Lightyear Capital Acquires AIG Advisor Group

Industry consolidations and acquisitions aren’t likely to slow in 2016, experts note, and the announced acquisition of AIG Advisor Group by a private equity firm only strengthens the argument. 

Lightyear Capital, probably best known in the retirement plan services industry as a previous owner of the Cetera advisory network, is jumping back into the space with the purchase of AIG Advisor Group.

Retirement plan industry professionals may remember Lightyear Capital’s successful purchase, reformation and eventual sale of Cetera Advisors and related brands to RCS Capital back in 2014—a process that undoubtedly brought nice profits to the firm given the premium $1 billion-plus price tag paid by RCS. Lightyear was further advantaged in the sale in that it played a key role in the original formation of Cetera, following the acquisition of three ING broker/dealers.

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Looking into the details of the newly announced acquisition by Lightyear, it appears American International Group, Inc. has agreed to sell AIG Advisor Group “to investment funds affiliated with Lightyear Capital LLC, a private equity firm specializing in financial services investing, and PSP Investments, one of Canada’s largest pension investment managers.” 

The transaction is expected to close in the second quarter of 2016, subject to regulatory approvals. Further terms of the deal were not disclosed, but it’s not very a difficult task to understand Lightyear’s motivations. AIG Advisor Group is already among the largest networks of independent broker/dealers in the United States, with “more than 5,200 independent advisers and more than 800 full-time employees.” Given Lightyear’s recent experience forming Cetera into a profitable and well-respected advisory shop, a related game plan is likely in effect. 

Advisor Group is actually comprised of four underlying broker/dealers, which include FSC Securities Corporation, in Atlanta; Royal Alliance Associates, in New York City; SagePoint Financial, in Phoenix; and Woodbury Financial Services, in Oakdale, Minnesota.

Peter Hancock, president and chief executive officer of AIG, was predictably upbeat about the announced sale, noting that AIG “continues to review its business strategy and take actions to become a more efficient, less complex company.” Hancock says his firm “looks forward to a continued relationship with Advisor Group as an important distributor of AIG products.”

Lightyear Capital, through its three affiliated private equity funds, has now “raised over $2.5 billion of capital and makes primarily control investments in North America-based, middle-market financial services companies.” One of Lightyear’s primary investors, PSP Investments, is “one of Canada’s largest pension investment managers, with CAD $112 billion of assets under management as at March 31, 2015.” It invests funds for the pension plans of the Public Service, the Canadian Forces, the Royal Canadian Mounted Police, and the Reserve Force.

Additional information is at www.aig.com

2017 White House Budget Includes Open MEP Expansion

The Obama administration intends to extend workplace access to a retirement savings opportunity to more than 30 million Americans.

Calling retirement a “pillar of the middle class,” Labor Secretary Tom Perez introduced a number of retirement proposals that are going to be included in President Obama’s 2017 budget.

Speaking on a White House press call, Jeff Zients, Director of the National Economic Council, noted that one out of three workers does not have access to a retirement plan—a percentage which increases to half of workers at companies with fewer than 50 employees. To improve this access, he said the Obama administration is rolling out budget initiatives intended to give more than 30 million Americans access to a retirement savings opportunity at their workplace.

One of the primary initiatives is that the administration will be looking to work with Congress on broadening multiple employer plans (MEPs). Perez said that current law and guidance doesn’t allow current plans or employers to take full advantage of the benefits of open MEPs, which he calls an exciting and useful tool for employees. The administration’s initiative is to reduce some of the plans’ compliance burdens so employers face fewer obstacles in their adoption.

Perez said he hoped that this clarity and codification would allow for small businesses and independent contractors to take advantage of the plans. One of the unnecessary barriers he cited was that under current law, there has to be commonality between employers coming together to form a MEP. The administration would like to open up the program so that employers could more readily access an open MEP, such as those from different sectors but a similar location, for example, he said. The reason it is important to the administration that such opportunities get codified is that it wants to increase access and reduce burdens but make sure there are sufficient consumer protections for participants, he noted.

The largest change being called for by the administration is that of the automatic IRA, in which employers without a retirement plan would offer automatic enrollment into IRAs. Zients noted that this proposal has bipartisan roots, being the brainchild of both The Heritage Foundation and the Brookings Institution and Perez said he is looking forward to working with lawmakers on these bipartisan issues.

In addition to promoting these ideas, the budget will include a $100 million grant proposal to encourage the development of portability ideas for benefits that will allow workers to take their retirement benefits and other employment-based benefits from job to job.

The budget initiatives continue the work of the administration’s initiatives that have already begun, such as the conflict of interest rulemaking, the myRA retirement savings vehicle, and the current state-sponsored retirement plan initiatives. The administration is working to build a retirement system that reflects the 21st century workplace, Perez said, with Zients noting that “acting on today’s proposals should be common sense.”

When asked about the status of one of the Department of Labor’s largest retirement initiatives, Perez’s answer suggested reports that the DOL’s conflict of interest rule—also known as revisions to the fiduciary definition under the Employee Retirement Income Security Act (ERISA)—will be sent to the Office of Management and Budget (OMB) soon are incorrect. Perez said the DOL is still “neck deep” in the process of reviewing the significant number of comments submitted in last fall’s comment period and hopes to reach a conclusion in the coming months.

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