Adam Antoniades’ first five months at the helm of Cetera Financial have not exactly been a “fairytale” start to his tenure, with a 150 basis point interest rate cut, a 28% drop in the markets in March and the coronavirus. But the CEO believes the global pandemic underscores the value of financial advice, and he’s leaning into the disruption during this time. To that end, the company is doubling down on understanding individual advisors’ needs, so its advisors can capture assets in motion and run more efficient practices.
In a conversation with WealthManagement.com, Antoniades outlined the firm’s strategy that he says will better position the firm for a post-pandemic world. It involves using Cetera’s nimbleness to accelerate certain programs and technology rollouts, as well as reorganizing roles and teams within the firm.
For instance, the firm recently launched the latest version of its digital onboarding platform for new accounts, reducing the time to open a new account from hours to minutes.
And this week, the firm announced new Advisor Growth teams, which will be dedicated to helping existing advisors grow their practices organically. These teams, led by Elisa Del Valle, Craig Markham and Malissa Lischin, will meet with advisors and help them find the aspects of the firm’s platform that will be most useful to their business. They’ll also be delivering the Resiliency Pack, the package of resources the firm rolled out to help its advisors run their businesses through the coronavirus pandemic.
WealthManagement.com: How is this pandemic affecting the business?
Adam Antoniades: There's an awful lot of noise about the industry, and it's complex, but the reality is the vast majority of advisors really do take that personal responsibility of taking care of their client very personally. They calm concerns. They put fears to rest. They bring reason, and logic and discipline at a time when most clients are emotional and irrational. I think the pandemic underscores the importance of advice. To that end, I feel like it gives us a chance to do those things that actually advance the noble aspects of our profession. That is always a good time for this business, even though it doesn't feel good because of the pain it creates.
For us, given our history, we've learned that when things are bad, you need to lean in. From our perspective, organizations that figure out the way to lean in and figure out the landscape quickly and make deliberate and strategic decisions, which I think we are, are the ones that will do best in this environment.
WM: How does Genstar, your private equity owner, play into your strategy?
AA: For us, we needed a partner that understood that there's an opportunity ahead and that is willing to help construct a capital structure that's flexible and, through it, resilient, that has minimal burdens and there's more of it, there's more capital where you need, when you need it. That's what they've done for us. They've created a capital structure that really doesn't have a ton of risk to it, relative to us. If you take our debt for example, it's highly flexible in that it's covenant-lite. What it means is we don't have all sorts of measures we need to manage to quarter in, quarter out. It's relatively low in terms of how burdensome it is. More importantly, we don't have the typical managing to quarterly earnings profiles, or we don't have to fund dividend payments. We don't have buyback plans. What that means is that we can have a longer lens at a time when lots of firms are tactical. Not saying that public isn't right for the right firms. I'm just saying, for us, this is the right structure, given where we are in our evolution. Getting that ingredient correct was really, really important.
WM: How do you think Cetera’s structure—being that you have very distinct b/ds serving different channels within the advisory space—will help you in a disruption?
AA: In a very short period of time, we were able to pivot. Because we know our advisors and because we got a market in specific communities, we were able to understand the problems and deliver against them very quickly.
WM: What have you done as part of that pivot?
AA: First, we've introduced an entirely new growth and productivity team. It essentially serves as the hub of every single one of the communities, and it serves to navigate all the resources that we have in the enterprise and help advisors identify which parts they want to take advantage of. It's made up of some internal resources that we repositioned and some external that bring a skill set that we didn't historically have.
We want to think of our advisors as key account managers and as key accounts, and then understand their business and bring our offering to them in a way that resonates to them in particular. Other firms, they've got great platforms, a lot of them, but what they say to advisors is, "Hey, you come to me and access my platform. You figure out how you want to access my platform." To us, a distinctive part is being able to bring the platform to them in a way that matters to them, rather than the complexity of 100 different capabilities that may only be relevant in part. They don't have an appetite to look at everything, and it's not pertinent to them. That way, it gets harder to navigate a difficult market.
We've also realigned aspects of the organization to perform in a way that we think is pertinent to a post-pandemic world. We know there's change coming. But internally, how do we control the quality of what we're delivering, if things are changing at the pace that we've seen in recent weeks? We’re instituting a group that's all about advisor experience and service, an entire team that serves to act as a gate for items that involve field integration, led by a guy called Jon Rothenberg that's been with us for some time. The guy's a master of the red-carpet experience.
This is our way of recognizing, "Hey, things are changing at a pace that is hard to control." Delivering something is only half the equation. Delivering it to a standard is really much more relevant. Our view was, "We know it's going to be different. We know it's going to change. Let's make sure it's quality." And that's what we've done.
Kim Holweger has been promoted to head of operations, and she’ll be leading both groups of our operations that have historically been independent, self-clearing operations and Pershing clearing operations, now under one roof.
We’ll also bring all our sales teams together, including retirement sales, business consulting, advisory platform, recruiting, under one tool.
WM: What technology initiatives have you accelerated during this time?
AA: The things we've accelerated are all about capturing market share, helping advisors capture more relationships, and touch more clients, improve the experience of those clients, and drive efficiency and scale in their practices.
We rolled out the next version of our digital onboarding platform for new accounts. It reduces the time to open an account to minutes rather than, historically, what the industry managed doing in hours. It is enhancements on our portals, e-delivery, broad-based e-signature beyond the new account process. ... Obviously, this pandemic is bringing out the germaphobe in all of us. We went from clients insisting that they had a wet signature to now they won't touch paper.
WM: Have you changed your recruiting approach in the last couple months?
AA: I think everyone is understanding that the world is in a different place. We're using all the tools that you're hearing and seeing, to create an experience that at least works for the time being and has longevity in it, should this be sustained for a longer period of time. Is it as effective? Time will tell. This concept of being able to interact with an advisor in a social environment, maybe take them to dinner, is still an important part of the equation in our mind, longer term, but for the foreseeable future, we're leveraging technology that you might expect, to create a virtual home office visit. Fortunately, we've been working to digitize a lot of the way we demonstrate our capabilities, for some time, even for our distant advisors, so it's not so difficult to do.
Last year, we had a record recruiting year in that we added $100 million of gross revenue. That was without the transactions that we did, which added at least $100 million more. Today, our pipeline is probably the biggest it's ever been. We have seen a little bit of slowdown in conversion in the first quarter. That's not unusual based on our experience, because advisors are focused on taking care of their clients, not on moving their book of business. That's not to say we've had a bad first quarter. Our numbers are slightly off the $100 million run rate, but I think we're at $20 million in recruited gross revenue through the end of April, in part because a lot of advisors have deferred their start dates while they go through this process, lots of paperwork, lots of disruption for them. But I anticipate that that will pick up as the new norm evolves.
In terms of net new assets in fee-based business, we took in $1.9 billion in the first quarter. This isn't recruiting. This is our current advisors.
In terms of retention, we improved year over year probably above industry average, at over 95% retention of our advisors. In March, we had zero attrition, which is measured by the day an advisor leaves. That doesn't always correlate with announcements you might see somewhere.
In terms of year-over-year growth, '18 to '19, given that we just finished our audits for '19, that was, again, a record growth year, with 20% year-over-year growth in revenue. First quarter '20 over first quarter '19 is up 7%. Of course, it's going to soften as you take in the decline in the market.
WM: Have you expanded into new affiliation models, such as a more dedicated RIA channel or employee channel?
AA: Foresters, which we acquired last year, has a significant employee footprint in terms of advisors, and it’s already seen 20% growth in its advisory business. It’s now known as Cetera Investors.
One of the reasons we like that business is that it has a new entrant program and an internship program. In February through April, our interns, getting ready to go into the summer, we've actually brought on 122 interns, half of which have been engaged virtually. That's a feature of their program. They work with a lot of colleges to facilitate interns, and that's what drives our new entrance in that space, because as I mentioned, a part of it is an employee channel. We're not as focused on it as some other firms right now, because we made our play into Cetera Investors, and we're busy harvesting that business.
We do have an RIA-only capability. That will be a place that we continue to augment, going into the rest of this year. It's currently custodied through Pershing, but it will be multicustodial.
This has been edited for clarity and length.