With no deal in sight, AIG advisers ready to jump ship. Giant FSC group rumored in talks to join LPL Financial
by Bruce Kelly and featured in Investment News
October, 2008
If the AIG Advisor Group is not sold soon, representatives and advisers will jump ship to find stability elsewhere, diminishing the value of its three broker-dealers, industry executives and recruiters said last week.
At stake is the future of almost 7,000 registered reps and advisers who generated $1.3 billion in fees and commissions last year. The AIG Advisor Group comprises three broker-dealers: AIG Financial Advisors of Phoenix, FSC Securities Corp. of Atlanta and Royal Alliance Associates Inc. of New York.
"It's a timing issue at this point," said Jonathan Henschen, president of recruiting firm Henschen & Associates in Marine on St. Croix, Minn. "If they don't sell and have a story that's reassuring, the reps will just scatter."
He added that the reps affiliated with the AIG firms said they have been inundated with marketing pitches from rival broker-dealers looking to recruit them.
On Friday, AIG broker-dealer executives were imploring reps to stay in their seats.
"As news of our impending sale becomes public, I'm sure you will continue to hear from competitors, some using rumor or promises of greener pastures in an effort to recruit you — and your book of business," Jeff Auld, president and CEO of AIG Financial Advisors, wrote in a letter to reps. "I urge you to defer any important career decisions until the new opportunities that will emerge with our change in ownership become clearer and better defined."
In the wake of the financial chaos wrought by the credit crisis, AIG is looking to sell a number of business lines.
It intends to hang on to its core U.S. property and casualty insurance businesses, its foreign-general-insurance businesses and its foreign-life-insurance business, its CEO Edward Liddy said in a conference call with analysts Friday morning.
But in his discussion of AIG's future, he failed to discuss specifically its broker-dealer network, the AIG Advisor Group.
Last Thursday, InvestmentNews .com reported that the AIG Advisor Group would be included in AIG's broad sale of assets.
As of Sept. 30, American International Group Inc. of New York had drawn $61 billion of an emergency loan the Federal Reserve made available to it last month. The Fed has extended credit of $85 billion to AIG.
When asked to enumerate the business units AIG will shed, Mr. Liddy said: "Everything else that doesn't fit." He added: "We have a preference for larger transactions."
Selling assets would help pay off the company's debt to the federal government.
AIG Advisor Group reps have a variety of opinions regarding the situation.
Some said they are focused on clients and are choosing not to concentrate on the parent company's dire problems, while others said they're looking seriously for a new broker-dealer.
However, some of AIG's foremost advisers are already in play, sources said last week, and one giant group, The Financial Services Network of San Mateo, Calif., could wind up with LPL Financial of Boston or one of its subsidiary broker-dealers, sources and recruiters said Thursday.
The Financial Services Network is by far the biggest group of advisers affiliated with FSC Securities.
Mr. Herrington did not return calls seeking comment about whether it intends to leave FSC.
Sources pegged the group as having 250 reps that annually produce between $30 million and $40 million in fees and commissions.
A spokeswoman for LPL declined to comment.
Larry Roth, CEO of the AIG Advisor Group, was not available to comment on these developments at press time.
The recent events surrounding AIG fly in the face of Mr. Roth's recent assertions that AIG is fully committed to the independent- broker-dealer business.
In an interview from early September — mere days before the downfall of AIG — and published this month in a trade magazine, Mr. Roth said, "AIG, our parent, is fully committed to this business."
