AIG Advisor Group Inc.'s move to dole out retention bonuses to assuage the 6,000 or so brokers who have remained loyal through the tumult of the past year appears to be too little, too late, or simply too binding for some advisers.
Details of the package are sketchy, with representatives and advisers saying management has informed them that they could get anywhere from 2% to 10% of their previous year's fees and commissions, known as a broker's “trailing 12” in the industry.
AIG Advisor Group appears to be very selective about which brokers will receive the bonus, with low-producing brokers getting little or nothing. Advisers who produce $300,000 or less in fees and commission may not be eligible for a bonus, sources inside and outside the company said.
Other advisers and industry observers said that the formula for the retention packages, in the form of a two-year forgivable loan, is complex and weighs not only an adviser's gross production but some determination of an adviser's profitability.
Regardless, after a year in which the three broker-dealers of
AIG Advisor Group — Royal Alliance Associates Inc., FSC Securities Corp and SagePoint Financial Inc. — were put up for sale and then after lengthy and involved negotiations abruptly pulled off the block last month, some advisers either have no stomach for the bonus or are simply heading out the door.
Adding to the confusion, sources said Alan Mooney of Mooney Registered Investment Advisory Inc., who manages one of FSC's largest network of offices, was asked by the broker-dealer to hand in his resignation by today. It would be effective Oct. 3, sources said.
Mr. Mooney's group, with more than 80 advisers under his office of supervisory jurisdiction, produced between $15 million to $18 million in fees and commissions in 2008, industry sources said.
Mr. Mooney declined to comment.
Another significant FSC producer, Erin Botsford, said she had not heard the details of any retention packages, but that she dislikes the idea of signing onto a deal that came with strings attached.
“I wouldn't take it anyway,” said Ms. Botsford, president and chief executive of the Botsford Group, which oversees $700 million in assets. “I don't need someone to buy my loyalty. I'm not for sale.”
Last week, AIG spokeswoman Evelyn Curran declined to give details about the packages for advisers or comment on Mr. Mooney. She did say that the money for the retention packages was coming from the operating budgets of the three AIG Advisor Group broker-dealers, and not from their corporate parent, the beleaguered insurance giant American International Group Inc.
The first word about the packages, dubbed “business building loans,” came to light last week just as AIG CEO Robert Benmosche back-pedaled from potshots he took at New York Attorney General Andrew Cuomo over bonuses.
The AIG Advisor Group, which internally is now being referred to simply as the “Advisor Group” in preparation for a rebranding and renaming of the broker-dealer network, was put up for sale last October as part of a wholesale re-structuring of AIG aimed at enabling the firm to repay the federal government's $85 billion bailout.
After months of sometimes agonizing waiting on the part of the brokers, Mr. Benmosche scrapped the intended sale soon after taking over as CEO of AIG last month.
WORDS TO REGRET
In some of his first meetings with AIG employees last month, he also revealed his feelings about Mr. Cuomo, who subpoenaed AIG in March during a political and media uproar over a previous round of $165 million in retention bonuses for executives.
According to Bloomberg, Mr. Benmosche told AIG employees in Houston on Aug. 11 that Mr. Cuomo was “unbelievably wrong” about the bonuses. “He doesn't deserve to be in government, and he surely shouldn't be the attorney general of the state of New York.”
Last Monday, AIG released a statement saying that Mr. Benmosche “regrets his comments regarding Mr. Cuomo.”
The reps and advisers with the broker-dealers of the AIG Advisor Group, however, are clearly different than the employees Mr. Cuomo targeted as part of his bonus inquiry, industry observers noted. The advisers are independent contractors, and not employees, and take great pride in that status, which allows them to move with relative ease to other broker-dealers.
AIG Advisor Group chief executive Larry Roth did not return a phone call made to his office seeking specifics on the retention bonus packages. Instead, he wrote in an e-mail: “All of our broker-dealers remain highly committed to their financial advisers and will continue to provide them with the support they need to grow their practices. We help advisers succeed by investing in them in many ways, including practice-management programs, back-office support and technology.”
The issue of brokers receiving bonuses has become a contentious issue for securities regulators.
Last Monday, SEC Chairman Mary Schapiro warned broker-dealer CEOs that offering large upfront bonuses to potential recruits comes with the responsibility of closely monitoring the sales practices of reps and advisers.
Reps with the AIG broker-dealers and industry sources were quick to note that Ms. Schapiro's comments were targeted at Wall Street investment firms, which routinely entice brokers from competitors with recruiting packages of up to twice their previous year's fees and commissions. That dwarfs the retention packages the AIG broker-dealers are offering their advisers.
E-mail Bruce Kelly at [email protected].
