AIG Advisor Group's retention bonuses will be paid out by its B-Ds, not its parent

As details of the AIG Advisor Group Inc.'s retention package for a select number of 6,000 brokers and advisers seeped out this week, AIG officials and advisers made clear that the money for these bonus payments is not coming from its cash-strapped parent — insurance giant American International Group Inc. — but from each of the three broker-dealers in the network. Dubbed “business-building loans,” the bonuses for the advisers who will get the retention money will come from the operating budgets of each broker-dealer, Royal Alliance Associates Inc., FSC Securities Corp. and SagePoint Financial Inc., said Evelyn Curran, an AIG spokeswoman. Larry Roth, CEO of the AIG Advisor Group, in conversations with brokers recently has emphasized the broker-dealers' financial strength, stating that the firms are sitting on a pile of excess net capital. The issue of bonuses at AIG has proven contentious for the insurer ever since the federal government last September agreed to prop up the company with an $85 billion bailout. This Monday, for example, AIG had to apologize for comments that new CEO Robert Benmosche made to employees about New York Attorney General Andrew Cuomo's ability and his inquiries into certain AIG bonuses. The advisers at each broker-dealer have been through the ringer this year, as AIG put them up for sale last October as part of a wide asset sale to repay the federal government's bailout. After months of arduous negotiation with other broker-dealers and private-equity firms, Mr. Benmosche last month yanked the broker-dealers off the block. Now advisers are being offered a retention package, and the bonus, in the form of a two-year forgivable loan, ranges from 2% to 10% of a broker's previous year's fees or commissions, or “trailing 12” in industry shorthand. Low-producing brokers are in line to get little or nothing, advisers and industry observers said. For more detailed information on the AIG retention bonuses, please see the Sept. 7 issue of InvestmentNews.