Ex-LPL Exec’s New Firm Has Ties to SEC-Barred Advisor
August 5, 2014 by Ann Marsh
Four months after resigning “in light of the company’s concerns about [his] interactions with other employees,” a former LPL Financial executive has a new job — with a firm whose recent regulatory history might fall under the label, “it’s complicated.”
As head of independent advisor services for the nation’s largest independent broker-dealer, Derek Bruton worked with thousands of advisors. In his new role, he’ll oversee 70 employees as CEO of Lucia Capital Group — a holding company that owns multiple subsidiary firms, including two RIAs (RJL Capital Management and RJL Wealth Management) and a broker-dealer.
“I looked at other opportunities and considered a lot of things,” Bruton says. “This was the right thing at the right time.”
Bruton describes Lucia Capital — which, like LPL, is based in Bruton’s hometown of San Diego — as a fast-growing firm with a “strong reputation for integrity, success and exceptional service.”
Yet the company also has lingering ties to an investment advisor that the SEC has permanently barred from associating with any investment advisor, broker or dealer.
Lucia Capital is a “partial successor,” according to the SEC, to Raymond J. Lucia Companies — founded by the Lucia Capital chairman’s father.
ASSETS PURCHASED
The newer firm’s chairman,Ray Lucia Jr., says he purchased client assets from the older firm, which his father ran for many years.
The father –Raymond J. Lucia Sr. — has offered personal financial advice on a daily radio show, The Ray Lucia Show, for more than 20 years; the show was syndicated nationally in 2000, and episodes may still be seen online on a site called the Money Business Life Network.
In 2012, the SEC charged the elder Lucia with misleading clients and prospects by falsely claiming that his “Buckets of Money” investment strategy had been scientifically proven via rigorous “backtesting” of its performance during past down markets.
Last year, the SEC revoked the elder Lucia’s registration as an investment advisor, as well as that of his firm. It fined the company $250,000 and Lucia Sr. himself $50,000, and barred Lucia “from associating with an investment adviser, broker, or dealer.”
The elder Lucia “withdrew his securities registration and retired from working directly with clients in 2010,” his son says via email, “prior to any of his regulatory issues.”
‘SEPARATE & DISTINCT’?
The younger Lucia says his father took these steps as part of a long-planned transition to focus exclusively on his media career, and not because of any SEC action. Today, the two firms are “separate and distinct,” the younger Lucia says via email. “Ray Lucia Senior has no affiliation with Lucia Capital Group.”
Yet Bruton’s new firm employs an investing strategy with a similar name to the one that that the elder Lucia used. The father branded the approach as “Buckets of Money”; the son calls it the “Bucket Strategy.” The newer firm uses it to design portfolio allocations and teaches it to advisors at other firms, both Lucia and Bruton say.
The person leading the new firm’s seminar for advisors,Rick Plum, is a former employee of Raymond J. Lucia Companies who “assisted in creating the backtests” for that firm, according to the SEC documents.
Moreover, when a reporter called the offices of The Ray Lucia Show and asked for a referral to a financial planner, the woman who answered the phone gave the reporter the phone number of Lucia Capital — saying it was the number for “theRay Lucia Company.”
When asked to comment on this exchange, Lucia Jr., said by email that the receptionist had made a mistake. “To be very clear on this point,” he wrote, “Ray Lucia Sr. does not provideLucia Capital with any referrals, nor would Lucia Capital accept any such referrals if they were ever made.”
A spokesman for the SEC said the commission would have no immediate comment on the matter.
Bruton did not respond to a request for comment about the referral.
BETTING ON GROWTH
While Bruton says it “wouldn’t be appropriate” for him to comment on his new colleagues’ “family relationships,” both he and Lucia Jr. say the firm is on a new growth path.
“The fact that these former Ray Lucia Sr. clients have stood with us over these years is a strong validation of this management team and firm, as well as the unique bucket strategy approach this team takes,” Lucia Jr. says via email. “That said, we also believe that advisors respect and appreciate the fact thatLucia Capital is very much its own entity with its own track record of success.”
Recent ADV filings for RJL Capital Management, dated in March, and RJL Wealth Management, dated in May, put the firms’ combined assets well below $1 billion, but Lucia Jr. and Bruton say the broader firm is growing rapidly and already has more than $2 billion in client assets — some of which is under the auspices of the broker-dealer.
“Adding Derek to our team is going to help us crystallize our processes and accelerate our growth opportunities,” says Lucia Jr.
Bruton says the growth trajectory is one of the main reasons that he decided to take the job. “This story aboutLucia Capital Group is about growth and that has always been my passion,” Bruton says. “I’m extremely excited about a return to my roots. I started out in this business on the wealth management side and really enjoyed it. … We are all very focused on being in this business a long time and having fun along the way.”
