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AIG Advisor Group’s Makeover Gets OK

AIG Advisor Group’s Makeover Gets OK

00:00 01 January in In the News

by Bruce Kelly and featured in Investment News
January, 2007:

Industry observers and financial advisers are welcoming a series of management changes announced Tuesday by AIG Advisor Group Inc., which hopes the changes will lead to better services for advisers.

The biggest change is that AIG has named Larry Roth to replace Peter Harbeck as chief executive.

Mr. Harbeck remains the group’s chairman.

AIG Advisor Group’s changes are seen as boding well for the network of broker-dealers.

The danger at some insurance-company-owned broker-dealer networks is that individual firms can become like “islands,” said Jonathan Henschen, president of Henschen & Associates, a recruiting firm in Marine on St. Croix, Minn. AIG Advisor Group is a subsidiary of American International Group Inc. of New York.
The changes signal that AIG Advisor Group’s management wants to “use the best ideas among the firms and spread them across the board to benefit everyone,” Mr. Henschen said.

Mr. Roth joined AIG in January 2006, replacing Mark Goldberg as president and chief executive of Royal Alliance Associates Inc. of New York, the network’s largest broker-dealer.

Mr. Roth’s promotion is one in a series of management changes that parallel a broad initiative across the network of 7,800 affiliated representatives and advisers to examine a variety of business areas and services to reps.

Those areas include recruiting, reps’ business continuity plans, better use of the resources of the private-client group of parent company AIG, education and training for advisers, and examination of the current deferred-compensation plan for advisers, according to company officials.

‘Positive all around’

Arthur Tambaro, vice chairman and chief operating officer of Royal Alliance, succeeds Mr. Roth as president of that firm.

“It’s positive all around,” said Mark J. Snyder, whose eponymous Medford, N.Y.-based firm is affiliated with Royal Alliance and has nearly $200 million under management.

“It’s wonderful for Royal with Art as president,” he said. “He helped build the company.”

Longtime AIG Advisor Group executives are spearheading the changes.

Joby Gruber, president and chief executive of two other companies in the AIG network, Advantage Capital Corp. and FSC Securities Corp., both of Atlanta, will oversee recruiting and other business development areas as part of the newly formed AIG Advisor Network. He will serve as president of that division. One adviser cheered Mr. Gruber’s new role in the organization.

“Anytime you put Joby Gruber in front of something, it’s positive,” said Erin Botsford, president of The Botsford Group, a unit of the Botsford Financial Group in Dallas. “He’s all about us doing the right thing for our clients.”

Jim Cannon, president and chief executive of AIG Financial Advisors Inc. of Phoenix, another company in the network, and of American General Securities Inc. of Houston, will focus on money management and advisory platforms.

AIG Advisor Group also has tapped Randy Epright as executive vice president and chief technology officer. Most recently, he was senior vice president, chief operations officer and chief information officer with AIG Retirement Services Inc.

The changes aren’t related to cost cutting, given that each broker-dealer has reached its “highest level of profitability, with assets under management from its variety of fee-based platforms close to $39 billion,” Mr. Roth said.

“This is not about cost savings or head-count reductions,” he said, adding that the industry’s continued consolidation presents a clear opportunity.

“I’ll be working closely with [parent] AIG,” Mr. Roth said, adding that he will focus on issues such as strategy, business planning, financial forecasts and compensation.

“We always worked separately. Now, we’re reorganizing the businesses to maximize what we can do for the advisers,” Mr. Roth said.

With Mr. Cannon in charge of advisory services, “it’s the first time the head of a broker-dealer will do this,” he said. “He’ll be running that business day to day.”

Mr. Gruber said that the network has a history of certain realignments, such as elimination of trading desks, but that hasn’t meant a reduction in services to reps and advisers.

Part of the process that the management change signals is that the various platforms at the firms will be examined to determine whether the network should create a best-of-class offering, he said.

Mr. Gruber said that he also will look closely at business continuity planning.

He added that FSC continues to talk to other broker-dealers about acquisitions, and perhaps as many as five deals will close over the next six months.