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AIG’s Advisor Group Evaluating Sale Options

The independent broker dealer world seems to be in turmoil. The latest sign: AIG’s announcement that it is evaluating the possibility of selling its Advisor Group IBD.

The news comes on the heels of reports that Cetera’s troubled parent RCS Capital is contemplating a similar move. Cetera has nearly 10,000 reps; AIG’s Advisor Group has close to 5,000 reps and $1.33 billion in revenue.

The potential sale was announced by Advisor Group’s Chair and CEO in a memo ahead of the expected news reports. “We are writing to let you know that we are evaluating these inquiries,” reported Investment News, quoting from the memo. “All interested parties have a favorable view of our growth prospects, are committed to the independent broker-dealer industry and are not among our competitors. Your broker-dealer president will hold a conference call later this week to discuss this in greater detail.”

According to Bloomberg News, activist shareholder Carl Icahn had been pushing for AIG to split into three entities to avoid regulatory scrutiny of large financial service companies. Former AIG CEO Robert Benmosche, who was reported to be an advocate of the IBD (and who died earlier this year), left the company in 2014.

Published reports suggest that the likely buyer would be a private equity firm. There was also speculation that Larry Roth, CEO of Cetera and recently RCS Capital, will make a play to combine Cetera and Advisor Group, a company he used to run.

When Nick Schorch’s RCS capital went on a mad buying spree of IBDs, culminating in the $1 billion-plus purchase of Cetera, experts wondered whether he saw something that others did not, and might change the industry as he had done in the non-traded REIT space. Now it seems that IBDs — with lots of liability, under severe significant regulatory scrutiny, made up of independent reps and thus hard to oversee, and facing limited and diminishing margins — will not see a renaissance any time soon.

For plan advisors, AIG’s BD was starting to show signs of life, with the hire of Kelly Michel as head of retirement services. Like Cetera, it seems unlikely that there will be significant investment until a sale is consummated.

Plan advisors are starting to join groups that act as middleware for a BD, but most are looking to recruit or acquire elite plan advisors — those with more than $1 million in revenue, and a limited group. The future is less clear for the more than 20,000 plan advisors with $25 million of DC assets but less than $1 million in revenue, especially with the IBD world in turmoil.

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