From the September 2006 issue of Research Magazine • Subscribe!

How to Succeed, over Salad

High-level business executives like James R. Cannon tend to shun hyper-caloric business lunches. Besides, coming from Phoenix, where AIG Financial Advisors is headquartered, you no longer get awed by fancy restaurants. Still, it takes a measure of austerity to order a Caesar salad and a cup of herb tea at Keen's Steakhouse, one of New York City's oldest and most famous eating landmarks, patronized by the likes of Teddy Roosevelt and Babe Ruth, who probably went for the mutton chops.

To be a gracious host, I settle for a Cobb salad for myself. It won't do cutting into a succulent prime rib while my guest is picking at lettuce leaves. But perhaps it is not such a bad idea for my waist line.

For all his herbivore eating habits and a boyish smile, you somehow wouldn't be surprised to find out that the President and CEO of AIG Financial Advisors majored in justice studies in college and spent some time working for the State of Arizona's securities regulator, catching crooks and fraudsters.

In an industry where successful professionals tend to change affiliation at will, Cannon's career is testimony to persistence and determination. He has worked for a number of companies, but that's mostly because his place of employment has tended to change names and owners. His first private sector job two decades ago was at an independent broker-dealer owned by Kaufman and Broad, which then became Broad Inc., Anchor National Life Insurance Co. and SunAmerica.

Cannon believes that consolidation among broker-dealers in the independent financial advisor field, underway for a number of years, will continue unabated. Eventually, he expects five or six major players to handle around 90 percent of all business, with the rest parceled out among true niche companies.

This is where AIG Financial Advisors comes in. Even before we get in our drink orders -- ice water for Cannon, ice tea for me -- he starts talking passionately about the need to leverage the brand name and the resources of a bigger organization. AIG Financial Advisors is very much his brainchild. It came into being last year, after three or four years of hard work, bringing together the assets of three broker-dealers owned by AIG Advisor Group: Sentra, Spelman and SunAmerica.

AIG is the kind of brand you can hang your coat on. Its AIG Financial Advisors subsidiary can benefit from a leg up from the parent's name and reputation. Proudly, Cannon recounts that the company will be running AIG television commercials in regional markets -- similar to ads the parent ran on national TV during the recent World Cup, but with a twist. It will give local financial advisors a twenty-second slot in which they can introduce themselves and their services.

At the firm's national conference in June, Cannon's wallet swelled with the business cards of those who expressed an interest in participating in the ad campaign.

The financial muscle, the synergies of some 4,000 businesses operating under the AIG umbrella, the products and the technological platform are all important resources backing up financial advisors. But Cannon is emphatic about the fact that they run independent businesses and it is entirely up to them how much they want to take advantage of the AIG name. They can do business under their own brand, or they can operate with AIG stationary and business cards.

Fee-based business accounted for 15 percent of business at AIG Financial Advisors two years ago, rising to 24 percent currently. Cannon expects fee-based business to reach 35 percent within the next two years.

The fee-based pay structure is more transparent, giving the client a clear understanding of what the advisor gets paid for and helping avoid conflicts of interest.

But this is only part of the story. A financial advisor no longer just sells products, but is increasingly becoming an overall mentor, often counseling clients about real estate deals, car purchases, second mortgages, etc. A set fee based on a percentage of assets under management or a retainer-like fee becomes a way to compensate the advisor for his time and expertise.

Not only clients are in need of mentorship. AIG Financial Advisors has two coaching platforms. One actually helps financial advisors transition to a fee-based system. Besides practical aspects of the shift, there are psychological changes. A fee-based business is a state of mind -- a shift from being a salesperson to becoming a true advisor. Few can accomplish a smooth transition from one to the other on their own, so AIG Financial Advisors has 25 coaches around the country helping to ease the transition.

The other coaching platform helps advisors run their business. It helps them design a successful practice for the long term, draft business plans and address a variety of related issues. The point is to listen to financial advisors' concerns and provide individualized turnkey solutions, not cookie-cutter recommendations. Cannon believes AIG Financial Advisors stands out in the field. The company has seven managers whose task is to listen full-time and understand the needs of financial advisors.

AIG Financial Advisors, says Cannon, became one of the first in the business to offer health insurance to advisors, their employees and their families, including coverage for pre-existing conditions. It is a product that Cannon hopes advisors might also start offering to their clients in an environment when even high-net-worth business owners lack good coverage options.

It is hard enough to run a small business, and most entrepreneurs need all the help they can get. In fact, AIG Financial Advisors has recently set up a pilot program called Advisors Select. It is meant for those reps who feel constrained by wirehouses, but are either not ready or unwilling to run their own business. Cannon likes to think of it as a hybrid structure: more freedom, broader range of products and higher earning potential, yet less responsibility than striking out on one's own. An office in Scottsdale, Ariz., has been a success, and the company is planning to open three more sites in California that have a high concentration of wirehouse and regional brokers.

But that is a pilot program. Dealing with financial advisors means dealing with independent entrepreneurs and, even at the broker-dealer level, the entrepreneurial culture can be contagious.

"When I left the state government, I wanted to find an environment where a person could better himself and be rewarded for it," says Cannon as I finish my dessert of fruit sorbet. He is sipping his herb tea.

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WHO: James R. Cannon, President and CEO, AIG Financial Advisors

WHERE: Keens Steakhouse, New York City, July 12, 2006

ON THE MENU: Cobb Salad, Mutton Chops, and leveraging the brand

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