Ameriprise closing in on $1T in client assets

Even though financial advisor movement slowed down across the industry in the first quarter, Ameriprise is drawing "high-quality recruits" over its "more irrational" rivals, the firm's CEO said.

The number of incoming experienced advisors to Minneapolis-based Ameriprise's Advice and Wealth Management unit slipped 23% from the same time a year ago, according to the firm's April 22 earnings statement and a call with analysts the following morning. Still, high-profile recruits such as the retail investment program of Comerica Bank and a credit union wealth arm that will bring $2 billion in client assets later this year are pushing up the firm's headcount. And interest revenue from Ameriprise's bank, stock and bond returns and advisor productivity boosted the firm's profit and revenue by double digits.

Asked by an analyst about the "competitive environment for FA recruiting right now," Ameriprise CEO Jim Cracchiolo noted the cohort of "high-quality recruits" who joined Ameriprise in a first quarter in which recruiting ran "a little slower" than in other periods.

"People were staying put a little more," Cracchiolo said, according to a transcript by Seeking Alpha. "I do believe that the market is very competitive and some of the competitors are actually, I think, being a little more irrational in that regard. So, we're much more focused on quality people that really think about where they need to associate. They want to build good practices, become more productive, want the support they need to do that. And those are the type of people that we've been focused on."

The key wealth management takeaways from Ameriprise's first-quarter earnings statement are below. And follow these links to see Financial Planning's analysis of the company's last four quarterly disclosures:

• Comerica recruits, client flows help Ameriprise rake in earnings of $2.9B
• Ameriprise sees wealth management growth despite slowing inflows
• Ameriprise wealth profits soar by 49% on interest rates and asset flows
• Ameriprise client cash yields record profit margin

Financial advisor headcount

The number of Ameriprise advisors rose by 105, or 1% year over year, to 10,364 in the first quarter. 

Most of the company's headcount gains came in the employee channel, where the ranks jumped by 128, or 6%, to 2,227 after an influx of advisors from Comerica's incoming program and other recruits. The number of independent franchisee advisors remained largely flat, with their numbers ticking down by less than 1%, or 23, to 8,137. In the last three months, the company recruited 64 experienced advisors, or 19 fewer than in the first period of 2023.

Productivity

Ameriprise advisors generated more revenue than the same time a year ago because of higher productivity, rising stock and bond values and growth in their businesses, according to the firm. Their average trailing 12-month revenue per advisor climbed 11% to $942,000.

Client assets

While client asset flows took a substantial hit in the first quarter compared to the first three months of 2023, stock and bond appreciation pushed up Ameriprise's client assets. Total holdings enlarged 19% to $953.8 billion, while advisory assets surged 20% to $521.7 billion. However, net advisory flows improved by only 4% to $6.5 billion, and the total incoming assets fell 31% to $8.5 billion. 

In his prepared remarks, Ameriprise Chief Financial Officer Walter Berman cited the draw of money-market funds at the beginning of last year as the reason for lower flows in the first quarter.

Expenses

The escalating productivity expanded the company's costs. Adjusted operating expenses increased 14% year over year to $1.8 billion in the first quarter, due to hiked-up compensation to advisors from the higher business and greater debt and general costs. 

Bottom line

For the quarter, Ameriprise's wealth unit earned pretax adjusted operating income of $762 million on revenue of $2.6 billion for a profit margin of 30%. Earnings grew 10% year over year, revenue shot up 13% and the margin went up by eight basis points. Client activity, market appreciation and bank interest income tied to higher rates helped the company's bottom line.

Remark

In his prepared comments, Cracchiolo noted that "the economic picture is not as strong in the U.K." and in Europe, the Middle East and Africa as in America. 

"Clearly, the operating environment remains dynamic. Equity markets have had strong year-over-year growth as the U.S. economy is proving resilient. However, inflation remains above the Fed's target and therefore interest rates remain high," he said. "Overall, many investors are holding cash on the sidelines or in shorter duration products, which will eventually move to other investments. This means opportunity for our business with our quality goal-based advice and active solutions."