Larry Roth's proposed purchase proves that AIG's Advisor Group is finally playing offense after the 2008 meltdown of its parent organization.

Press report: AIG pays in the ballpark of $115 million -- or $82,000 per rep -- for Woodbury

The low price-per-rep may reflect the fact that few of Woodbury's advisors are high-end producers with sophisticated clients, one analyst says

August 1, 2012 — 4:22 AM UTC by Brooke Southall

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Larry Roth was on the prowl for deals with $100 million of excess capital and now he’s spending much of it in a White Knight role. See: Larry Roth has AIG playing offense again in the advisor game, according to press reports.

The CEO of American International Group Inc.'s Advisor Group is buying Woodbury (Minn.) Financial Services Inc. from The Hartford Financial Services Group Inc. for $115 million, consisting of a $25 million dividend from Woodbury and $90 million from AIG, according to the Hartford Courant. The price could dip if revenue trends slip.

Woodbury Financial employs 200 people in its home office. It is a broker-dealer with 1,400 independent representatives across the United States who sell life insurance and investment products, including those of The Hartford.

The Advisor Group includes FSC Securities Corp. of Atlanta, SagePoint Financial Inc. of Phoenix and Royal Alliance Associates Inc. of New York. See: After AIG presses for new deal, SEI unbundles TAMP offerings.

Advisor Group, with its more than 4,800 advisors, has $200 million in capital, about $100 million of excess net capital as of last year.

Ryan Shanks: This is the final nail in the coffin of the negative part of that.
Ryan Shanks: This is the final
nail in the coffin of the
negative part of that.

New day

The deal is a good one for both Woodbury and for AIG, according to Ryan Shanks, principal of Finetooth Consulting.

For the Advisor Group, it proves once and for all to the market that it is on offense, not defense, after the 2008 meltdown of its parent corporation. See: AIG’s Advisor Group introduces a 100%-payout for big RIAs as part of a massive revamp of its fee-based platform.

“This is the final nail in the coffin of the negative part of that,” he says. “Phenomenal technology, phenomenal service and advisors would say: No way.”

Who got the best deal?

Liam McGee: Woodbury Financial is one of the most respected broker-dealers in the United States.
Liam McGee: Woodbury Financial is one
of the most respected broker-dealers in
the United States.

Woodbury likely has many insurance-focused reps, and the deal may open the door for more AIG product sales, says Chip Roame, managing principal of Tiburon Strategic Advisors. See: GAO study puts insurance agents up for scrutiny as it rejects idea of sweeping RIAs, b-ds, planners into one regulatory pool.

But it may be an even better deal for Woodbury if it gets a boost from a better organization with better technology, Shanks says.

“Woodbury has some great advisors but not higher-end advisors who deal with sophisticated clients. It’s below that notch.”

The Hartford’s chairman, president and CEO, Liam McGee, took issue with that remark in a statement. See: Is Hartford Financial’s market exit a death knell for the annuity crowd or just more Hartford haplessness?.

“Woodbury Financial is one of the most respected broker-dealers in the United States,” he said.

What is almost certain is that this puts the Advisor Group over the $1 billion mark in sales. It manages about $110 billion in assets. See: A different take on too-big-to-fail.


Mentioned in this article:

FSC Securities Corporation
RIA-Friendly Broker-Dealer
Top Executive: Jerry Murphy

SagePoint Financial
RIA-Friendly Broker-Dealer
Top Executive: Jeff Auld

Finetooth Consulting
Consulting Firm, Specialized Breakaway Service, Recruiter
Top Executive: Ryan N. Shanks

Tiburon Strategic Advisors
Consulting Firm
Top Executive: Charles Roame



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