After months of waiting for talks on the sale of the three broker-dealers that make up the AIG Advisor Group to be resolved, many of the more than 6,000 representatives and financial advisers in the network are growing anxious about their future.
Meanwhile, last Wednesday, the chief executive and president of AIG broker-dealer Royal Alliance Associates Inc. of New York, Arthur Tambaro, sent a letter to that firm's reps and advisers that acknowledged that AIG was in the final stages of negotiations with a potential buyer, said one adviser affiliated with Royal Alliance.
"The letter acknowledged that this was an extensive process and that there was significant interest from potential buyers," said Jeffrey Vahanian, president of Vahanian & Associates Financial Planning Inc. of Saratoga Springs, N.Y. The firm has $88 million in assets under management.
Regardless, AIG's reps and advisers are dusting off their contingency plans in the event a sale fails to materialize anytime soon. Reps, recruiters and executives at rival broker-dealers said that advisers are considering any number of options, from jumping to a new broker-dealer to forgoing their securities licenses and becoming registered investment advisers.
Another adviser amplified the need for reps to have contingency plans as they wait to see whether a deal would go through.
"We're all independent entrepreneurs," said Kevin Myeroff, chief executive and president of NCA Financial Planners of Cleveland, which is affiliated with Royal Alliance. "And like all independent entrepreneurs, we should have a Plan B and a Plan C in place," he said, declining to specify exactly what those plans were for his firm.
When asked if he was feeling anxiety over the future of AIG Advisor Group Inc, Mr. Myeroff said no. "I don't feel pressured or rushed," he said. "There's no reason to panic. For us, it's business as usual."
Mr. Myeroff's firm has $545 million in assets under management.
Several sources acknowledged the price tag being bandied about for the three broker-dealers — Royal Alliance, FSC Securities Corp. of Atlanta, and SagePoint Financial Inc. of Phoenix — ranged between $200 million to $300 million. The looming question is how much revenue generated by advisers will remain at the three firms.
For 2007, the AIG Advisor Group network reported $1.3 billion in gross revenue.
So far, only Royal Alliance has reported its 2008 figures to
InvestmentNews, which tracks a variety of financial information from independent broker-dealers.
Royal Alliance said its gross revenue dropped 8.8% in 2008, to $448 million.
The AIG broker-dealers have been on the block since October when Edward Liddy, CEO of parent American International Group Inc.of New York, put a number of the giant insurance company's assets up for sale. Mr. Liddy was required to make that decision in order to pay back the federal government, which bailed the company out after it collapsed.
Sources said many of the reps and advisers at the AIG broker-dealers have stayed put for a number of reasons, including:
• The difficulty in changing broker-dealers, particularly in such a punishing stock market.
• Reps and advisers have put their faith in assurances from top managers, including AIG Advisor Group CEO Larry Roth, that a deal was imminent.
• Advisers want to see what a potential retention package from a buyer could be, with many hoping it would be 10% to 15% of their previous year's fees and commissions.
• AIG advisers, particularly those affiliated with Royal Alliance, enjoy some of the highest payouts in the business. With payout levels ranging from 92% to 97%, depending on the type of product, those Royal Alliance advisers are not likely to see such levels at a new firm.
Regardless, one recruiter said last week he saw an "uptick" in inquiries from AIG Advisor Group reps in recent weeks.
Reps and advisers with AIG "are growing weary," said Jonathan Henschen, president of Henschen & Associates LLC, a recruitment firm in Marine on St. Croix, Minn. "They're tired of waiting. It's wearing thin."
A potential sticking point in any deal for the broker-dealers is how to quantify potential liabilities, particularly in such a terrible market, said one industry source who asked not to be identified. Liabilities for broker-dealers from lawsuits and arbitration claims often emerge 18 months after a market collapse, the source said.
In an e-mail response to questions, Mr. Roth made no mention of the sale, but said: "We're focused on providing our advisers with the same excellent support they've grown accustomed to so they can focus on their clients and their practices."
E-mail Bruce Kelly at [email protected].
