Ameriprise Q4 earnings rise to record on growth

Ameriprise seeking more upmarket and young clients, CEO says

January 28, 2022 11:35 AM

After four straight quarters with its wealth manager adding about double the advisory assets compared to two years ago, Ameriprise CEO Jim Cracchiolo is almost ready to call it the new normal.

In a call after the Minneapolis-based firm disclosed its fourth-quarter earnings on Jan. 27, an analyst noted that the record wrap advisory flows came in well above the normal range of $4 billion to $5 billion prior to the pandemic. The analyst asked Cracchiolo if the firm would be able to continue that level of organic growth, and the firm’s CEO answered “yes,” with the caveat that equity volatility could make it hard to predict. The firm’s “base of activity is much stronger than it was two years ago and three years ago because of what we've been doing” on technology for advisory clients, expanding existing relationships and the base of possible customers, he said.

“That has translated to the flows that you're seeing,” Cracchiolo said, according to a transcript by the website Seeking Alpha. “Our client acquisition was up strongly this year, including in the segment that we really wanted to grow, which is the $500,000 to $5 million category. We're starting to work on moving even further upmarket to higher net worth. We're also focused on some of the younger generation as we bring through the remote and the digital capabilities that we've been investing in.”

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To see the key takeaways from the earnings announcement and call, scroll down our slideshow. For coverage of Ameriprise’s prior quarterly earnings, click here.

Recruiting

The headcount of Ameriprise’s Advice & Wealth Management unit rose by 2%, or a net 194 registered representatives, from the year-ago period to 10,116 in the fourth quarter. The figure includes 2,128 employee brokers and 7,988 independent advisors. The company added 86 experienced advisors in the quarter.

Advisor productivity

Adjusted operating net revenue per advisor on a trailing 12-month basis surged by 18% to $796,000 by the end of the year. “Our advisers are highly engaged,” Cracchiolo said in his prepared remarks. “The training, coaching and full suite of tools we provide advisors is helping them build and deepen client relationships, track prospects and run and grow their practices on our fully integrated platform.”

Client assets

New clients, deeper relationships with existing ones and the recruiting of experienced advisors boosted total assets by 17% year-over-year in the fourth quarter to $858 billion. In-flows soared by 29% from the year-ago period to $12.5 billion, setting a record. Wrap advisory assets increased 22% to $464.69 billion, following equity value appreciation and flows of $10.5 billion. In the bank that the wealth manager launched in 2019, assets reached $12.5 billion by the end of the year after $4 billion in cash sweep accounts moved into it last year, Chief Financial Advisor Walter Berman noted. “Ameriprise Bank is a broad driver of wealth management,” he said.

The bottom line

The wealth manager’s pretax adjusted operating earnings jumped 34% year-over-year to a record $472 million in the fourth quarter, due primarily to the in-flow of client assets, more transactions and equity value appreciation. Adjusted operating total net revenues climbed 19% to $2.11 billion. An operating margin of 22.3% soared by 250 basis points above the year-ago period.

Recruiting outlook

Noting that Ameriprise’s headcount increased by 2% in 2021 and 1% in 2020 after being down slightly in 2019 and flat in 2018, an analyst asked Cracchiolo if he thought it would be possible to continue expanding the number of advisors at that rate. “We do feel good about our ability to continue that along those lines,” Cracchiolo said. “There are people out there that have been buying up networks and growing in advisors. And it doesn't matter what their productivity level is, it doesn't matter how they want to do business, etc. We don't really want to play that game. We feel if we can bring in good quality people, if we could help them grow their productivity, and if I can grow productivity across 10,000 advisors, and I can replenish that and grow at 1%, 2%, 3%, I'll do really well and I'll continue to give a very strong client value proposition.”