Ameriprise CEO eyes surge in planning services

Register now

Ameriprise wants its nearly 10,000 financial advisors to boost their share of clients who have comprehensive plans above the firm’s current level of roughly 40%, CEO Jim Cracchiolo says.

“This is one of the things I’m really excited about as we move into ’19,” he said during the company’s third-quarter earnings call.

His comments came after rising client assets resulted in higher third-quarter revenue and profits. Net revenues in the company’s wealth management unit rose 11% over the same period last year to $1.6 billion, due to continued net inflows and market appreciation.

Pretax adjusted operating earnings also jumped 19% to $355 million on the asset growth and higher earnings on cash sweeps. Executives, meanwhile, think they can sell more services to their existing client base.

Regular planning services for clients of the firm’s wealth management division, which accounts for 46% of its pretax adjusted operating earnings, represents a “great opportunity” even though Ameriprise already has “a good penetration compared to anyone in the industry,” the CEO says.

The Minneapolis-based firm’s advice and wealth management segment consists of an employee brokerage and the No. 2 independent broker-dealer by annual revenue. Its head count has expanded by 43 advisors, or less than 1% year-over-year, to 9,933. That figure includes 7,759 independent advisors.

Cracchiolo provided hints about how Ameriprise hopes to ramp up its planning reach through digital goal-tracking technology and a transition next year to Salesforce’s customer relationship management software.

“These capabilities are in development and testing, and we will be introducing them with training and support to advisors beginning and throughout next year,” Cracchiolo said in his prepared remarks. “I’m energized about our opportunity and so are our advisors.”

The firm will move over to Salesforce’s CRM tool starting next year as part of an effort to boost efficiency with new technology.
July 25
4 Min Read
FP50 2018: Which IBDs produce the most fee-based revenue?
The ongoing shift away from commissionable products is driving major changes in the space.

Retail wealth management client assets grew 9% from the year-ago period to a record $588 billion. The firm reported net inflows of $5.7 billion for fee-based wrap accounts. Ameriprise advisors have taken in wrap net inflows above $5 billion for five straight quarters.

Surging client assets in wealth management also pushed up expenses 9% year-over-year to $1.2 billion, mostly from higher distribution costs like advisor compensation. Variable charges linked to revenue growth and company investments forced up general and administrative expenses.

A “lesser percentage” out of the 40% of Ameriprise clients with comprehensive plans receive updates each year from their advisors on them, according to Cracchiolo.

“We are investing even more today, so that we can ensure that we can deliver a consistent level of advice to even all of our clients as we go forward,” Cracchiolo said.

The improvements will “digitally enable all that advice,” he added, “with online goal tracking and ensuring that, in an interactive way, our clients can deliver that seamlessly to more of their clients, because it does take a bit more work and engagement.”

Advisor productivity increased 11% year-over-year to $613,000 in adjusted operating net annual revenue per advisor. The 87 experienced advisors Ameriprise recruited in the third quarter had about 20% higher productivity than the incoming advisors in the year-ago period, the firm says.

The segment’s fee on brokerage cash balances has soared by 62 basis points in the past 12 months to 1.73% on $24.2 billion in client cash holdings amid multiple hikes in interest rates by the Fed. An analyst asked Cracchiolo for the company’s outlook on the cash sweep fees next year.

“As we continue to see rates go up, we will be passing more on to the client,” Cracchiolo said. “We’ll pick up some, but I don’t think we’ll pick up to the extent we picked up previously.”

The parent company earned $594 million in adjusted operating earnings on net revenue of $3.3 billion, or $4.05 in earnings per share. The adjusted EPS jumped 20% year-over-year while beating analysts’ consensus by 37 cents.

For reprint and licensing requests for this article, click here.
Earnings Independent BDs Regional BDs Holistic financial planning Fintech Jim Cracchiolo Ameriprise Ameriprise Financial