ING’s bid to buy Aetna makes FNIC advisers fret

The highly autonomous 2,700 advisers of Financial Network Investment Corp. are faced with the prospect of becoming part of giant Dutch financial conglomerate ING Groep NV less than three years after selling out to insurer Aetna Inc.

If the deal goes through, the Fnic advisers will find themselves a tiny cog in an even larger machine. They will have to confront the same issues of pay, support and autonomy the cooperative’s president, Miles Gordon, negotiated in the sale of its back-shop operations to Aetna in July 1997.

Agreements to retain senior Fnic managers like Mr. Gordon and the company’s headquarters in Torrance, Calif., as well as prohibitions against fee agreements that favor Aetna offerings, expire this summer.

Last week, Atlanta-based ING America Insurance Holdings and managed care company WellPoint Health Networks Inc. of Thousand Oaks, Calif., made an unsolicited takeover offer for Hartford, Conn.-based Aetna. Under the $10.5 billion bid, ING would buy Aetna’s financial services and international businesses, including FNIC.

globe-girdling insurer

ING Groep, the $50 billion market-cap combo with worldwide holdings in insurance, banking and asset-management, has more than $450 billion in assets and more than 83,000 employees in 60-odd countries. Some 20 of those units operate across North America.

In the United States, the company’s near 4,000-rep ING Advisors Network is an amalgam of four broker-dealer firms — Investors Financial Group Inc. in Atlanta, Locust Street Securities Inc. in Des Moines, Iowa, Multi-Financial Group in Denver and Vestax Securities Corp. in Hudson, Ohio — acquired since 1997.

The network generated more than $600 million in gross commissions and fees last year, according to one estimate, with 10.3% of the sales representing ING proprietary products.

The acquisition of the Fnic reps would rank ING’s adviser operations among the top brokerags in this country that cater to independent advisers.

Though few Fnic advisers appear surprised by the takeover offer, given Aetna’s eroding health maintenance organization profits, its sliding stock price and the resignation 10 days ago of CEO Richard Huber, many have been left wondering what a sale would mean for the independent planner force. It generated an estimated $230 million in gross fees last year.

“If this transaction takes place, I don’t have any idea what it will mean in terms of their plan for Financial Network,” says FNIC regional director Dan Anderson in Minneapolis, who received an e-mail Thursday morning from Aetna’s new chairman, William Donaldson, about evaluating the takeover offer and urging calm.

“I obviously would be concerned about that, but there’s so much of this happening now that you almost get numbed to it,” adds Mr. Anderson. His office generated more than $19 million in fees last year and is FNIC’s biggest independent member.

“The fact that we have something going on here shouldn’t surprise anybody,” says Seattle planner Jerry Brown, a long-time FNIC board member who helped negotiate the group’s sale to Aetna. “Aetna has been reeling.”

FNIC planners sold their back-office operations to Aetna to gain access to a deep-pocketed partner willing to make badly needed investments to upgrade its computer systems.

In exchange, Aetna hoped to marry FNIC advisers to its insurance agents — who specialize in signing up companies and individuals in retirement plans — in hopes of cross-selling. Advisers say that part of the deal hasn’t paid off.

“It’s been a good relationship, but some of the opportunities — the synergies they were looking for early — never really have materialized,” says Steve Benton, FNIC’s regional director in San Antonio. His 55 reps sell mutual funds, annuities, discount stock brokerage and insurance to banks and credit unions.

Mr. Benton says many FNIC advisers already had full customer loads and weren’t interested in new Aetna leads. Likewise, Aetna agents were reluctant to jeopardize a hospital and corporate retirement account by bringing in a FNIC adviser. He estimates that Aetna offerings represent less than 5% of the more than $1 million in gross commissions his office generated last year.

Still, FNIC planners say their relationship with Aetna is good, because the co-op’s overall revenues have grown sharply and Aetna, while improving back-office systems, has lived up to its promises to allow the group to operate autonomously.

Mr. Benton believes a purchase by ING — or some other suitor — would have little effect on his local business. “If I was unhappy, I would just go somewhere else,” he says. “All regional directors are in the same situation, they own their business and can choose what broker-dealer they want to be with.”

So far, ING has left its four U.S. brokerages alone, says market research consultant Russ Allen Prince in Shelton, Conn. “But that might be due to neglect,” he says, citing ING’s preoccupation with acquisitions.

The ultimate importance of ING’s existing Advisors Network — not to mention the potential addition of FNIC — in selling the company’s insurance, annuities and mutual funds is yet to play out. “ING is getting bigger and bigger. Are the broker-dealers going to be given the resources and support that will make them worthwhile?” asks Mr. Prince.

“If they are simply pressured to sell ING product in a dictatorial marching-rule sense, then you will have mass revolt and see a lot of desertions,” Mr. Prince says. “If the company develops value-added support services, the reps will happily use a lot of the high-quality ING products.”