SunAmerica, ING consolidating

The nation’s two largest networks of independent broker-dealers are changing top executives and revamping services in the face of one of the sharpest declines in brokerage revenues in recent memory.

The moves at SunAmerica Financial Network and ING Advisors Network Inc. are aimed at consolidating operations and cutting costs, according to observers inside and outside the companies.

And they start right at the top.

Kevin Hart, president and chief executive of SunAmerica Financial Network, is out after only two years in that capacity.

Declining to explain Mr. Hart’s departure from that post, SunAmerica spokesman John Pluhowski says only that the executive is looking at other opportunities in the company.

Industry consultants and recruiters familiar with SunAmerica say that Mr. Hart fell victim to the bear market, which turned sales goals set in the heady days of 2000 into chimeras.

A SunAmerica executive, asking not to be identified, disagrees, stressing that Mr. Hart did a good job and was not forced out.

Miles Gordon, the chief executive of ING’s Atlanta-based broker-dealer network, is stepping down July 1 and leaving at the end of the year. He will be replaced by chief operating officer John Simmers.

Mr. Gordon, 55, says he is taking early retirement because of declining health. He says diabetes hampers his ability to meet the job’s demands for extensive travel.

Mr. Gordon and Mr. Simmers have been colleagues for almost 20 years. In 1983, they started what is the largest broker-dealer in the ING network, Financial Network Investment Corp. in Torrance, Calif.

That both broker-dealer networks are tightening their belts in the wake of the market downturn comes as no surprise to observers. The strategies of their parent companies have more or less mirrored each other over the past several years.

American International Group Inc. of New York, the parent of SunAmerica, and Dutch financial services giant ING Groep NV, which owns ING Advisors Network, both paid top-of-the-market prices during the ’90s to build up their brokerage networks.

SunAmerica has five broker-dealers, and ING has seven, with 9,051 and 8,000 registered representatives, respectively.

The bear market of 2001 slashed revenue. At ING Advisors Network, revenue was down close to 15% last year; SunAmerica Financial Network does not disclose revenue figures.

Among outside observers, the consensus is that the moves do not reflect a change in strategy or a lessened commitment to the broker-dealer networks. Instead, both companies appear intent on streamlining operations to meet market conditions.

With back offices consolidating at both ING and SunAmerica, boundaries among the broker-dealer firms are eroding, observers say.

New leaders

In an April 1 letter, Mr. Hart’s interim replacement, John Graf, told his colleagues that SunAmerica would “streamline our organizational structure and consolidate major support functions throughout the network.”

According to Mr. Graf’s letter, the consolidation is affecting three divisions: legal and compliance, finance and recruiting.

Industry observers say that individual SunAmerica broker-dealers such as FSC Securities will suffer from a lack of recruiting because SunAmerica Securities Inc. in Phoenix now will run those efforts.

Technology at SunAmerica will be in the hands of its New York affiliate, Royal Alliance Associates Inc.

Brokers at other firms across the network may be alienated as they change from a current platform to Royal Alliance’s Vision 20/20 system.

Brokers with Atlanta-based FSC recently have been sent marketing material from the parent company that features the SunAmerica and AIG names. “It’s all going to be one brokerage firm,” one broker there says.

At Multi-Financial Securities Corp. in Denver, one of the brokerages in the ING Advisors Network, Russell Diachok resigned as president and CEO at the start of the month. His father is the firm’s founder.

Patrick McEvoy, president of Multi-Financial, took Mr. Diachok’s spot and will lead about 750 brokers, almost double the number since ING acquired the company in 1998.

Mr. Gordon says that Mr. Diachok’s decision came as a surprise, particularly since ING has decided to make Denver the site of the back office for three of its brokerages, Multi-Financial, VESTAX Securities Corp. of Hudson, Ohio, and Investors Financial Group Inc. of Atlanta.

The big cost savings are coming from the consolidation of the back offices, he says. “It’s been autonomous,” he says. “It’s not going to be that way anymore.”

Locking in management

The company also is talking to the brokers about potential name changes.

By the end of next year, the three may do business under the Multi-Financial name, he says.

Mr. Gordon says there are no plans to sell any broker-dealers.

He also says that ING Groep is not pressuring its brokers to sell more ING investment products.

The company, however, wants brokers to increase sales of ING products over the next three years to 20% of sales. Right now, they make up about 14% of the brokers’ sales. “Sure they want it higher,” he says, adding that the recent addition of FNIC to the ING Advisors Network will make that possible.

With Mr. Diachok leaving, Mr. Simmers has made it a priority to lock in the current management team at the ING Advisor Network.

That’s something SunAmerica Financial Network has had trouble doing. The company continues to struggle to find a top manager for its brokerage network. Mr. Hart was hired almost two years ago and was promoted from within the company.

He replaced Gary Krat, who left the company due to an illness. Mr. Krat is credited with the expansion of SunAmerica’s brokerage operations.

Mr. Graf is a vice-chairman of SunAmerica and a member of its board of directors. He reports to Jay Wintrob, SunAmerica’s CEO.

The FSC broker questions Mr. Graf’s experience.

“He’s an insurance person running an investment company,” the broker says.

The interim chief executive was a senior vice president in charge of asset accumulation with American General Corp. in Houston, which AIG bought last August.