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Ameriprise wealth unit absorbs costly fiduciary changes as client assets hit record

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With the fiduciary rule partially in effect, Ameriprise says it’s all hands on deck to navigate a swiftly changing regulatory environment. Among other efforts, the firm has in recent months conducted more than 100 instructional sessions focused on the Department of Labor’s rule.

The firm is “well-prepared” for the regulation after spending $30 million on compliance last year, CEO Jim Cracchiolo said in a conference call Wednesday following the release of Ameriprise’s second-quarter financial results.

Overall, the firm said stronger adviser productivity helped boost quarterly profits, offsetting losses caused when the firm eliminated 12b-1 fees from advisory accounts to comply with the rule. Headcount for the firm’s wealth management unit declined for the fifth straight quarter.

“We’re managing well through an ongoing period of change,” Cracchiolo said.

Wirehouses, broker-dealers and banks unveiled client-friendly policies while asking the agency for further delays.
June 8

The wealth management unit’s pretax profits jumped 32% to $291 million year-over-year, and retail client assets rose 11% to $512 billion, a record high, according to the firm. Eliminating 12b-1 fees in advisory accounts cost Ameriprise firm $54 million.

Cracchiolo cited adviser productivity as a key driver of growth. Despite the loss of 12b-1 fees, net annual revenue per adviser climbed 7% over the year-ago quarter to $541,000. More than 80 experienced advisers moved their practices to Ameriprise in the second quarter, according to the firm.

Shares of the Minneapolis-based firm soared to more than $100 in early November, and haven’t dipped below triple digits since then. By midday Wednesday, shares were up nearly 5% over the previous day’s close, to $145.41.

The firm’s overall headcount fell by a net 118 advisers from the year-ago to 9,640. Ameriprise’s employee channel contracted by 62 advisers to 1,992, and the firm’s independent channel shed 56 advisers, falling to 7,648.

Cracchiolo rejected an analyst’s suggestion that the firm took in more client assets by letting low-producing advisers go in favor of higher-earning advisers with established books. Instead, he cited the higher productivity, which he said is “at the top of the charts” for regional and independent brokerages.

Ameriprise's headcount may grow in the third quarter, however, due to the July 1 close of Ameriprise’s acquisition of San Antonio-based independent broker-dealer Investment Professionals. The IBD has about 200 advisers and $8 billion in assets from its bank and credit union clients.

Ameriprise phased out 12b-1 fees from advisory accounts in April, switching all mutual fund investments to institutional share classes or providing rebates to clients, according to Cracchiolo. The fees will remain in place for commission-based accounts, even if the rule goes into full effect on Jan. 1.

The firm will adjust its plans if the DOL adds additional mandates around commission-based accounts, Cracchiolo said. But, he added, “Over the course of the remainder of the year, we don’t see a change for the things we implemented.”

Although the firm's executives have publicly called on President Trump’s administration to rescind the rule, Cracchiolo noted the firm's recent training push.

“We continue to provide clear direction and extensive training for our advisers so that they are well-supported and able to continue serving clients and building their practices through this time,” he said.

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