Ameriprise's wealth management business reported a 2% year-over-year fall in net revenues during the second quarter. At the same time companywide revenues were down 4%. The regional brokerage blamed lower client activity levels and below average equity markets for its poor results. Clients are being cautious over their investment activities, says Jim Cracchiolo, Ameriprise's CEO.
Profits for this segment recorded a slight growth of 0.45% to $221 million. Ameriprise attributes this to higher earnings on cash balances and growth in assets. This, however, was not enough to offset lower client activity levels in the second quarter.
Operating expenses were on the decline, dropping 2% to $1 billion. The firm also experienced a 3% drop in distribution expenses, reflecting lower transaction activities. General and administrative expenses were down 1% compared to the year before period.
Ameriprise has been managing expenses tightly, while allocating resources to prepare for the Department of Labor's fiduciary rule, according to Walter Berman, the firm's CFO.
Ameriprise was doing "fairly well," getting ready to weather the rule's implementation next year, says William Boland, senior analyst – wealth management at Aite Group, a research and advisory firm.
The firm's net flows, however, need to be watched closely going forward before making a conclusion on the Ameriprise's performance. If revenues continue to soften in the next few quarters that would be alarming, Boland says.
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The firm suffers declines due to below average market conditions, but sees growth in the rank and file.
April 28 -
The firm and industry leaders expect small brokerages to struggle with higher costs, creating recruitment opportunities.
April 28
Adviser headcount was 9,758, an increase of 37, or 0.38% year-over-year. The growth was led by the firm's independent channel, which had 7,704 advisers, up 65, or nearly 1%. Industry recruiter Danny Sarch acknowledged Ameriprise has its appeal in the industry.
The largest recruits managed more than $17 billion in client assets.
"Ameriprise's name is attractive to some and they do a good job in remaining scandal free," says Sarch, founder of Leitner Sarch Consultants, an executive recruiting firm.
The independent broker-dealer has been looking "very closely to the support advisers' needs and also the activities required for them to serve clients," Cracchiolo says. The firm, he adds, also has strong digital platforms that cater to the needs of advisers and clients. Ameriprise will continue to invest in digital initiatives and services, Cracchiolo says. He acknowledged that today's clients, and not necessarily younger clients, are showing interest in robo advisers and other digital platforms. He did not offer more specifics during a call with analysts.
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Headcount at the fast-growing firm was up 327 year-over-year.
July 20 -
The number of financial advisers at the firm declines 1% to 15,042.
July 15 -
The wirehouse has faced a difficult business environment so far this year, and additional headwinds may be coming during the second half of 2016, top executives say.
July 20
Total client assets in wealth management reached a record $461 billion, up 2% from the year ago period. The segment's AUM grew to $188 billion, an increase of 4%.
Despite the poor results, Ameriprise expects "significant growth" going into the future, Berman says. He did not elaborate on how during the earnings call.
Besides a firmwide slump in revenues, Ameriprise's overall operating earnings followed the same downward trajectory, recording a 13% decrease. The firm, however, announced a more favorable result for their firmwide expenses which decreased 1% due to well managed and controlled general and administrative expenses.
