Ameriprise acquisition stems declining advisor headcount
Buoyed by the recent acquisition of an independent broker-dealer, Ameriprise's advisor headcount reversed several quarters of decline, and the firm reported strong profits for its wealth management unit.
Had it not been for the acquisition, the firm's advisor ranks would have declined by 72 compared to the year-ago period. Instead, it rose by 143 advisors to 9,890, the firm reported.
Pretax operating earnings for Ameriprise's Advice & Wealth Management unit soared 29% year-over-year to $298 million, and client assets rose 13% to a record $539 billion, according to the firm. Fee-based wrap accounts saw an inflow of $6.1 billion, another record and the sixth straight quarter of growth, CEO Jim Cracchiolo said Wednesday.
Wirehouses have also lately taken in strong profits alongside mixed recruiting results. While wirehouse advisors’ annual productivity often amounts to around $1 million, Ameriprise’s operating net revenue per advisor on a 12-month basis is $541,000. The metric has increased 12% year-over-year.
Ameriprise’s advisor productivity is more than double that of its independent competitors, Cracchiolo said in an earnings call with analysts. He attributed the productivity to market conditions, sharpened focus by advisors following partial implementation of the fiduciary rule and recruiting.
“Over the course of the year, we brought in very good advisors that have larger books and productivity. In which case it’s not just the number, but it’s the size of the advisors that we’re bringing in,” Cracchiolo said in response to an analyst’s question about the unit’s increased expenses. “The upfront cost of that is a bit higher, but the productivity is a bit higher.”
The wealth management unit's expenses rose 4% to $1.085 billion.
The rule has cost the firm tens of millions of dollars in compliance and lost revenue.
The firm's adviser headcount slipped 98 year-over-year.
CEO Jim Cracchiolo said the firm's efforts won't go to waste should the rule be overturned.
FIDUCIARY DELAY BUMP?
The Department of Labor's fiduciary rule also resulted in extra expenses, according to the Minneapolis-based firm, which has said it spent $30 million on compliance last year. Part of the rule went into effect June 9, but President Trump’s administration has moved to delay full implementation by 18 months.
Asked whether the pushback helped the firm’s results, Cracchiolo replied that the firm is “continuing to see our advisors get back [to focusing] on their businesses and books.”
The recently acquired IBD, San Antonio-based Investment Professionals, also added $8 billion in assets to Ameriprise in the third quarter. Ameriprise now has 7,681 advisors in its independent channel and 1,994 advisors in its employee brokerage.
The Advice & Wealth Management unit remains the “primary growth driver” for the company, CFO Walter Berman said.
Following release of the earnings Wednesday, independent investment research firm CFRA Research boosted its target price of Ameriprise stock by $8 to $160 per share and affirmed its “hold” rating. The company’s operating earnings per share of $3.53 for the quarter beat CFRA’s EPS estimate by 70 cents.