Ameriprise FAs, Without American Express, Gain New Assets, Improve Average Production by Double Digits

Ameriprise seems to be doing just fine without the backing of its former parent company, American Express. The firm had a good second quarter, meeting analyst consensus expectations, enjoying strong asset flows, improving advisor productivity and increasing its mass affluent client base.

So far, Ameriprise seems to be doing just fine without the backing of its former parent company, American Express. The firm had a good second quarter, meeting analyst consensus expectations, enjoying strong asset flows, improving advisor productivity and increasing its mass affluent client base.

The firm, which was spun off from American Express in the third quarter of last year, reported net income of $141 million for the second quarter of 2006, ended June 30; that’s down from income before discontinued operations of $149 million in the year-ago second quarter, but generally in line with analyst consensus expectations. Total revenues grew by 8 percent, to $2.1 billion for the quarter, which attributes to solid growth in retail client activity. That in turn drove higher management fees, distribution fees and premiums.

On an adjusted basis, earnings increased by 22 percent, to $195 million for the quarter, versus a year ago, and adjusted revenues grew by 13 percent. (Adjusted earnings exclude operations discontinued as part of the spinoff, nonrecurring costs related to the firm’s separation from parent American Express, as well as AMEX Assurance, the firm says.)

“A key factor in our success in the quarter is the continued stability and increased productivity of our advisor force,” said Jim Cracchiolo, chairman and CEO in a release. Advisors produced greater revenue, with gross advisor production up by 15 percent versus the year-ago quarter, despite the “turbulent market environment,” Cracchiolo said.

Advisors also continued to add mass affluent clients, defined as individuals with more than $100,000 to invest, Ameriprise’s target market, he said. The number of mass affluent clients, or accounts with $100,000 or more in assets with the company, grew by 8 percent versus the year-ago quarter. And average assets per new client increased by 24 percent year over year.

Overall, net asset inflows totaled nearly $2 billion, “the strongest they’ve been in recent memory,” says a Lehman Brothers research report on the firm. This included 27 percent growth in net flows into Ameriprise’s main wrap account program (now at $1.9 billion); a near doubling in variable annuity net flows, to $1.3 billion; and a more than doubling, to $800 million, in net flows into the wrap mutual fund program being run out of Ameriprise’s independent broker/dealer, Securities America, the research report says.

“The key takeaway from Ameriprise’s June-quarter results reported last night is that the company is making progress on its No. 1 agenda item, which is to build the pile of assets that it is either managing itself or gathering for others,” says the Lehman Brothers report. “Ameriprise wants to drive ever-more assets through its existing infrastructure, lifting earnings and returns by having higher fees and investment income go against a relatively set cost basis. That’s pretty much what happened in the quarter.”

Management, financial advice and service fees grew by 18 percent, or $100 million, to $654 million in the quarter, “driven by strong net inflows into wrap accounts and variable annuities, and equity market appreciation,” which were offset by continued net outflows in the firm’s proprietary RiverSource mutual funds.

The total number of advisors sat at 12,372 as of June 30, 2006, up by 2 percent from the year-ago quarter. Retention of semi-independent “franchisee” advisors “remained strong” at 90 percent, the firm said, while retention among employee advisors is at 60 percent, due, in part, to higher productivity requirements than before.

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