Larry Roth, the chief executive of AIG Advisor Group, has a hefty task ahead as he looks to rebuild the beleaguered unit that American International Group Inc. chose not to divest in August.
Roth credits Robert Benmosche, who was named AIG's CEO and president Aug. 10, with re-energizing the advisory group and recommitting resources to it. Roth also said that a large, diversified insurance-based financial services company remains a great environment in which to expand a broker-dealer.
Had AIG Advisor Group been sold to a private-equity firm — and a deal was imminent — the unit's advisers would have been left with many questions, Roth said. They would not know how committed the new management would be to investing in technology. They would not know whether the new management would want to go self-clearing.
Perhaps most important, they wouldn't know whether the new management would want to combine the network's three broker-dealers — Royal Alliance Associates of New York, SagePoint Financial Inc. of Phoenix and FSC Securities Corp. of Atlanta — into one branded unit.
AIG Advisor Group still faces a litany of questions. Its parent remains, essentially, a zombie company that is 80% owned by the federal government, which has infused $170 billion since AIG's 2008 collapse. To the public, AIG is synonymous with the credit market freeze and subsequent economic meltdown.
"The AIG name is not a positive," Roth said. "I don't think there is anything I could tell you with a straight face that is great about the AIG name at the moment. But I do believe that we not only have closure, we also have clarity and a CEO at AIG who understands our business. That's very meaningful."
Plenty of challenges still remain for Roth and AIG Advisor Group, which lost about 18% of its trailing 12-month production over the past year. He and his team must revive recruiting and hope an ambitious advertising plan succeeds at reaffirming AIG in a crowded field. And they must retain the top advisers, a group rivals are recruiting heavily. Roth said the recruiting, the marketing, the conferences, the meetings — it's all happening. "We're back in business now," he said.
The toxicity of the AIG name is obviously not lost on Roth — for the past several months the company has been referring to itself simply as "The Advisor Group." Though it is not yet known what the company brand will look like after its makeover, Roth said it is almost certain that the initials AIG will be permanently dropped.
That would appear to be a smart move; some observers said any line that can be traced from the broker-dealers back to its controversial parent company is troubling. Bill Bergman, chief analyst for AIG at Morningstar, said that, though there are some positive things happening at the company, such as the solidifying of its leadership, it's unclear whether the stain of the past year can ever be completely lifted.
"Inherently the brand's been damaged and I don't know how long it's going to take to recover," Bergman said. "You watch kids walk around in soccer jerseys with AIG on them and all you can think about is how we've had the worst financial meltdown since the Great Depression and they were central to it. The brand is important."
The presence of Benmosche, formerly of MetLife, has been pronounced in a number of ways. His reputation for blunt talk is well known in the industry.
"Benmosche is a bull in a china store. He says what he wants to say and he really doesn't have any filters on the repercussions," said Jonathan Henschen, the president of Henschen & Associates, a Minnesota recruitment firm.
Sure enough, shortly after taking the helm of AIG, Benmosche lashed out at New York Attorney General Andrew Cuomo's criticism of AIG's bonus plans in March, saying Cuomo "doesn't deserve to be in government." He later apologized for the comment, but according to a report in The Wall Street Journal, during a board retreat in mid-September AIG board members planned on discussing how to rein in Benmosche.
From the perspective of many in the advisory group, Benmosche has been a rejuvenating force. More than anything, he has brought "clarity" to the company, Roth said. Within four days of being hired, Benmosche called off the proposed sale of Roth's advisory group.
The unit has suffered losses in its advisory ranks. From November 2008 through February, AIG Advisor Group lost about 18% of its advisers to competitors. To improve retention, it launched a "business-builder program."
The retention package being offered to advisers is in the form of a two-year forgivable loan from the broker-dealers that will have to be paid back if a broker fails to meet unspecified production goals. The value of the loans will range between 2% and 10% of the broker's "trailing 12" production.
Though retaining advisers is a key step in jump-starting business, re-energized recruiting and marketing will also be central to AIG's plans. The advertising budget for the coming year will be "north of a million dollars," Roth said.
Bergman said he sees two positives for AIG: Signs of a housing recovery and the new leadership. He said that Benmosche's hiring has brought stability, and credits his decision to mend fences with former CEO Hank Greenberg. Bergman said Greenberg could open access to private capital and other business opportunities.
Roth said he sees more opportunities than roadblocks for the advisory group. He said the company still has plenty of capital and remains profitable. He's willing to put the advisory group's services, products and technology against those of any its competitors.
"I think the next two or three years could definitely be the most exciting," Roth said. "Luckily for us, our senior leadership is intact and our best advisers are intact. I'm quite confident. We're going to go out there and slay some dragons."