Ameriprise Financial, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Business Performance: Ameriprise delivered a strong quarter with assets under management, administration and advisement reaching a new high of $1.7 trillion, up 8% year-over-year. Adjusted operating EPS excluding unlocking was up 12% to $9.92 with a 27% firm-wide margin.
• Advisors and Recruiting: Adviser count is up, and productivity increased 10%. The firm recruited 90 experienced advisors in the quarter, with a strong pipeline for the fourth quarter. The Ameriprise value proposition is resonating with advisors.
• Digital and AI Investments: Record digital adoption from clients, with mobile app satisfaction hitting an all-time high. Investments in Advice Insights (using big data and machine learning) and digital capabilities are streamlining workflows and driving engagement.
• Product Launches: Launched a new advertising campaign, Signature Wealth platform, checking accounts (soft launch), and expanded HELOCs. In Asset Management, initiatives like the partnership with State Street for a unified global back office were highlighted.
• Client Satisfaction and Recognition: Consistently earned top client satisfaction (4.9 out of 5) and employee engagement is best-in-class. Received awards like J.D. Power's outstanding customer service certification and Forbes' Best Companies recognition.

Segment Performance

• Wealth Management: Assets under management, administration and advisement grew 8% year-over-year to a record high of $1.7 trillion. Adjusted operating net revenues excluding unlocking increased 9% to $3 billion. Advisor productivity grew 10% to $1.1 million. Wrap assets were up 14% year-over-year, with client assets growing to a record $1.1 trillion.
• Asset Management: Operating earnings increased 6% to $260 million. Total assets under management and advisement rose to $714 billion. Net outflows improved sequentially, with retail and institutional outflows easing. Revenues increased 3% to $906 million.
• Retirement & Protection Solutions: Pretax adjusted operating earnings excluding unlocking were $200 million. Sales were solid at $1.4 billion, driven by demand for structured variable annuities. The company completed its annual actuarial assumption update, with an unfavorable after-tax impact of $5 million.
• Corporate: Pretax operating loss excluding unlocking was $93 million, an improvement from the prior year due to lower severance and cloud migration expense as well as favorable share-based compensation expense.

Guidance

• Walter Berman mentioned targeting an 85% payout ratio for the fourth quarter based on share price and substantial free cash flow.
• Expect G&A expenses to decline 3% full year. In Asset Management, expect mid-single-digit G&A expense decline excluding performance fees.
• Targeted return on equity remains strong at nearly 53%, and the firm is committed to returning capital to shareholders at a differentiated pace.

Risks

• Market Fluidity: The operating environment remains fluid with strong bull markets but variables like inflation, interest rates, labor market softening, tariffs, and geopolitical impacts.
• Regional Bank M&A: Uncertainty from regional bank mergers could impact the bank channel and related deals.
• Interest Rate Changes: Impact on cash revenues, sweep cash balances, and the need to adjust rates on banking products as the Fed cuts rates.

Question and Answer

Q: Can you comment on the Comerica relationship and asset values?

A: Jim Cracchiolo stated they have a strong relationship with Comerica, and Walter Berman mentioned assets under management around $15 billion with protections in the contract.

Q: What happened with the two sizable advisor teams that left?

A: Jim Cracchiolo noted they were one-offs, and the firm has strong recruiting with 90 advisors joining and a solid pipeline.

Q: Discuss expense actions in Asset Management and guidance on crediting rates?

A: Jim Cracchiolo mentioned comprehensive reviews and cost-saving initiatives. Walter Berman stated they will manage cash revenues as rates come down, maintaining profitability in the banking business.

Q: Thoughts on cash revenues related to the bank and sweep cash trends?

A: Walter Berman noted cash balances are stable, and they plan for increases in sweep cash with cuts, ensuring profitability is sustained in AWM.

Q: Update on Signature Wealth rollout?

A: Jim Cracchiolo said it's early but going well, with advisors adopting the platform and attracting new assets.