As details of the AIG Advisor Group Inc.’s retention package for a select number of 6,000 brokers and advisors seeped out last week, AIG officials and advisors made clear that the money for these bonus payments is not coming from its cash-strapped parent, insurance giant American International Group Inc., but from each of the three broker-dealers in the network.
Dubbed “business-building loans,” the bonuses for the advisors who will get the retention money will come from the operating budgets of each broker-dealer—Royal Alliance Associates Inc., FSC Securities Corp. and SagePoint Financial Inc., said Evelyn Curran, an AIG spokeswoman.
Larry Roth, CEO of the AIG Advisor Group, in conversations with brokers recently has emphasized the broker-dealers’ financial strength, stating that the firms are sitting on a pile of excess net capital.
The issue of bonuses at AIG has proved contentious for the insurer ever since the federal government last September agreed to prop up the company with an $85 billion bailout. On August 31, for example, AIG had to apologize for comments that new CEO Robert Benmosche made to employees about New York Attorney General Andrew Cuomo’s ability and his inquiries into certain AIG bonuses.
The advisors at each broker-dealer have been through the wringer this year, as AIG put them up for sale last October as part of a wide asset sale to repay the federal government’s bailout.
After months of arduous negotiation with other broker-dealers and private equity firms, Benmosche last month yanked the broker-dealers off the block.
Now advisors are being offered a retention package, and the bonus, in the form of a two-year forgivable loan, ranges from 2 to 10 percent of a broker’s previous year’s fees or commissions, or “trailing 12” in industry shorthand. Low-producing brokers are in line to get little or nothing, advisors and industry observers said.