Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ameriprise Financial Inc (AMP, Financial) reported a 9% increase in revenues, reaching a new record of $4.2 billion.
- Earnings per share (EPS), excluding severance costs, increased by 17% to $8.72, marking a new high.
- Assets under management and administration grew by 12% year over year to $1.4 trillion, driven by client net inflows and market appreciation.
- The company returned $693 million to shareholders in the quarter, maintaining a strong return on equity of nearly 50%.
- Client satisfaction in Wealth Management remains high at 4.9 out of 5 stars, with total client assets in wealth management up 17% to $972 billion.
Negative Points
- Inflation remains sticky, and geopolitical instability along with the upcoming US election are concerns for clients.
- Total outflows in Asset Management were $4 billion, although this was an improvement from the previous year.
- The advisor force grew only modestly, with the addition of 52 experienced advisors, indicating a potential slowdown in recruitment.
- Despite strong net investment income, the Retirement and Protection Solutions segment saw higher distribution expenses, impacting overall earnings.
- The competitive environment for hiring experienced advisors remains challenging, with some slowdown observed in the second quarter.
Q & A Highlights
Q: I wanted to start with the cash sweep commentary, Walter. So it doesn't sound like you're planning on making any big changes. But I know in the past you've said that's always subject to the competitive environment. Obviously, we've seen a handful of companies take some actions on their cash sweep rate. So I guess the question is I'm trying to reconcile those two. Is it that the moves that those peers are making are sort of catching up to you or as you're sort of client account size different that you're just not experiencing the same need to make those changes.
A: As you know, we operate within regulatory and fiduciary standards. Therefore, we feel certainly looking at sweep in its transactional aspect of cash and motion, it's totally appropriate and aligned. I can't really comment on what is taking place with the wire houses. I don't understand it. All I know is what we do from that standpoint and all the actions we have taken to ensure that the money is in sweep is really for transactional purposes, and it's at the levels you know that we -- the majority of it is in under 100,000 -- account balances are under $6,000. Our rates are competitive, and we keep the appropriate level of cash that we think is necessary to operate. So that is the focus of us, and we feel very comfortable with that. And obviously, we'll evaluate things as it goes, but we -- looking at what we have today, we think it's totally appropriate.
Q: Just another one on the bank. So I think maybe at the fourth quarter call, Walter, you said you expected bank NII would be higher in '24 than '23, which seems to be the case year-to-date. But then you also made a comment about '25. Just wondering if you think that you could continue to see bank NII growth as we move into '25 over '24, and maybe unpack some of the underlying drivers.
A: As I remember what I said, clearly, '24 over '23, but I still believe it was slow, but yes, but the net interest income should be higher. That statement I think it's still valid. The driver is, obviously, we're investing over 6%. And so we feel that as maturities and our short duration, that it will give us that momentum. And we are adding, but we'll obviously be measured, but we're adding.
Q: Can you disclose how much of your client cash is specifically held in your wrap advisory accounts?
A: It's about $12 billion.
Q: Your experience recruits have slowed down a bit year-to-date. Can you comment on what you're seeing from a competitive environment for hiring experienced advisors? And just kind of any thoughts on why the slowdown, and your expectations for the rest of the year.
A: Yes. We sort of, again, a bit of a slowdown as into the second quarter. We can't tell you exactly why it looks like people would stay in put a little bit based on markets, et cetera, and moving into the -- I guess, into the seasonal. We see a good pickup in our pipeline again. And so we think that will improve as we go forward. But other than that, speaking to the team, that's really what they saw.
Q: I wanted to go back to your comments regarding clients starting to put capital to work and money to work. In wrap. we saw those net flows pick up a little bit. Can you talk a little bit about where the cash is coming from? Is it ultimately coming out of the kind of $40 billion, $41 billion balance that currently sits in sweep and your certificates business or is this coming out from other sources kind of like money market funds that sit off balance sheet or outside of the sweep program? And maybe just remind us how much cash ultimately still on the sidelines outside of that $40 billion, $41 billion number.
A: So the -- if I understand, Alex, your question about -- I think our total cash is about $80 billion to $81 billion. And so therefore, in money markets and in third-party CDs is about $40-some-odd billion. And we are seeing that certainly money is still coming into, I would say -- money markets, they're probably -- money markets and -- but it's and slowed a little on the CD side. And so from that standpoint, there is -- we are seeing less in CDs and there is a shift. People are staying shorter from that standpoint as they're trying to take advantage of the yield curve. That's the trend that we're seeing about now.
Q: Clients rerisk and extend duration and put capital to work, which you capture those economics in your wrap program, which is great. But should we expect that to put any pressure on the $40 billion balance across sort of sweep in your certificates business? Or could that remain fairly stable as money comes out of other forms of kind of cash options?
A: Good question. We do anticipate because, obviously, from an economic standpoint, that would be beneficial to us. We've had new money go in there. And yes, as it gets redeployed, that would be beneficial, and we think that was -- certainly, will be a source of the repositioning.
Q: G&A really well managed. I think if you look at this quarter, excluding severance, I think you're at like $910 million or something like that for Q2. How should you sort of think about G&A evolving through the rest of the year? And I know you highlighted a number of some kind of savings programs that you continue to sort of find. So maybe any sort of early thoughts on your 2025 G&A outlook would be helpful.
A: On '25, I can say that we feel certainly we're -- the expenses are being well managed. And certainly, as we reposition and look at our process changes and other efficiencies that we're getting there. So I think I feel confident as we said for '24. '25, we certainly will continue. We're going to be investing in the business. So I would say you should see well-managed expenses, but we are going to be investing for growth. So I think it caught up the way you certainly have seen we've operated in prior years and certainly, especially in '24, it's -- we manage our expenses in a portion to our revenue and manage our margin.
Q: Curious to drill down a little bit on the $12 billion of sweep within advisory accounts. So do you know what portion of that $12 billion would include Ameriprise as a fiduciary or investment advisor. So a little more specifically, what portion of that $12 billion would be in the employee channel and in any portfolios where Ameriprise with centrally managed or central models where Ameriprise is the advisor.
A: A lot of our central models are really run by outside managers,
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
