Ameriprise expects its newly launched bank to continue driving growth in its advice and wealth management unit.
The big benefit is that its 10,000 financial advisers will soon be able to start offering services like deposits, mortgages and credit cards directly to clients through the bank.
In reporting its second-quarter earnings, Ameriprise showed that although the wealth management unit is spending more money, it is making more as well.
Pretax adjusted operating earnings for the unit
“Our wealth management business is leading the way,” Chief Executive Jim Cracchiolo told analysts in a call Thursday after Ameriprise reported earnings.
Wealth management has been contributing more to the Minneapolis-based company’s bottom line each year. In the second quarter of 2016, the unit contributed to a little more than two-thirds of Ameriprise's total pretax earnings. It now accounts for half the pretax earnings.
Investing in the new bank and technology — such as
“This was a time for us to increase those expenses,” Cracchiolo said. “We wanted to shift that back to growth investments.”
Ameriprise Bank launched in the second quarter with about $2.2 billion in cash sweep accounts.
"Later this year and in 2020, we'll add new deposit-based products, credit cards, mortgages, as well as price lending," Cracchiolo said.
Ameriprise recruited 72 experienced advisers in the second quarter, but headcount across the employee and franchise channels dipped by 28 registered representatives to 9,951 on a sequential basis. The company has added a net 45 advisers year over year, though. The employee channel now has 2,185 advisers and the franchise channel has 7,776 reps.
A spokeswoman from Ameriprise declined to discuss the sequential loss of advisers this quarter and a decline of net flows to advisory accounts. Wrap net flows shrank by roughly $500 million year over year.
Ameriprise will continue to invest in boosting adviser productivity, Cracchiolo said. The higher expenses also came from transactional commissions and related volume costs, along with a higher mark-to-market accounting impact from deferred compensation for advisers.
“Recruiting is a huge emphasis for every firm,” said Rob Blevins of Rowlette Executive Search. “But Ameriprise, they’re not shy about devoting resources.”
In the second quarter, Ameriprise's trailing 12-month adjusted operating revenue per adviser expanded by 6% from the year-earlier period, to $638,000. More than 70 experienced advisers affiliating with the firm in the quarter brought 19% higher productivity than recruits from the same time in 2018, Cracchiolo said.
Client assets also jumped by 7% year over year to a record $607.5 million, including an inflow of $4.8 billion into wrap accounts. The company said the increase occurred even though equity values appreciated only 3% year over year.
