Ameriprise: Advisor Quality Trumps Quantity Amid Solid Overall Growth
May 9, 2014 by Cyril Tuohy
Recent declines in the number of advisors representing Ameriprise Financial isn’t as important as the quality of the advisors who are choosing to stay or are coming aboard, company executives said.
The number of financial advisors — employee advisors and franchisee advisors — representing Ameriprise stands at 9,704, down by 73 advisors compared to the same period last year. This number is down by 12 advisors compared to the fourth quarter in 2013, according to company filings.
Employee advisors dropped by 50 in the first quarter compared to the fourth quarter of 2013, the company said. This represents about 2 percent of the employee advisor workforce of 2,155.
Franchisee advisors increased by 38 people in the first quarter compared to the fourth quarter of last year, the company said. At the end of the first quarter, the company employed 7,549 franchisee advisors, according to company documents.
Ameriprise chief financial officer Walter Berman, in an earnings call with analysts, said “the most important thing to concentrate on is the quality and the activity levels in AUM (assets under management)” that advisors are bringing to the company.
Eventually, Ameriprise wants to grow the total number of advisors working for the company, Berman also said. But, for the moment, the profitability of advisors “is the key here.”
In the first quarter, 76 “experienced advisors” moved their practices to Ameriprise, and the pipeline for new advisors “remains good,” the company also said.
The financial services firm reported first quarter net income of $401 million, up 19 percent from the year-ago period. The company also reported net income per diluted share of $2.01, up 27 percent compared to the year-ago period.
Berman said that strong competition for advisors and a robust — if aging — stock market has caused some advisors to resist moving to Ameriprise. These factors have made it more challenging for Ameriprise to generate profitable growth, he said.
“Markets that are this strong, it does create complacency but we’re still able to attract the type of advisors that we want,” he said.
If profitable advisors are the key — for the moment — to the performance of the company, the question is: How profitable are these advisors as a group?
Advisor client assets grew 12 percent to a record $418 billion and total wrap assets jumped 19 percent to $159 billion, the company said. Wrap net inflows in the first quarter reached a record $4.2 billion.
In a wrap fee arrangement, clients are charged one fee for brokerage accounts managed by a financial advisor.
At the end of the first quarter, operating net revenue per advisor was $454,000, up 15 percent from a year earlier, the company said. The 76 new “experienced” financial advisors that joined Ameriprise in the first quarter are performing above that, Berman said.
The “quality of what we’re bringing on again” is at a higher level than the rest of the advisors combined, from a standpoint of individual profitability and the volume of assets the advisor manages, Berman also said.
As a result, the profit margins of employee advisors are improving, Berman said. In the past, employee advisors have delivered profit margins in the low single digits.
In the advice and wealth management segment, Ameriprise reported first quarter pretax operating earnings of $181 million, up 39 percent from the year-ago period, due to asset growth in fee-based accounts.
First quarter pretax operating margin – a measure of profitability – was 15.8 percent compared to 12.8 percent in the year-ago period, even “in the face of an $8 million headwind from low interest rates,” Berman said.
Total retail client assets grew to $418 billion at the end of the period, up 12 percent compared to a year ago.
In response to an analyst’s question about employee advisor margins, and how much more profitable employee advisors could become for Ameriprise, Berman said the margin could “double and triple” over the next couple of years as long as interest rates remain stable.
The company also reported adjusted net pretax operating margin of 39 percent compared to 33.2 percent in the year-ago period. Assets under management grew to $504 billion, up 8 percent from the year-ago period, due to market appreciation.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.
