From the November 2006 issue of Research Magazine • Subscribe!

November 1, 2006

Royal Alliance Shifts Gears

Much of the industry's future growth, as far as Royal Alliance's Larry Roth is concerned, lies in fee-based business. And Roth, who's been at the helm of the AIG-owned organization since January when he replaced the well-liked Mark Goldberg, has now outlined how his broker-dealer will support this and related business strategies,

"I've developed a set of business plans, with AIG's support, for us to grow as the highest-quality broker-dealer," says Roth. These measures include a move to bigger and better corporate offices in New York, a new management structure and a dual-clearing relationship with National Financial for RIAs.

Roth, 49, says he came on board earlier this year from Berkshire Capital Securities after gaining parent company AIG's pledge to financially support growth plans for Royal Alliance. With 2, 400 affiliated independent advisors -- 1,100 of whom are fee-based -- Royal accounts for about one-fourth of the 8,000-member AIG Advisor Group and brings in about 40 percent of the group's assets and sales.

After getting up to speed over the past few months, Roth is now moving to put in place what Royal Alliance "needs to do to be No. 1." He outlined these measures in both a September memo to advisors and a recent phone interview with Research.

"I boarded a moving train, which meant I could focus on the broader issues ... and let others focus on day-to-day matters," explains the executive. "That way, I could help us identify and design a new headquarters, a new platform and a new management team to take us from being about a $400 million business to being a $1 billion team."

In February 2007, the 250 staff members at Royal Alliance current headquarters on Third Avenue in mid-town Manhattan will move downtown to One World Financial Center on the Hudson River. "We've been in the current offices for 20 years, and we've outgrown them," says Roth. The firm will occupy 85,000 square feet at its new facility, up from 60,000.

"It's a beautiful site for our recruiting, too, with a great new design," he adds. "It gives us room to grow."

Expansion seems to be the name of the game for Royal Alliance, as well as for the other firms in the AIG Advisor Group -- FSC Securities Corp., AIG Financial Advisors, American General Securities Inc., and Advantage Capital Corporation.

Fee-based work by RIAs in the group -- including assets managed by third-party money managers, in SMAs and in wrap programs -- stands at $30 billion. This figure could hit $50 billion by the end of 2008, the company says.

At Royal Alliance, fee-based work accounts for about one-third of total sales, and it is expected to expand to 60 percent by 2010. The brokerage reportedly had $370 million in revenue last year. "We are very excited about this momentum," explains Roth.

Leading up the 3,400-member RIA effort across the AIG Financial Group is Clara Sierra, who has been appointed senior vice president, investment advisory services and marketing. She joined the AIG Advisor Group in April 2002.

Under Sierra's direction, AIG Advisor Group will give Royal Alliance and other reps the ability to clear through National Financial as part of its unified managed-accounts platform. Pershing will remain the main clearing firm for the broker-dealer. This dual-clearing capacity and UMA program is set to be rolled out in the first quarter of 2007.

Gary Bender, who leads the BD's recruiting effort, has also become a senior vice president. Over the past three years, he has helped the average production level of new offices grow to more than $2 million from $400,000. The average advisor's gross dealer concessions (or GDC) is now about $177,000, nearly double the $99,000 it was in 2001.

LeeEllen Walker-Redd is now responsible for coaching practice management and training programs, while Mayra Ferrer continues to direct facilities management and related issues.

Royal Alliance is also separating the supervisory and business-development functions of some managers, as well as the legal and compliance functions.

"I've been very fortunate to join when I did," shares Roth. "Our 2006 revenues and profits should be the best ever."

"The idea that some things may not work out is not an option," he quips. "I'm not over-confident. But at Royal Alliance and AIG, we believe the independent model is the model of the future, and that we have all we need to accomplish what we've set out to do."

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Royal Alliance's New Directions

The independent broker-dealer's plans include:

o New digs at One World Financial Center (85,000 sq. ft)

o New dual-clearing for RIAs via National Financial

o Separating its supervisory and business-development departments, as well as its legal and compliance departments

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