Genworth Financial has agreed to sell its broker-dealer unit to Cetera Financial Group for about $78.5 million.
With the sale of Genworth Financial Investment Services, a tax and accounting financial adviser unit, Genworth said it will focus on its core asset-management business, called Genworth Financial Wealth Management.
Al Orendorff, a spokesman for Genworth Financial (NYSE: GNW), said the transaction is unrelated to the U.S. financial services reform law, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
The Los Angeles-based Cetera Financial said it's the parent company of the largest, privately held family of independent broker-dealers in the United States. It provides broker-dealer services, advisory programs, and technology for about 5,000 independent financial sales professionals and more than 700 financial institutions and their investor clients across the country.
The company expects the transaction to close in about 90 days, subject to regulatory approvals. "This sale allows wealth management to continue to provide strong solutions and support for all our independent advisers while GFIS moves to a company dedicated to its long-term development," said Michael D. Fraizer, Genworth chief executive officer, in a statement. It's "another step in our ongoing efforts to strengthen Genworth's capital flexibility and risk buffers."
Through nearly 2,000 independent tax and accounting professionals and financial advisers, GFIS has focused on helping tax and accounting professionals integrate wealth management into their practices.
If a strict definition of a fiduciary standard of conduct becomes the fate for broker-dealers owned by U.S. life insurance companies, they could be forced to completely revamp their sales and distribution business model. The U.S. Securities and Exchange Commission in January 2011 recommended the standard to Congress. It would apply to broker-dealers and investment advisers when they provide investment advice about securities to individual investors.
"This transaction creates significant strategic benefits for our business and our advisers," said Gurinder S. Ahluwalia, president and chief executive of Genworth Financial Wealth Management, in a statement. "We can now focus 100% on serving our clients -- financial advisers and third party broker-dealers -- including GFIS as it becomes part of Cetera."
Genworth Life Insurance Co. and Genworth Life and Annuity Insurance Co. each currently have a Best's Financial Strength Rating of A (Excellent).
(By Fran Matso Lysiak, senior associate editor, BestWeek: mailto:[email protected])
(c) 2012 A.M. Best Company, Inc.
A.M. Best Company, Inc.