AmEx’s adviser woes pyramid

A seven-month-old American Express Co. campaign to boost its adviser force to 20,000 by 2006 has hit a bottleneck, according to sources familiar with the hiring efforts.

Managers charged with recruiting and training more than 11,000 advisers are calling it a “hiring freeze.”

Ruben Segovia, an American Express manager in Oxnard, Calif., says the nationwide freeze has been in place for two months and is expected to last until at least January.

The reason for the freeze remains unclear, but the company’s Minneapolis-based adviser unit is in the process of training new advisers and moving to a new sales system introduced earlier this year, which may be overwhelming the system.

Tom Joyce, an American Express Financial Advisors spokesman, insists the company is only involved in a “hiring slowdown.”

“We’ve basically told our group vice presidents to continue recruiting,” he says.

Without providing details, Mr. Joyce says the company will “most likely end the year with a net increase in advisers.”

He says the company began the year with about 11,400 advisers.

An update on the hiring effort is expected in the company’s third-quarter earnings release on Oct. 25, but it is not expected to break down figures.

American Express’ push to nearly double its sales force in the next five years coincides with an overhaul of the sales structure.

The overhaul is based on three platforms representing different affiliations with the company.

No evidence

Advisers can become employee advisers (platform one), franchisees (platform two) or independent broker-dealer reps at AmEx’s Securities America Inc. unit (platform three).

The platform system is designed to attract veteran advisers from competing firms. But some advisers say they have seen no evidence of those veterans despite aggressive advertising.

Without providing details, Mr. Joyce says veterans are coming.

Advisers in the field insist that any advisers coming aboard are platform-one greenhorns and that the emphasis on hiring combined with a lack of training has resulted in turnover and frustration in the ranks.

“Platform one is not going well at all,” says one veteran adviser. “They still have a tremendous turnover rate.”

Adviser turnover is nothing new. Limra International, a Windsor, Conn., organization that tracks turnover says companies selling insurance products have a 34% retention rate after two years. After four years, that falls to 16% among advisers.

Mr. Joyce claims that AmEx has “one of the best retention rates in the industry” but would not give figures.

Evidence of frustration among AmEx rookie advisers is streaming across an internal electronic bulletin board, according to copies of postings obtained by InvestmentNews.

“In my first year, I’ve seen everyone in [platform one] before me leave the company for various reasons, which has to do with their own dismay. And now most of the new hires are not surviving as well,” reads a Sept. 28 posting.

An Aug. 30 posting says, “How can [AmEx] seriously expect advisers to get 100 financial planning clients on an annual basis? Is there anyone else out there that thinks that this is virtually impossible? Or is everyone in this company a `yes man,’ afraid to say something for fear of retribution? There are other financial companies out there with better compensation packages. See ya there.”