Roth’s Exit From Advisor Group: ‘A Big Deal’

News that the Larry Roth, who has led the Advisor Group of 6,000 independent reps for the past six years, is set to be CEO of Nicholas Schorsch's Realty Capital Securities on Monday has raised eyebrows and questions for broker-dealer recruiters and other experts.

Peter Harbeck is serving as interim president and CEO of the Advisor Group, which includes the IBDs Royal Alliance, FSC Securities, SagePoint Financial and Woodbury Financial.

“This is a big deal. It leaves a big void,” said Jon Henschen, president of Henschen & Associates, a broker-dealer recruiting firm, in an interview.

Chip Roame, head of Tiburon Strategic Advisors, agrees. “Larry did a terrific job leading Advisor Group through the AIG crisis and rebuilding it afterward,” he said. “It would be difficult to rate his performance other than an A.”

Losing such an “A-level” executive is tough in any business, particularly in the highly competitive, bottom-line-focused field that IBDs play in today.

Two years ago, in fact, Roth predicted that many small broker-dealers “are gone or will be soon” because of technology, compliance and other business costs. “You cannot expect longevity if you’re a small niche player,” he said in an interview at the time. “This business is not for wimps.”

“Certainly Roth’s departure has the potential to cause weakness for Advisor Group in the marketplace today,” Roame said. “I do not know how the reps perceived Larry. But from the outside, he held the place together and grew it, so I assume they see him as a loss.”

Still, the industry consultant added, “I don’t think any rep leaves for this reason alone. If they had a foot out the door, this might speed them along. But no, I do not expect this to drive a lot of turnover.”

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Harbeck (right), who has worked for Advisor Group for nearly a decade, says the firm is “home to some of the industry’s greatest leaders … I am confident our more than 6,000 financial advisors understand our commitment to their success.”

Advisor Group, which is owned by AIG, wrapped up its purchase of Woodbury Financial Services from The Hartford in December, adding some 1,400 advisors and $25 billion in assets under management to its network. It hosted its annual conference for female advisors in May,emphasizing how important it is to expand the diversity of its advisor force.

Recently, it’s had a good run of recruiting. For instance, Royal Alliance Associates added a group of 50 independent advisors with $1.4 billion in assets and some $8 million in yearly fees and commissions in July. The group had previously been affiliated with Walnut Street Securities.

However, Henschen wonders if part of Roth’s motivation in leaving is the direction of the Advisor Group of IBDs. The group has done some consolidating recently, he says, and could stand to trim more staffers from its back offices. “That could be a tough thing to do, but it still has lots of overhead,” the recruiter said. Future Shock?

There are also questions over the Advisor Group's strategy and stability. “Who’s running the ship? And where is the firm headed?” Henschen asked. “The firm has been a bit iffy in this regard, and with Larry going, there will be some insecurity.”

The Advisor Group has been grappling with executive shifts at its IBDs in recent years. The head of Royal Alliance, Art Tambaro, said in July that he would retire at the end of the year. Tambaro has led Royal since 2007. He will be replaced by Dmitry Goldin.

Jerry Murphy was tapped to lead FSC in August 2011, after Mark Schlafly departed. Schlafly, formerly of LPL Financial, assumed the post in June 2008 when FSC’s chief at the time, Joseph “Joby” Gruber, was forced to resign. (FINRA charged Gruber with allowing a subordinate to take his 2007 continuing-education proficiency tests.)

SagePoint is led by Jeff Auld, formerly of Berthel Fisher and NEXT Financial. Auld joined the Advisor Group in July 2008, at the height of the financial crisis.

Interim CEO Harbeck insists that the Advisor Group is well positioned on its current growth path. Each of its broker-dealers “is actively recruiting advisors, and we are on track to have one of our most successful years in recent history,” he explains.

“We are one of the largest independent broker-dealer networks in the country,” he noted, “and we will continue to actively recruit advisors to each of our firms and remain focused on being the network of choice for today’s advisors.”

For his part, Henschen says, Roth's legacy does bode well for the group of IBDs. “I give Roth credit. With the ‘09 chaos at AIG, they lost reps that year and in 2010, but they have gained reps since then. And the Woodbury acquisition was a good one.”

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