An Overland Park-based brokerage firm is shutting its doors amid a branding shift by its parent firm and as the group and other companies consented to fines related to the sales of variable annuities.
VSR Financial Inc., which has been in business since 1984 and was sold last year to Cetera Financial Group, is closing its home office, and its brokers are moving to other firms, said Mike Stanfield, VSR’s chief executive officer.
Many of the VSR brokers are becoming brokers with another Cetera Financial company called Summit Brokerage Services Inc. of Boca Raton, Fla., Stanfield said. Others are going to work for other firms.
Stanfield said the decision to close VSR Financial stemmed from Cetera’s decision to eliminate some of the several brokerage identities it operates. VSR became part of Cetera Financial Group in March 2015. Cetera was part of RCS Capital Corp., which had restructured in bankruptcy, Stanfield said.
A spokesperson for Cetera said, “As publicly announced earlier this year, Cetera Financial Group has been implementing an orderly wind-down of VSR, a process that will be concluded by mid-November. Certain financial advisers from VSR have transitioned to another firm within Cetera, and others were provided ample time to transition to other firms that were a better long-term fit for them.”
Stanfield said VSR’s home office had employed as many as 90 people to support its network of brokers at its peak. The home office count has diminished as VSR’s number of brokers has declined.
VSR Financial had 215 brokers in 58 branches in September, at which time it listed $3.1 billion in customer assets. In mid-2014, it had 264 brokers and $12.3 billion in customer assets.
Currently, the home office at 110th Street and Antioch Avenue has about 20 employees. Stanfield said “a handful” would remain until the end of December when the VSR franchise will close.
Separately, the Financial Industry Regulatory Agency said Wednesday that it levied fines on several companies related to variable annuity sales.
FINRA fined VSR Financial along with related firms Cetera Advisor Networks LLC of El Segundo, Calif.; Cetera Financial Specialists; Summit Brokerage Services; and First Allied Securities Inc. in San Diego.
VSR Financial was fined $400,000 among $2.2 million in fines for the Cetera group, which also was ordered to pay customers at least $4.5 million.
“We are pleased to have reached an agreement with FINRA and put these matters behind us,” said the spokesperson for Cetera.
FINRA also fined Voya Financial Adivsors Inc. based in Des Moines, Iowa; Kestra Investment Services LLC of Austin, Texas; and FTB Advisors Inc. of Memphis, Tenn. The size of the fines varied, with Voya paying the most at $2.75 million. Voya also was ordered to pay customers at least $1.8 million.
FINRA levied more than $6.4 million in fines based on the firms’ failure to supervise the variable annuity sales.
The case dealt with variable annuities, which are insurance products that allow investors to put money in various investment products such as stocks. FINRA’s complaint focused specifically on the variable annuities’ L-shares.
FINRA said L-shares charge higher fees than other share classes in a variable annuity but allow investors a shorter surrender period.
One problem, according to FINRA, was that brokers sold clients these L-shares for their short-term flexibility but added riders and other features that provided benefits to the investor over longer periods.
None of the firms had an adequate system to supervise the sale of multiple classes of shares with variable annuities and failed to give brokers “reasonable guidance regarding the narrow class of customers for whom the costs and features of L-share variable annuities were suitable.”
None of the firms admitted or denied FINRA’s charges, but all consented to the findings.