In an August 2009 meeting, Larry Roth, the chief executive of Advisor Group, was blunt about how much the massive taxpayer bailout had damaged the American International Group name. In fact, the network of broker-dealers was still called AIG Advisor Group at the time, but was planning a major rebranding that would distance it from the troubled company.
"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," Roth said then. But he also said that the 11th-hour decision made by AIG's then-new president and CEO, Robert Benmosche, to nix a deal for the adviser group had brought closure and clarity to the network's three broker-dealers: Royal Alliance Associates of New York, SagePoint Financial of Phoenix and FSC Securities of Atlanta.
Despite the turmoil surrounding AIG, Roth said, Advisor Group was increasing its marketing budget, organizing conferences, meeting with advisers and stepping up its recruitment efforts. He also credited Benmosche's leadership.
Fast-forward 14 months and it's no surprise that Roth, who seemed to possess unwavering confidence during the worst of times, is even more hopeful about the adviser network's prospects. AIG's deal to repay the Federal Reserve Bank of New York almost $100 billion of the money it received from the Troubled Asset Relief Program signals the beginning of the end for the country's most-controversial government intervention into the business sector. For Advisor Group, the deal brings with it the possibility of escaping from under the dark cloud that has enveloped the entire company. (The broker-dealer network is owned by SunAmerica, which itself is a wholly owned subsidiary of AIG.)
"No one was surprised that senior management was able to accomplish what they did, but I was pleasantly surprised by how quickly it happened," Roth said. "I was telling my management team that although I had no expectation whatsoever, I was hoping that a year from now we would be able to tell a story like this. I'm really happy that it came so quickly, but of course there is still a lot of work to do."
Indeed, plenty of work remains. Although the deal to sever ties with AIG will eventually end the government's investment in the company, the ramifications of the taxpayer bailout cannot be brushed aside so easily. The extent to which the AIG brand is tainted remains unknown. Is it permanently damaged, or will Americans eventually forgive, if not forget? Are advisers still wary of the AIG affiliation?
It is also unclear whether taxpayers will end up losing money on the deal or profiting from it. (The answer will likely play a factor in how forgiving people are.)
But despite the nagging uncertainties, there is little doubt that Advisor Group is in a much better position than last year. Roth said that over the past 18 to 24 months, Benmosche and SunAmerica CEO Jay Wintrob have invested heavily in back-office support, technology, client services and other areas.
This level of financial support did not come as a surprise to Roth. Shortly after Benmosche joined AIG, he and Roth sat together at a dinner with other senior executives and Benmosche told him that he was enthusiastic about the independent broker-dealer business, which he had a significant amount of experience with in the past. Benmosche also indicated that not only did he intend to keep the business — he was also going to give Roth and his team the funding they needed to invest in their broker-dealers.
"So as it relates to the day-to-day operations of the business [the deal] doesn't really have an impact," Roth said. "What it does, though, is build a significant amount of enthusiasm with our employees and our advisers."
Roth happened to be at a national education conference for advisers in Florida, roughly a week after AIG's deal to repay the Fed and the Treasury Department was announced. He said the buzz among advisers there was noticeable. Although it's hard to say what the reputation of the company will be to outsiders going forward, internally things are looking up.
"The beauty of this is that when Bob came in, he said he was going to support our businesses, find a way to repay the government and build shareholder value in a more traditional sense. He's done that," Roth said. "So you have the CEO of a firm saying that he's going to do something that is frankly quite bold and then accomplishing it. I think that's a positive thing from a reputation standpoint internally for advisers and employees."
Although AIG's deal to repay the government in many ways represents a new beginning, for Advisor Group everything is essentially business as usual. After the agreement with the Fed and Treasury was announced in September, Roth said Benmosche delivered a two-part message to senior management.
One part was thanking everyone for all of their hard work in keeping their businesses strong during the tumult after the bailout. The second part was that now more than ever, performance matters. "That means we need to continue to be committed to investing in our business, we need to keep our adviser-retention numbers up, we need to continue to recruit and then we have to continue to manage our business in a traditional sense," Roth said.
Managing business in the traditional sense means retaining your best advisers, helping them recruit other advisers and then focusing on things like expense management, quality compliance and other business matters. Roth said that advisers are starting to benefit from the heavy investments in technology and back-office support. This is probably why retention is back up to normal levels, around 95%.
Roth said that the company may not be having its best recruiting year, "but [it's] still good." Next year's budget will be even higher than 2010's, so he is confident that the numbers will go up. And back in March, Rehmann Financial announced that it was moving roughly $2.5 billion of client assets to Royal Alliance, a significant deal that gave Advisor Group its first serious momentum push since the bailout.
As for the rebranding that dropped AIG from its name? There are no plans to change back. "The advisers have always viewed themselves as affiliates of the broker-dealers themselves anyway," Roth said. "So [the rebranding] didn't affect our current advisers at all. It does make the story going forward from a recruiting standpoint a little cleaner, although everyone that we recruit knows we're a part of SunAmerica, which is of course a part of AIG."
Right now, the affiliation with AIG may not be as big a risk as it might once have seemed. Roth said that it is still the third-largest insurance company in the nation. Advisor Group has been profitable every month over the past couple of years, and SunAmerica is quite profitable. "It's much better to be owned by a large public company," Roth said.
"We're very happy to be owned by SunAmerica," Roth said. "We would not want to be a private company right now. It's much better to be owned by a large public company."
