AIG's Advisor Group introduces a 100%-payout for big RIAs as part of a massive revamp of its fee-based platform

After issues with its parent company put AIG-Sun America’s Advisor Group behind the curve in its move to advice-for-a-fee, the firm is now taking no prisoners as it puts its catch-up plan into action.

The New York-based owner of FSC Securities, Royal Alliance and SagePoint Financial has slashed prices for fee-based advisors, raised payouts for big RIAs, re-engineered its master deal with Envestnet Asset Management, and has invested a “seven-figure amount” in new technology.

Advisor Group is finally signing onto Envestnet’s standard platform as part of its launch of VISION2020 Wealth Management. Advisor Group was using a customized platform the big Chicago-based outsourcer that did not benefit as readily from upgrades.

As an incentive to use the platform more intensive, Advisor Group’s fee for the platform will drop 15% to 40% depending on business model and account/relationship size.

And it has created a program for independent RIAs that, for the first time, gives them a 100% payout. The previous best was 97%. The new program is for RIAs with more than $100 million of AUM. Nearly half of Advisor Group’s advisors are affiliated with an independent RIA practice. See: Larry Roth has AIG playing offense again in the advisor game.

At the same time, the Envestnet deal gives Advisor Group renews advisor access to SEI Advisor Network. See: After AIG presses for new deal, SEI unbundles TAMP offerings

Steadier, stickier

These fee cuts along with increased payouts will result in a short-term revenue setback for the AIG advisor business with an eye toward a long-term benefit of retaining, attracting and growing advisor practices.

“We’re taking a $2 million hit our first year…we’re doing it to grow market share. I think it’s well calculated” says Bruce Levitus, head of product sales and senior vice president of Investment Advisory Services at AIG Advisor Group.

Fees-based practices have become even more coveted in the post-2008-crash era because they assure steadier revenues, stickier relationships and allow advisors to concentrate on building their practices.

Parental woes

Advisor Group still has about 65% of its advisors managing or advising assets themselves rather than using managers, a percentage it hopes will come down by using the carrot of incentives.

The firm was hit with a double whammy of a tough market and the woes of its troubled parent company, American International Group, which needed an $85-billion bailout from the federal government to survive.

But it is emerging from that painful period with resolve, according to Bill Crager, president of Envestnet.
Bill Crager: Advisor Group is committed
to growing and improving the fee-based
platform

“Because of the issues with AIG, it was [unclear] whether they would spin out or be part of the parent. Once that question was resolved, the management team [became fully committed] to growing and improving the fee-based platform.”

Turning the tide

Of course, AIG, which has about 4,700 advisors, is only one of several mammoth broker-dealers like LPL, Cetera and Commonwealth that have launched big upgrades of their fee-based platforms this year.

See: Commonwealth’s revamp of technology includes subtracting Advent

Levitus says his company gathered intelligence from across the industry before making a move. “We looked at LPL Financial we looked at Commonwealth Financial Network. We also looked at the Schwab and Fidelity platforms.”

See: LPL has a new high-margin, high accolade advisory platform but SAM’s sticking around

Crager says the way that broker-dealers are investing in fee-based platforms compared to 2008 is remarkable.

“Now we’ve got a storm surge,” he says.