Ameriprise cushioned by $25M Comerica breakup fee

Ameriprise’s first quarter earnings got a $25 million boost from a breakup fee following Fifth Third Bank’s acquisition of its former institutional client Comerica Bank.

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Ameriprise reported Thursday that its pretax operating earnings for January through March “included a $25 million benefit due to the termination of the Comerica Bank relationship.” That infusion of cash helped boost operating earnings for the firm’s Advice & Wealth Management segment by 20% year over year to $951 million.

Ameriprise lost Comerica Bank as an institutional client as a result of Fifth Third’s purchase of the regional bank on Feb. 2. Ameriprise stated in a regulatory filing in March that the acquisition would cost it 89 advisors and $18.5 billion in client assets by the end of the third quarter. 

At the same time, Ameriprise offered assurances that Comerica’s departure would “not have a material impact on future Advice & Wealth Management segment and Ameriprise Financial operating earnings.”

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Ameriprise had been the investment services provider and broker-dealer for Comerica since 2023. Ameriprise provided various insurance, brokerage and advisory services to Comerica employee advisors through its financial institutions group. 

Ameriprise reported Thursday that the departure of Comerica advisors had weighed on its intake of client assets. Its net inflows of new assets fell by nearly 60% year over year to $4.2 billion. 

Chief Financial Officer Walter Berman said during an earnings call Thursday evening that the Comerica loss was the cause of a “reasonable portion of the outflows that we had.” 

“We are certainly seeing because of the acquisition, a more accelerated pattern,” he said. “We expect that pattern to continue and accelerate actually in the second and third quarter.”

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Berman said Ameriprise has also seen a quickening of advisor departures “amid an aggressive recruiting environment.”

“While we have significant capacity to recruit, the recruiting deals we are seeing today in this perceived risk-on environment exceed what we believe is a balanced risk-return approach given the long cash paybacks and marginal [profit and loss] benefits over the extended life of these arrangements,” Berman said.

CEO Jim Cracchiolo told analysts Thursday that 61 advisors came to Ameriprise in the first quarter, with more on pace to join in Q2. Suggesting some firms may be paying too much in recruiting deals, he said he and other executives want an advisor workforce that is “built, not bought.”

With turnover in the industry, he said, “when someone leaves for a big check, they most likely leave again. But if they leave because they want to go to a place that has a better environment, culture support, et cetera … they usually stay.” 

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Ameriprise reports higher client assets, revenue per advisor

Even with the fall in net inflows, Ameriprise’s total for client assets was up by 12% year over year to nearly $1.15 trillion. That increase was “driven by organic growth and advisor productivity in a higher but more volatile market environment.”

Rather than dwell on the Comerica loss, Ameriprise executives on Thursday were quick to call attention to the firm’s addition of Huntington Bank as a client of its institutional division. 

Huntington, which has turned to Ameriprise for brokerage, advisory and insurance services for its wealth management unit, Huntington Financial Advisors, is bringing roughly 260 advisors and $28 billion in client assets. Berman told analysts Thursday most of those assets will be added in the fourth quarter.

Ameriprise reported Thursday that net revenue for its Advice & Wealth Management segment rose by 14% year over year in the first quarter to $3.18 billion. Partially offsetting that was a 12% increase in operating expenses, which rose to just over $2.2 billion. Ameriprise attributed the increase mostly to “distribution expenses,” which mainly consist of advisor compensation.

The segment’s pretax operating margin — or the percentage of revenue left over minus expenses except taxes — was up 1.5 percentage points in the first quarter to 30%. Ameriprise reported its advisors had produced $1.16 million over the past year on average, a figure up 10% and a record high.

Ameriprise no longer reports its exact advisor headcount. It has put the number in recent press releases at “more than 10,000.”

For all of its businesses, including divisions for asset management and retirement and protection services, Ameriprise reported its operating net revenues were up by 11% year over year to $4.8 billion in the first quarter. Its net income was up by 57% to $915 million.