Ameriprise CEO says firm focused on productivity as headcount slips again

Ameriprise’s financial advisor headcount is slipping, but CEO Jim Cracchiolo says he expects its force of nearly 9,900 to “pick up a bit” in 2020. He also points out that recruitment is fueling the broker-dealer’s higher revenue, earnings and client assets.

“We actually feel good about the recruitment,” Cracchiolo told analysts on a Jan. 30 call after the firm reported fourth-quarter earnings. “We're actually focused a bit more on higher productivity. And so the average productivity of the people who are leaving us [is] still much lower.”

The ranks of the Minneapolis-based firm’s employee and franchise channels ticked down by a net 60 advisors — or 1% year-over-year — to 9,871 in the fourth quarter. It was also the third straight sequential decline in headcount for the Advice & Wealth Management unit.

To Cracchiolo’s point, adjusted operating net revenue per advisor on a 12-month basis rose by 6% to $664,000. At least the fifth straight quarter of advisory wrap account in-flows above $4 billion, combined with equity market appreciation, boosted client assets by 19% to a record $643 billion.

An analyst asked Cracchiolo about the impact of advisor productivity on the company's margin. He says the advisor activity has been a constant in recent years, whereas the firm is “managing” the fact that interest rates and other factors can go through “spurts” up or down.

“We have added to margin based upon the productivity increase and the business growth,” Cracchiolo said. “And I don’t see that changing substantially.

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The firm has completed the rollouts of its new Salesforce customer relationship management platform and a more customized advisory program, Cracchiolo noted. Ameriprise’s new bank is also up and running. At one point during the call, he said the firm would “embark on something this year” aimed toward servicing “the higher-net-worth channels.”

A spokeswoman declined further comment about any potential project around the competitive demographic. Ameriprise often cites its large number of mass-affluent clients, and an investor presentation in November stated that the company planned to “grow our client base and move further up market” as one of its “five key levers.”

With respect to declining headcount, Cracchiolo said some stemmed from layoffs when Ameriprise “reformed and restructured” a former BD it acquired in 2018 and folded into its employee channel. The franchise channel shrank by a net 15 advisors year-over-year to tick down to 7,740, while the employee channel contracted by 45 representatives to tumble to 2,131.

“We’re focused mainly on the growth of that productivity and the type of people we are bringing in, but I think the advisor count should probably pick up a bit more like we were doing more at the beginning part of the year,” Cracchiolo said. “I feel good about the type of productivity we're bringing in the recruitment end and the ramping up of the people who are here.”

On the plus side, the firm recruited 63 new advisors in the fourth quarter. Shortly after the earnings call, Ameriprise announced that two practices with a combined five advisors and more than $250 million in client assets affiliated from rival IBDs. One of the advisors aligned in the fourth quarter, with the rest coming in September.

Next September will mark the 15th anniversary of Ameriprise — once known as American Express Financial Advisors — going public as an independent firm. The Advice & Wealth Management unit has emerged as its driving force in recent years, overtaking the protection, annuities and asset management segments.

The unit’s pretax adjusted operating earnings have soared by more than 75% in the past five years to $1.51 billion in 2019. In that span, its share of the firm’s total earnings expanded to 52% from only 33% in 2015.

“We've seen a consistent shift in our business mix over the past few years and expect this to continue as we focus substantial investments in areas of opportunity within wealth management business,” CFO Walter Berman said in prepared remarks.

In the fourth quarter, the BD’s revenue surged by 8% year-over-year to $1.71 billion. The unit’s expenses jumped by 9% to $1.32 billion on the higher advisor compensation and other distribution charges for the increased business.

The BD also had lower brokerage cash balances amid the lower interest rates to close out last year. Pretax adjusted operating earnings rose 5% year-over-year to $387 million with a margin of 22.6%, just below the 23.3% from the year-ago period.

The parent firm’s net income dropped 14% year-over-year to $463 million, which it attributed to market volatility relating to the hedges of its variable annuity products and changes to its credit spread.