Ameriprise Q3 wealth earnings rise on higher interest rates

Ameriprise's wealth profits soar 30% as higher interest rates fuel earnings

October 26, 2022 10:43 AM

Roughly three years after its launch, Ameriprise Bank is helping to boost the firm's wealth management earnings, a buffer to the impact of lower profits from managing client portfolios with slumping stocks.

Profits at the firm's Advice & Wealth Management segment vaulted upwards by 30% in the third quarter, even as market volatility dented client assets and advisory flows, according to the firm's Oct. 25 earnings statement. The Minneapolis-based firm added more than 200 independent financial advisors for the second quarter in a row, with its existing base improving their productivity on the strength of higher cash and other brokerage assets whose revenues are less linked to stock values.

Account flows grew "significantly" in the third quarter, thanks to Ameriprise's ability to "generate good growth in advisor productivity," CEO Jim Cracchiolo said in a statement.

"Ameriprise delivered another good quarter, demonstrating the strength of our business and ability to navigate periods of heightened volatility and market dislocation," Cracchiolo said. "Growth in our cash business and bank drove higher spread income in wealth management that more than offset equity market depreciation in our businesses."

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To see the key wealth management takeaways from Ameriprise's third-quarter earnings statement, scroll down the slideshow. For coverage of the company's earnings in the second quarter, click here. To see the firm's results from the first quarter, follow this link.

Financial advisor headcount

The number of Ameriprise advisors climbed by a net 209, or 2%, from the year-ago period to 10,282 in the third quarter, with the firm adding 89 experienced brokers in that span. The ranks of employee brokers ticked down by a net 23, or 1%, to 2,089, while the firm's fleet of independent franchise advisors rose by 232, or 3%, to 8,193.

Client assets

Despite slumping stock values of the quarter, Ameriprise's client net flows jumped 11% year over year to $11.2 billion in the third quarter. Wrap advisory flows tumbled by 31% to $6.4 billion, while brokerage account flows soared by more than 650% to $4.8 billion.

On an overall basis, total client assets slipped 12% from the year-ago period to $711.4 billion, with advisory assets falling by the same percentage to $385.2 billion. As clients moved out of stocks, cash balances grew 16% to $46.3 billion. Ameriprise Bank added a net $8.8 billion to reach $18.6 billion in assets by the end of the third quarter.

Expenses

The Ameriprise wealth unit's general and administrative costs hiked up 12% year over year to $393 million due to business growth investments, volume-related compensation and other expenses from the flows of client assets. In addition, the same time a year ago saw what the company described as "unusually low" levels of such expenses due to lower staffing and other factors. Across the board, the firm's adjusted operating expenses fell 3% to $1.5 billion because of lower distribution costs.

Revenue and earnings

Ameriprise's wealth division earned pre-tax adjusted operating earnings of $595 million on adjusted net revenue of $2.1 billion, for a margin of 27.8%. The profit margin soared by 540 basis points from the year-ago period as earnings surged by 30% and revenue increased 4%. The client inflows, higher interest rates and the rising bank balances more than offset the impact of the plummeting stock values and fewer transactions across accounts.

Ameriprise's wealth profits soar 30% as higher interest rates fuel earnings

Financial advisor headcount

Productivity

Client assets

Expenses

Revenue and earnings