Ameriprise Wealth Q2 Profit Falls 28%
Like other regional firm executives in recent days, Ameriprise Chairman and Chief Executive Jim Cracchiolo has found a silver lining amid the darkness of the Covid-19 economy.
“We’re very well positioned on the recruiting front, and the pipeline looks good,” he told analysts on a call Thursday to discuss the Minneapolis-based company’s 69% drop in second-quarter net income.
“Many advisors have more time to evaluate options and then take advantage of video sessions webinars, virtual VIP meetings and open houses to get to know Ameriprise,” Cracchiolo said.
He called it “a very efficient way to showcase” the firm’s “advisor value proposition,” echoing similar earnings call assertions this week from Stifel Financial Chairman and CEO Ron Kruszewski and from Raymond James Financial Chairman and CEO Paul Reilly.
Ameriprise Financial hired 75 brokers during the second quarter but its end-of quarter headcount of 9,894 was down by 57 from June 30, 2019. Retention of experienced advisors in its employee channel declined 200 basis points to 90.9% from the year-earlier quarter.
As at many of its rivals, Ameriprise’s wealth business also experienced declines in profit and revenue.
Net revenue in its Advice & Wealth sector fell 7% from a year earlier to $1.54 billion while pretax operating earnings was off 28% to $271 million. It attributed the decline to the “precipitous decline in short term interest rates” that had a $122 million impact, a $37 million decrease in transaction activity because of the pandemic, and a $27 million fee decline because of lower average equity markets.
Travel and face-to-face meeting restrictions stemming from the pandemic lockdown made it harder for Ameriprise advisors who often lead with kitchen-table financial plans to sell certain products, especially those that are long-dated, Cracchiolo noted.
“Having types of conversations remotely regarding protection and life insurance and longer-term contracts wasn’t necessarily their priority,” he said. “I think you can see that across the industry so we do believe that we’ll come back.”
But clients added $4.9 billion to fee-based managed accounts, setting up a rise in third-quarter revenue that will be based on beginning-of-quarter account levels, the company said. It also ballyhooed a 28% rise in brokerage cash balances from the 2019 second quarter, and said clients began reinvesting cash following the March volatility. Brokerage cash balances fell 5% since the end of this year’s first quarter.
The average annualized production of Ameriprise’s brokers rose 5% to $669,000 from $639,000 a year earlier, Ameriprise said.