 28 years in business, First Allied Securities, a San Diego, Calif.–based independent broker/dealer owned by Cetera Financial, has dropped its registration. Parent company Cetera withdrew the firm’s registration from the Financial Industry Regulatory Authority and transitioned its affiliated reps to Cetera Advisors, one of its subsidiaries.
A spokesman for Cetera declined to comment on the action. First Allied’s website reads, “First Allied has joined Cetera Advisors as of September 12, 2022. You will be redirected to Cetera Advisors shortly.”
First Allied was founded in 1994 as a private company; Adam Antoniades, current CEO of Cetera, was a co-founder and served as CEO of First Allied until 2014. According to InvestmentNews data, the b/d had 597 producing reps as of 2018.
First Allied reps have seen a lot of change over the years. In 2002, Wells Fargo bought FAS Holdings, which included First Allied Securities, to try and expand its roster of wealthy clients, according to the Sacramento Business Journal. In 2005, Wells Fargo sold the b/d to Advanced Equities Financial Corp., the Chicago-based venture capital investment bank, according to the San Francisco Business Times.
In August 2011, First Allied spun out from Advanced Equities, and private equity firm Lovell Minnick bought a majority stake in the firm. In 2013, Lovell Minnick sold First Allied Holdings, which included the b/d as well as The Legend Group, to Nicholas Schorsch, the CEO of the now-defunct RCAP Holdings, a sister company of Schorsch’s nontraded REIT sponsor, American Realty Capital.
First Allied was the first IBD purchased by Schorsch, whose RCAP Holdings went on an acquisition binge, buying several more broker/dealers, including Cetera.
But RCAP became mired in controversy in October 2014, when Schorsch’s REIT company announced a $23 million accounting error. In November 2015, a unit of the company, Realty Capital Securities, was charged by Massachusetts' top securities regulator with fraudulently casting shareholder proxy votes. RCAP subsequently filed for Chapter 11 bankruptcy at the beginning of 2016.
RCAP emerged from bankruptcy and reorganization in May 2016 as a private company with fresh capital and a new name, Aretec—Cetera spelled backward.
At that time, Cetera announced that Investors Capital Corp., one of its b/ds, would be merged with Cetera Advisors, and VSR Financial would merge with Summit Brokerage Services. Summit was closed in 2019 and converted into an office of supervisory jurisdiction of Cetera Advisor Networks.
Jonathan Henschen, founder of the recruiting firm Henschen & Associates, said First Allied was a very attractive firm before Schorsch bought it, and that he placed a lot of large teams with it. The firm was known for access to alternative investments, attracting advisors who worked with wealthy clients and accredited investors.
But under Lovell Minnick’s ownership, they cut back-office staff by about one-third, Henschen said, with more cuts taking place under Cetera’s current private equity owner, Genstar.
“That’s what private equity does, is they cut staffing—either do the centralized services or team approach,” he said.
“The idea of integrating First Allied into Cetera Advisors has been in existence for quite some time now, probably since the bankruptcy in 2016 and thereafter, when it would make sense to look more closely at capturing operating efficiencies,” said a source familiar with the company.
In 2018, Cetera took steps to consolidate the leadership of those two firms, appointing Mimi Bock as president of Cetera Advisors and First Allied. Bock replaced former Cetera President Erinn Ford and First Allied President Kevin Keefe, according to published reports.
It makes sense to merge First Allied into Cetera Advisors, as Cetera is the bigger firm and had fewer retail alternative liability issues and legal exposure risks than First Allied, the source said.
It could also be a way for Cetera to shore up financial strength as prospects for acquisition growth seem cloudier.
“It could also be a function of greater pressure from Genstar because they believe that in the absence of major deal success growth that they may at least try to start doing some operational synergy pruning,” he said. “There was a general hope or expectation that they would be able to massively scale Cetera up with really successful M&A and that they’d really be able to blow up recruiting in a massive way as well.”
Independent broker/dealers that pull registrations from FINRA and close down are required to hold a certain amount of cash for a period of time after the business ends. Given higher yields on cash across the rest of the company, it may be Cetera executives felt this was a good time to consolidate the First Allied accounts, according to the source.