Ameriprise Q2 profits rise on recruiting, flows and cash

Ameriprise’s recruiting, flows and cash push up profits 16%

July 27, 2022 6:16 PM

Rising interest rates, recruiting wins and incoming assets carried Ameriprise to double-digit profit gains in the second quarter, even as slumping stocks left a large hole.

Ameriprise’s Advice and Wealth Management unit reeled in more than 200 independent advisors over April through June as the Minneapolis-based firm approached nearly a half a billion dollars in profit, according to the firm’s July 27 earnings call with analysts. While the asset flows were positive but came in below last year’s level, some of Ameriprise’s rivals sustained an outflow for the quarter.

CEO Jim Cracchiolo, citing the larger number of incoming recruits compared to the first quarter, said he views recruiting as “a continued good opportunity” for the company.

“We are speaking to more people,” Cracchiolo said, according to a transcript from Seeking Alpha. “People are recognizing what we bring to the plate, the combination of the support we give, the technology and how we help them really grow their practices.”

The license obtained by UBS allows the firm to manage assets for institutional and high-net-worth investors in the world’s second-largest economy for the first time.

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To see the key takeaways from Ameriprise’s earnings statements for financial advisors and other wealth management professionals, scroll down our slideshow. For coverage of the company’s earnings in the prior quarter, click here.

Financial advisor headcount

The number of Ameriprise advisors rose 2%, or a net 198, from the year-ago period to 10,245 by the end of the second quarter. The company’s headcount of employee brokers slipped 8 to 2,096, while the number of independent franchisee advisors grew by 206, or 3%, to 8,149. In its recruiting fights with rivals, Ameriprise picked up 99 experienced advisors.

Productivity

The average amount of business generated by Ameriprise advisors, as measured in adjusted operating net revenue on a trailing 12-month basis, jumped 11% to $814,000 despite the recent stock slump. New client acquisition, incoming recruits and expanded relationships with existing customers easily outpaced lower trading volume and asset flows.

Client assets

Market depreciation took a bite out of client assets in the second quarter, but investors’ move to cash boosted Ameriprise’s balances in that asset class. Total client assets slipped 9% on year-ago levels to $735.5 billion, net flows declined 10% to $8.6 billion and incoming advisory assets tumbled by 39% to $6.2 billion. Cash balances soared by 21% to $47.4 billion, with the amount in Ameriprise’s bank climbing by 79% to $15.5 billion.

Expenses

With stock losses canceling out the company’s organic growth, distribution expenses such as advisory fees and commissions to advisors ticked down by 1% year-over-year to $1.2 billion. General and administrative expenses increased by 4% to $376 million because of the impact of higher volume-related costs over the entire last 12 months.

Revenue and earnings

Lower but still sizable client flows and rising cash holdings now generating higher yields from interest rates offset the smaller trading volumes and slides in the stock market. For the second quarter, Ameriprise generated pretax adjusted operating earnings of $492 million on net revenue of $2.1 billion. Revenue rose 4%, profit was up 16% and the unit’s margin of 23.9% was 250 basis points higher than the same time a year ago.

Remark

Ameriprise delivered “solid” results “in a significantly more challenging environment,” Cracchiolo said in prepared remarks. “Clearly high inflation in the U.S. and globally as well as geopolitical uncertainty continued to cause greater volatility in pressured markets,” he said, according to Seeking Alpha’s transcript. “With the Fed raising rates and concern about a potential recession, markets are experiencing headwinds and that's weighing on investor sentiment.”