A massive recruiting addition of bank-based financial advisors to the Ameriprise Advice and Wealth Management unit helped to buoy the firm's profits amid rising expenses.
The first $15 billion of client assets
After adjusting for "several one-time items," Ameriprise's overall earnings per share of $7.75 for the year beat Wall Street's consensus of $7.70, William Blair analyst Jeff Schmitt wrote in a note after the company released its quarterly results.
"Overall, it was another strong quarter for wealth management, highlighted by stabilizing cash and strong flows; expense management is driving margin expansion; and capital return remains high," Schmitt wrote. "We continue to rate Ameriprise 'outperform' as strength in wealth management, expense discipline and high capital return should drive higher EPS levels over the next few years. Risks include asset-based fee pressures, exposure to equity markets, foreign-exchange risk, a near-term shift in Fed monetary policy from tightening to easing an increase in sweep rates, and regulatory changes."
The key wealth management takeaways from Ameriprise's fourth-quarter earnings statement are below. And follow these links to see Financial Planning's analysis of the company's last four quarterly disclosures:
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 Ameriprise nets record 30% margin as interest rates boost profit
Financial advisor headcount
The number of advisors rose by a net 98 year over year, or 1%, to 10,367. In the firm's larger independent "franchisee" channel, the headcount dropped by 34 — less than 1% — to 8,139.
However, the firm's hiring of a net 132 advisors in its employee channel pushed up that division's ranks by 6% to 2,228 and more than offset the small losses among independent teams. In the last three months of 2023, the firm recruited 166 experienced advisors.
Productivity
Boosted client activity, organic growth and rising stock and bond values pushed up the productivity of Ameriprise's advisors. Adjusted annual operating net revenue per advisor jumped 11% from the year-ago period to $916,000. The number has surged by a compound annual growth rate of 8% since 2018, according to the firm's investor presentation.
Client assets
A strong flow of incoming client assets and the steady performance of stocks and bonds boosted the wealth management unit's holdings last year, even though the "significant equity market appreciation during the quarter, particularly in December, was not fully reflected in fourth-quarter results," because the quarterly advisory fees are based on balances at the beginning of the month, according to Ameriprise.
Compared to 2022, incoming assets climbed by a quarter to $53.3 billion and total client holdings grew 19% to $901 billion. For the quarter, flows to wrap net advisory accounts also increased by 12% year over year to $7 billion. Cash balances slipped by 6% to $44.5 billion, but high interest rates continue to boost the firm's profits as well.
Expenses
Ameriprise became
After the impact of the regulatory charge and distribution costs tied to the level of client assets and corresponding compensation to advisors, adjusted operating expenses for the wealth unit expanded by 9% year over year to $1.7 billion.
Bottom line
Interest rates, asset values and incoming clients drove higher earnings in the fourth quarter.
Amerprise's wealth unit produced two-thirds of the company's overall pretax adjusted operating earnings in 2023, to the tune of $2.9 billion in earnings for that division alone. Those receipts have shot up at a compound annual growth rate of 16% in the past five years.
For the quarter, the division generated a pretax profit of $698 million on adjusted operating net revenue of $2.4 billion for a margin of 29%. Earnings enlarged by 5% and revenue ballooned by 8%, but the margin fell by 90 basis points due to the regulatory charge.
Remark
"Ameriprise delivered another strong quarter and record operating results in 2023," CEO Jim Cracchiolo said in a statement. "We're executing well, serving clients' needs and outperforming across market cycles. Our complementary businesses drove significant revenue and earnings growth, as well as strong free cash flow that we consistently invest in the business and return to shareholders at a differentiated rate."
