February 5, 2014

Ameriprise Advisors Boost Fees 11% in 2013

The company plans a new ad with Tommy Lee Jones to run during the Sochi Olympics

CEO Jim Cracchiolo of Ameriprise. CEO Jim Cracchiolo of Ameriprise.

Ameriprise Financial (AMP) said Wednesday that its fourth-quarter net income was $298 million, or $1.47 per share, down 23% from $388 million, or $1.80 a share, last year. Operating earnings, though, were $378 million, up 3%.

Total net sales were $2.95 billion vs. $2.67 billion in the year-ago quarter, while operating revenues jumped 8% to $2.8 billion, thanks to “strong fee-based business growth from client net inflows and increased client activity, as well as market appreciation, which more than offset the pressure from continued low interest rates,” the company says.

“We had a very good quarter, and a terrific year,” said Chairman & CEO Jim Cracchiolo in a statement. “Our advisory and asset management businesses are leading our growth. Overall, assets are up significantly across the firm and we have particular strength in our Advice & Wealth Management business, with robust client net inflows and good growth in advisor productivity.”

Wealth Business

In the quarter, pretax operating earnings from the Advice & Wealth Management unit and the Asset Management unit totaled $356 million, up 37% from the year-ago period. For the full year, operating earnings from these two businesses were $1.3 billion, up 31% from 2012.

The wealth management unit posted a 36% jump in pretax operating earnings to $162 million, and a 35% increase in full-year operating earnings to $598 million. When its former banking operations are excluded, full-year operating earnings soared 52%.

“Margin expansion continued throughout 2013 primarily from improved advisor productivity, the addition of experienced advisors and market appreciation,” Ameriprise said in its earnings release. Its Q4 pretax operating margin was 14.4 % vs. 14.2% last quarter and 11.8% last year.

Operating net revenues grew 12% year over year to $1.1 billion driven, while total retail client assets expanded 16% to $409 billion.

Wrap net inflows expanded 38% from a year ago to $2.8 billion, and brokerage cash balances improved to $19.6 billion. “The combination of asset growth and strong client activity drove a 14% increase in operating net revenue per advisor, excluding results from former banking operations,” the company explained.

Its total headcount of advisors at year-end 2013 was 9,716—down from 9,767 in late 2012. It now has 2,205 employee advisors versus 2,318 12 months before, and 7,511 independent advisors versus 7,449 in late 2012.

Ameriprise’s advisors improved their overall average level of annual fees and commissions, or production, by 11% year over year to $440,000 per advisor as of Dec. 31. Its advisors have average assets of $42.1 million.

Sterne Agee analysts John M. Nadel and Jason Weyeneth, CFA, say that they are reducing their estimates on Ameriprise’s earnings for 2014.

Still, they believe the company’s “story remains intact,” but note that its recent results indicate “the continued deterioration of several key fund performance metrics and the potential loss of AUM from a recent fund manager departure at Threadneedle.”

New Ad Campaign

During a call with equity analysts, Cracchiolo said Ameriprise is launching a new ad campaign on Feb. 8. The ad’s theme is “confident retirement.”

“Working with Tommy Lee Jones, the campaign conveys how our advisors are uniquely positioned to help people answer their toughest retirement questions. In fact, you'll see a lot of Ameriprise on major TV programming, including during the Olympics, as well as online through the first half of the year,” he said.

In conjunction with the ad campaign, Ameriprise will update its website so investors can “explore and evaluate how prepared they feel for retirement, see where they stand versus their peers and be directed to an Ameriprise advisor,” he noted.

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