Ameriprise tightened its corner on the mass-affluent market with its purchase of H&R Block Financial Advisors (HRBFA) in August. Much of the financial advisory industry has long looked down its nose at Ameriprise's down-market approach. But analysts say its strategy is nothing to sneeze at.
Indeed, they say Ameriprise got a pretty sweet deal when it purchased HRBFA for $315 million last month. The deal, which will close within four to six months, gives Ameriprise an additional 376,000 client accounts with $30 billion in client assets and 900 advisors, bringing its total advisor count to about 13,000. “Ameriprise paid very little — less than 1 percent — for these client assets, which they should be able to recoup in a year,” says Robert Ellis, senior vice president of the Wealth Management Group at Celent, a Boston-based financial research and consulting group.
And it's the client assets they bought, he says, more than the advisor force. “H&R Block advisors are dependent on H&R Block tax preparers for client referrals. They're passive,” he says. “Clients are brought to them; they don't seek clients out. That will change once they get over to Ameriprise,” Ellis says.
And if it doesn't change, the H&R Block advisors may not last long. In fact, 80 to 90 percent will most likely see the door because they probably won't be able to meet production minimums, Ellis predicts. Today the average H&R Block advisor generates $315,000. The key to making the acquisition a success: Get that $30 billion and those 376,000 client accounts into Ameriprise financial plans, says Ellis.