AIG lawsuit decision a boost for its reps

Avoiding a second black eye, insurer's board says it will not join action against U.S. government

Jan 9, 2013 @ 4:02 pm

By Bruce Kelly

A decision by the board of directors at American International Group Inc. not to sue the U.S. government for allegedly giving short shrift to the giant insurer in its 2008 bailout is good news for its network of independent broker-dealers.

The insurer issued a statement today stating that it will not join a $25 billion investor suit led by Starr International Group Inc. and former AIG chief executive Maurice “Hank” Greenberg. According to lawsuit, the federal government deprived investors of tens of billions of dollars because of the allegedly sweet deal the Fed concocted when it purchased an 80% stake in the company for $182 billion.

Starr International had demanded that AIG join the suit.

“In considering and ultimately refusing the demand before us, the board of directors properly and fully executed our fiduciary and legal obligations to AIG and its shareholders,” Robert S. “Steve” Miller, chairman of the AIG board, said in the statement. “America invested in 62,000 AIG employees, and we kept our promise to rebuild this great company, repay every dollar America invested in us and deliver a profit to those who put their trust in us.”

A little more than a week ago, AIG launched a media blitz with the tagline “Thank you, America.” Turning around and suing the U.S. government would have severely undercut that message. What's more, joining the suit would have dramatically undermined the recent hard work and diligence by AIG's independent-broker-dealer network of 7,000 registered representatives and investment advisers to stabilize and rebuild since the painfully embarrassing and costly bailout.

Now simply called Advisor Group, this is the same network of broker-dealers that used to operate under the umbrella of AIG Advisor Group. Public anger over the Fed's role in propping up the insurer led to the decision to lop off the AIG name from the broker-dealers' brand. That name change coincided with the wholesale re-branding of one of its broker-dealers in 2009, SagePoint Financial Inc., which used to be called AIG Financial Advisors Inc.

Before the bailout, Advisor Group CEO Larry Roth regularly touted AIG's fortress of a balance sheet as a reason why reps should flock to the AIG broker-dealers. But the company's brand took a huge hit when management, in September 2008, indicated that the insurer was about to collapse.

The massive meltdown left broker-dealers despondent and shattered, particularly the renamed SagePoint. About a quarter of that firm's brokers left in 2009, with at least another 5% leaving in 2010. The firm has recently gained ground and now has about 1,800 reps and advisers.

“The AIG broker-dealers have done a very good job to improve their brands since 2008, all the while distancing themselves from” the parent company, said Larry Papike, president of third-party recruiting firm Cross-Search.

An AIG lawsuit against the federal government would have been “the last thing anybody at the AIG broker-dealers wanted,” he said. “This has been universally panned [by staff] as, 'Oh, no, not now!'”

Others agree.

“For AIG to insert itself into this discussion, just at a time when the company finally started to emerge from being the most vilified company in the world, was simply inexplicable,” said Larry Taunt, who left AIG's SagePoint in 2010 to join another broker-dealer.

“I don't know how much was spent on the recent Thank You ad campaign, but they might as well have burned that money" if AIG had gone through with the suit, said Mr. Taunt, chief investment officer and chairman emeritus of Regal Financial Group, who spoke before AIG made its announcement today.

AIG spokeswoman Linda Malamut noted that under applicable law, as well as according to certain court rulings, the AIG board had to consider and respond to Starr's demand.

The four firms SagePoint, FSC Securities Corp., Royal Alliance Associates Inc. and the recently acquired Woodbury Financial Services Inc. are on track to produce about $1.2 billion in total revenue for 2012. That compares with roughly $39 billion for the entire company.


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

May 02


Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video


Why broker-dealers are on a roll

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss last year's bounce-back for IBDs.

Latest news & opinion

Top 10 IBDs ranked by revenue

These independent broker dealers generated the most revenues in 2017.

8 podcasts advisers listen to when they aren't working

Listening to podcasts for the fun of it.

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print