The Ameriprise Advice and Wealth Management unit netted a record profit margin for the third quarter in a row, thanks to the Fed's interest rate hikes and rising asset values and flows.
The Minneapolis-based wealth management giant surpassed its two prior highs in pretax adjusted operating margin of 29.9% and 30.6% in the second quarter, according to Ameriprise's
Key wealth management takeaways from Ameriprise's second-quarter earnings statement are below. For coverage of the company's earnings in the first quarter,
Financial advisor headcount
Ameriprise added a net 29 advisors year over year to reach 10,274 in the second quarter, with recruiting gains of 99 experienced brokers in the past three months. The count of independent franchisee advisors ticked up by a net 17 representatives to 8,166, while the number of employee brokers increased by 12 to 2,108.
Productivity
Resurrected stock values and asset flows boosted Ameriprise advisors' businesses in the second quarter, according to the firm. Adjusted 12-month operating net revenue per advisor jumped 7% from the year-ago period to $874,000.
Client assets
The inflow of billions of dollars and higher stock values pushed up Ameriprise's client assets, even though cash holdings came down as advisors and their customers paid taxes. Client assets climbed 13% year over year to $833.35 billion in the second quarter, with advisory assets under management in wrap accounts growing by 14% to $454.69 billion. Flows expanded by 10% to $9.41 billion.
On the other hand, client cash balances dropped 11% to $42.02 billion, or about 5% of their portfolios, compared to 6.5% a year ago. The company's yield on cash assets remains lucrative due to interest rate trends: Ameriprise generated returns of 4.77% on them for the quarter, which was up by 347 basis points from the second period of 2022.
Expenses
More distribution expenses including compensation for financial advisors and general and administrative costs that are coming back after being "muted as a result of the pandemic" resulted in a greater hit to Ameriprise's bottom line than a year ago, according to the firm. Adjusted operating expenses rose 3% year over year to $1.61 billion.
Bottom line
The client asset inflow and higher interest rates ratcheted up Ameriprise's wealth management business to massively higher profits for the quarter. The wealth unit generated pretax adjusted operating earnings of $731 million on net revenue of $2.34 billion, for a margin of 31.2%. The revenue surged 14% year over year, while margin soared by 730 basis points and profit ballooned by 49%.
Remark
The company enjoyed "another strong quarter overall, led by continued growth of our wealth management business," CEO Jim Cracchiolo said in a statement. "We're benefiting from our broad investment capabilities, extensive technology and high-quality service that are core to the Ameriprise client experience and represent strategic advantages. We're serving more affluent clients and had another strong quarter of experienced advisor recruiting. And with the growth of Ameriprise Bank, we're driving excellent results across wealth management with revenue and profitability at record levels."
