With sale of AIG's B-D network squashed, advisers fret about their futures

Advisers across American International Group Inc.'s three broker-dealers were stunned to learn that — contrary to all prior indications — the sale of the insurer's broker-dealer network would be scrapped.
AUG 18, 2009
Advisers across American International Group Inc.'s three broker-dealers were stunned to learn that — contrary to all prior indications — the sale of the insurer's broker-dealer network would be scrapped. On Monday night, the AIG Advisor Group informed its 6,000 reps and advisers in an e-mail that Bob Benmosche, AIG's new CEO, was eager to keep the business. “It was a surprise to us,” said Reeves Moore, an adviser affiliated with FSC Securities in Canyon Lake, Texas. FSC Securities of Atlanta is one of the three broker-dealers in the AIG network. The other two are Royal Alliance of New York and SagePoint Advisors of Phoenix. “The fallout has yet to be seen,” said Jeffrey Vahanian, president of Vahanian & Associates Financial Planning Inc. of Saratoga Springs, N.Y. Mr. Benmosche and the rest of AIG's management have two key issues to contend with, Mr. Vahanian said. First, now that reps and advisers know they will stay with AIG rather than be bought by a private-equity firm or rival broker-dealer, advisers need to see “confirmation of how AIG intends to support the broker-dealers,” he said. Also, advisers will want assurances that AIG will keep enough distance from the broker-dealer network so that advisers will be able to disassociate themselves from any controversies that could be connected to government bailout funds AIG has received to stay afloat. For example, Mr. Vahanian said, it is of great importance for advisory firms to hold industry conferences. That's because AIG has drawn a great deal of criticism for holding conferences and events that lawmakers have labeled as lavish and excessive for a company receiving billions of dollars in taxpayer funds. “It's important for [Mr. Benmosche] to stand up and say we are doing business, and worry less about what appears to be politically correct, and worry more about doing the right thing,” Mr. Vahanian said. The move to keep the three broker-dealers flies in the face of months of painstaking negotiations with a variety of broker-dealers and private-equity firms. Those discussions took place as a result of former AIG chief Ed Liddy's vow to dump the broker-dealers as part of a widespread sale of AIG assets to pay back more than $80 billion of bailout money AIG was given after it essentially collapsed last fall. “I would hate to see us lose a large number of advisers,” Larry Roth, CEO of the AIG Advisor Group, said in a conference call to advisers today. “We've been playing defense, and we need to get back to playing offense.” Mr. Roth said that the AIG Advisor Group will be rebranded in the future, and that the firm will “absolutely” have meetings for advisers in the future. Attrition has hit the broker-dealers top line, he said. Mr. Roth didn't give a count of the number of reps who have left the firm since last October, but said that they represented 18% of revenue through July. That was a lot more than he would have liked, although it's not as great as some would have expected, Mr. Roth said. [More: First republic loses $10.8 billion advisor team to Morgan Stanley]

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