Amid bank launch, Ameriprise wealth unit hits record assets

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Ameriprise’s Advice & Wealth Management unit is spending more money and making more of it as well, with nearly 10,000 financial advisors slated to get new client tools under its bank.

Pretax adjusted operating earnings for the Minneapolis-based firm’s wealth management division grew by 7% year-over-year to $376 million in the second quarter, in large part due to bulked-up advisor productivity and client assets.

“Our wealth management business is leading the way,” CEO Jim Cracchiolo told analysts in a call after Ameriprise reported earnings.

Trailing 12-month adjusted operating revenue per advisor expanded by 6% from the year-ago period to $638,000. More than 70 experienced advisors affiliating with the firm in the quarter brought 19% higher productivity than recruits from the same time in 2018, Cracchiolo noted.

Client assets also jumped by 7% year-over-year to a record $607.5 million, including an inflow of $4.8 billion into wrap accounts. The company notes the increase occurred despite only 3% appreciation in equity values year-over-year.

Advice & Wealth Management has been adding more toward the company’s bottom line each year. In the second quarter of 2016, the division contributed to a little more than two-thirds of the company's total pretax earnings. They now account for half the firm’s pretax earnings.

Investing in the new bank and technology — such as a new Salesforce CRM system — will continue driving wealth management’s expansion, according to Cracchiolo. The broker-dealer’s expenses surged by 7% year-over-year to $1.28 billion.

“This was a time for us to increase those expenses,” Cracchiolo said. “We wanted to shift that back to growth investments.”

Ameriprise Bank launched in the second quarter with some $2.2 billion in cash sweep accounts. The new services open to wealth management clients by next year include deposits, mortgages and pledge lending. Credit cards will start in the fourth quarter, CFO Walter Berman said.

Ameriprise recruited 72 experienced advisors in the second quarter, but headcount across the employee and franchise channels dipped by 28 registered representatives down to 9,951 on a sequential basis. The firm has added a net 45 advisors year-over-year, though. The employee channel now has 2,185 advisors and the franchise channel has 7,776 reps.

A spokeswoman from Ameriprise declined to sequential loss of advisors this quarter and a decline of net flows to advisory accounts. Wrap net flows shrank by roughly $500 million year-over-year.

Ameriprise will continue to invest in boosting advisor productivity, Cracchiolo said. The higher expenses also came from transactional commissions and related volume costs, along with a higher mark-to-market accounting impact from deferred compensation for advisors.

“Recruiting is a huge emphasis for every firm,” says recruiter Rob Blevins of Rowlette Executive Search. “But Ameriprise, they’re not shy about devoting resources.”

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