Ameriprise Advisers More Productive, But Summer Is A Drag

Ameriprise Financial Inc.'s (AMP) advice and wealth-management segment reported year-over-year earnings growth and increased adviser productivity in the third quarter, but seasonality factors and clients' risk aversion were a drag on the segment's results in the quarter.

Improved market results along with the company's efforts to boost adviser productivity and keep expenses in line propelled the segment to year-over-year gains, James Cracchiolo, chairman and chief executive of Ameriprise, said Thursday on its quarterly earnings call. But the slower summer months, historically low short-term interest rates and a quarterly decline in the "average equity markets" took their toll in the third quarter, he said.

Net operating revenues for the advice and wealth-management segment rose 14% to $946 million from the year-ago quarter due to the adviser productivity gains, growth in average fee assets driven by market appreciation and lower operating general business expenses, Ameriprise reported late Wednesday. The segment includes its franchise advisers and employee advisers, which are both branded as Ameriprise Financial advisers, in addition to its independent broker-dealer unit, La Vista, Neb.-based Securities America Financial Corp.

The segment also reported pre-tax operating earnings of $88 million in the third quarter, up from $28 million a year ago, and its pre-tax operating margin rose to 9.3%, up from 3.4% a year ago, and slightly higher than last quarter, it said.

However, the segment's revenue was down 2% from the second quarter, Ameriprise said. There was improvement in client activity, though it continued to be below pre-crisis levels, Walter Berman, the company's executive vice president and chief financial officer, said on the call. "Average equity markets" were down 4% quarter over quarter, he said. However, that was partly offset by strong sales in Ameriprise's new variable annuity product, he said.

Adviser productivity, measured as operating net revenue per adviser, increased 21% in the quarter from a year ago, the company said. That increase was due partly to appreciation in the equity markets, but also came from increased client activity and inflows that have come into products like its new mutual-fund wrap product over the past year, Cracchiolo said. Lower-producing advisers have left and the company has cut costs, he said.

But advisory productivity was off slightly from the prior quarter mostly due to the slower summer months, Cracchiolo said. "Clients are more confident now than they were a year ago but doubts and concerns are persisting and, as a result, investing behavior continues to show a fairly high level of risk aversion."

However, even with the seasonality impact, total client assets for the segment increased $313 billion, up 9%, from a year ago. Wrap accounts were an important contributor, Cracchiolo said.

In addition, historically low short-term interest rates impacted the segment's profit "fairly significantly," he said.

Ameriprise's total adviser headcount declined 6% from a year ago to 11,608 in the quarter, primarily due to the continued departure of low-producing advisers, it also said Wednesday.

The company has an employee adviser retention rate of 78%, which is probably the highest it has been, but would like to boost that rate into the 80s, Cracchiolo said. The company continues to see a slowing of adviser departures, "though it's probably not done," he said. With more than 11,000 advisers, "just to replace normal attrition...you have to make up for all of that," he said.

Ameriprise is trying to add to teams, to give them greater support to build out their practice with support staff and assistant advisers, Cracchiolo said. The focus going forward will be on increased productivity and growth of practices "in combination to the number of people we have," he said.

Shares of Ameriprise were up 3.9% at midday Thursday at $52.83.

-By Daisy Maxey, Dow Jones Newswires; 212 416 2237; daisy.maxey@dowjones.com

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