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Ameriprise eyes M&A after boosting advisor recruiting and productivity

After gains in financial advisor recruiting and productivity, Ameriprise is open to both large and small M&A deals as part of its wealth unit's growth plans, according to its CEO.

There may be opportunities “to look at some good potential additional add-ons to our wealth management business from an M&A perspective,” Jim Cracchiolo said April 25 in a call after Ameriprise announced first-quarter earnings.

“This is an area that is our core,” he continued. “We know it well; we understand it; we do believe we can bring a lot to it. So It’s one of the things that we want to spend a little bit more energy on.”

Ameriprise headcount

Cracchiolo had pivoted to discussing M&A after an analyst asked him to outline the wealth unit’s expansion strategies. The company says 90 experienced advisors joined in the quarter, with record productivity levels. Ameriprise is recruiting more large teams, according to the CEO.

“We have a very good class of people coming in and we feel like we’re actually hitting stride right now, in really how Ameriprise can really appeal to people in the industry, people who really can continue to grow their productivity,” Cracchiolo told analysts.

The Minneapolis-based firm’s wealth unit spans nearly 10,000 advisors, including an independent broker-dealer with 7,789 representatives and an employee brokerage with 2,190. Ameriprise had a “terrific recruiting quarter, both in quantity and quality,” Cracchiolo said.

Ameriprise added a net 98 advisors over the past 12 months to reach a headcount of 9,979 advisors, the firm notes. While the advisor force ticked up by only 1%, it's an improvement over its largely flat total in prior quarters — aside from advisors joining under a small BD acquisition.

The wealth unit’s pretax adjusted operating earnings surged by 11% year-over-year to $350 million on $1.55 billion in revenue, a margin of 23%. Its margin swelled by 140 basis points from the year-ago period.

Fourth-quarter equity losses stanched client assets at wirehouses, indies and other brokerages — but their stocks are regaining ground after reporting earnings.
March 11

Despite lower inflows related to equity volatility in January, retail client assets increased by 6% year-over-year to $588 billion. Advisory assets under management grew by 11% to $279 billion.

Advisory wrap accounts represent “an important growth platform for us and one of the largest in the industry,” Cracchiolo said. Even though stock prices fell at the end of the year, adjusted annual operating revenue per advisor rose 6% to $628,000.

Technology investments in goals-based planning, client experience and moving to Salesforce as its customer relationship management vendor — along with added services from the parent firm’s upcoming bank — should help further boost advisor productivity, according to Cracchiolo.

The investments drove the unit’s general and administrative expenses up by 6% year-over-year to $331 million. Costs relating to the new recruits’ first year with the firm also caused expenses to rise, but analysts shouldn’t view the costs as higher ongoing overhead, Cracchiolo says.

“We’re making some really good investments, investing in our advisors, investing in the ability for them to actually grow even more their productivity,” he said. “So that expense incremental we think will give us very good paybacks in that regard.”

He didn’t specify any company or type of firm Ameriprise may be considering acquiring, noting that it was “a bit early” to elaborate. Wealth management M&A hit a record 181 deals in 2018 — the sixth straight year of record transaction volumes, according to investment bank and consulting firm Echelon Partners.

In 2017, Ameriprise purchased Investment Professionals and folded the BD into its employee channel. An M&A deal “may be a good use of our capital moving forward,” Cracchiolo said, adding that the firm sees “different opportunities in the wealth management space right now that we’re thinking about or looking at” and he didn’t want to go further.

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