Cetera to Buy Tax-Focused Avantax in $1.2B Deal
September 11, 2023 | Janet Levaux | Think Advisor
Cetera Financial Group is buying Avantax, formerly Blucora, in an all-cash transaction for $1.2 billion — a transaction that adds Fidelity as a custodial partner for Cetera. The news comes a month after Cetera wrapped up its purchase of Securian Financial Group’s retail wealth business, which it says brought it close to $50 billion in assets.
Dallas-based Avantax has some 3,075 financial professionals focused on tax and wealth management, as well as nearly $83.8 billion in assets under administration and $42.6 billion in assets under management.
Currently, San Diego-based Cetera has more than 9,000 financial professionals with $341 billion in AUA and $121 billion in AUM. Thus, the combined entity — assuming that most Avantax advisors and staff move to Cetera — would include 12,075 financial professionals, $424.8 billion in AUA and $163.6 billion in AUM.
Fidelity Angle
Cetera CEO Adam Antoniades emphasized the custodial relationship Avantax has with Fidelity when highlighting the significance of the deal: “This acquisition will establish a strategic relationship between Cetera and Fidelity, which will enable Cetera to expand further into a multi-custodial platform, enhancing Cetera’s capabilities to provide tools and functionalities for its affiliated advisors,” he said in a statement.
How will the multi-custodial platform help Cetera? “It allows Cetera to more easily acquire other Fidelity-using independent broker-dealers,” Chip Roame, head of Tiburon Strategic Advisors told ThinkAdvisor in an email. “I bet there is lots more to come here!”
Cetera currently works with BNY Mellon Pershing for clearing and custody services, according to its most recent regulatory documents. It also has some self-clearing operations. In 2018, the firm sold a majority stake to Genstar Capital, which Roame says is “a savvy investor in the broader wealth and investment management market.”
With Cetera now poised to have a relationship with both Fidelity and Pershing, the firm would have a “powerful combination” of custodians “that should serve it well,” said Larry Roth, head of RLR Strategic Partners, who was CEO of Cetera from 2014 to 2016. “It seems that the strategic drive [behind] this deal is very thoughtful and powerful.”
More Growth Plans
A key force behind Cetera’s growth strategy is Cetera Holdings CEO Michael Durbin, who joined Cetera four months ago after spending over 14 years at Fidelity Investments as an executive and senior advisor.
The recently hired executive is likely to “lead Cetera to buy more IBDs and also to diversify into other businesses,” such as deals with RIAs, firms with employee advisors, product companies and retirement businesses, Roame explained.
Cetera bought its first RIA in early June: The Retirement Planning Group of Leewood, Kansas, which has 14 advisors and manages about $1.4 billion in assets. The RIA offers clients holistic financial planning services, as well as tax solutions and payroll and bookkeeping services.
Tax Capabilities
Avantax will “significantly build out Cetera’s capabilities in tax and wealth management … ,” Durbin said in a statement. “This acquisition will activate this potential and represents an important milestone in Cetera’s growth trajectory.”
Avantax officially changed its name earlier this year, after selling its TaxAct software. Its independent broker-dealer and RIA used to do business as HD Vest Financial Services and 1st Global Advisors, respectively.
Avantax has built “a high-quality platform to evaluate [clients’] tax needs, not just high-net-worth individuals but overall mass affluent clients,” explained Roth. The platform helps professionals look at both tax-efficient investing and retirement distribution strategies, along with estate-planning issues, he says.
“The tax orientation and especially this technology, assuming it gets integrated across Cetera, is going to give [the firm] a head start” in this area, Roth added. In other words, the Avantax deal brings Cetera “a tax capability that [can] serve all its clients” and likely give it a competitive edge.
Cetera, according to Durbin, aims to further expand its “wealth management and tax expertise as a core component of its [five-year] growth strategy.” Like Roth, Durbin sees the Avantax deal as “a terrific start.”
