In the competitive recruiting fight for financial advisor talent, Ameriprise has followed the lead of rivals that have restricted their publicly reported headcounts to a vague number.
The Minneapolis-based company disclosed in its April 24 earnings statement for the first quarter that the Advice & Wealth Management segment generated 65% of its adjusted operating net revenue for the period and set a record level of advisor productivity. However, the exact number of independent franchise and employee advisors, beyond the figure of “more than 10,000” cited by Ameriprise’s press releases, was missing from the announcement.
Without providing any evidence to verify his claims, CEO Jim Cracchiolo responded to an analyst’s question on the firm’s earnings call by saying that advisor retention “is quite good” and that client “books and activity stay” when there are retirements and transitions.
The analyst, Tom Gallagher of Evercore, had noted that “there’s going to be some suspicion that there’s something in the numbers that caused the company to remove it” whenever a company takes a figure out of its earnings. He asked Cracchiolo whether advisor headcounts are “under some pressure for some reason,” according to a transcript by investing website Seeking Alpha.
“No, there’s nothing,” Cracchiolo said. “Headcount is actually up, you know, if we did provide it. So that’s not in any way a change, but you know, all the wirehouses removed it. I think you saw a few of the other players remove it. I won’t mention their names, but you could look at all of them. So we just figured we followed the disclosures and so we figured that was appropriate.”
Ameriprise’s move came after rival Raymond James said earlier this year that it will limit its advisor headcount reporting to a single annual update. UBS Wealth Management Americas shares its number of advisors, but the other wirehouses — Bank of America’s Merrill, Morgan Stanley and Wells Fargo — have stopped divulging their counts as well.
Other than citing Cracchiolo’s answer to the analyst’s question, representatives for the firm didn’t answer follow-up questions about any possible future releases of the headcount metric or other motivations for not including it.
In general, companies that stop listing particular metrics tend to begin doing so in their first-quarter reports. Some experts question the value of knowing the exact turnover of advisors as compared to metrics like client assets and flows. On the other hand, advisors and wealth management professionals who service those assets will no longer know a key metric as they watch Ameriprise compete with rivals like LPL Financial and its record and growing headcount.
To see the key wealth management takeaways from Ameriprise’s first-quarter earnings statement, scroll down the page. And follow these links to see analysis of the company’s results from the first, second, third and fourth quarters of 2024.
Financial advisor competition
The undisclosed headcount metric made some aspects of Ameriprise’s wealth results murky. The number of experienced advisors joining Ameriprise’s ranks rose by a net 18 year-over-year to 82 in the first quarter. Last year, the company’s overall headcount ticked up 1% to 10,427, or a net 60 advisors. It’s not clear when or if there may be an update to that figure.
Ameriprise’s wealth unit remains profitable, to the tune of a 29% first-quarter margin, but it’s embroiled in legal wrangling with LPL over advisor recruiting movement and expanding far less rapidly. Ameriprise also appointed a new top recruiting executive in December after the abrupt departure of its former chief of advisor outreach.
Over the past five years, Ameriprise has added a net 699 registered representatives — who are usually, but not always, advisors, according to a report by research and consulting firm ISS Market Intelligence. LPL’s recruiting and M&A activity, though, has pushed its rep headcount up by 6,844, or nearly 10 times as much, over the same time period. By the end of last year, LPL’s share of the reps in the independent brokerage channel had surged to 24% from 16% in 2020.
“While the number of independent reps shrank, large independent firms like LPL Financial expanded rapidly,” the ISS report said. “LPL added nearly twice as many new reps as the next nine largest firms combined.”
Advisor productivity
Business growth, rising client activity and asset appreciation fueled a new high in 12-month adjusted operating net revenue per advisor at $1.06 million. That figure jumped 12% year-over-year.
Client assets
Asset values plus “client and advisor engagement, and a focus on positioning portfolios to meet financial planning goals across market cycles,” drove higher customer holdings, according to the firm. Total client assets climbed 7% from the year-ago period to $1.02 trillion, while net flows rose 21% to $10.3 billion and incoming advisory holdings soared 34% to $8.7 billion.
Expenses
The higher advisor productivity led to more compensation costs and other expenses tied to increased business, according to the firm. Adjusted operating expenses escalated 11% year over year to $1.99 billion in the first quarter. The general and administrative portion enlarged just 1% to $424 million due to “strong expense discipline, as well as continued investments in growth initiatives and volume-related expenses due to business growth,” the firm said.
Bottom line
For the quarter, the wealth unit netted pretax adjusted operating earnings of $792 million on revenue of $2.78 billion, for a margin of 28.5%. The profit increased 4% from the same time a year ago, while revenue was up 9% and the margin slipped by 130 basis points.
Remark
Cracchiolo feels “very good” about the company’s “value proposition, particularly our technology capabilities,” he said in response to an analyst’s question about the company’s advisor recruiting pipeline. Even though “a lot of people were having issues and problems in the first quarter with handling trade activities and the system availability and other things like that” during the volatility in the first quarter, “all of our systems that are proprietary systems were all available,” he noted. The exact headcount of advisors may not always reflect the underlying dynamics, he added.
“None of our competitors really report that anymore,” Cracchiolo said. “We looked at the wirehouses, some of the independents. They don’t really put number of advisors or number of retention. And, in the retention numbers, we were constantly trying to explain where people were retiring and other things like that, or transferring their books, and that was all rolled into the numbers. So we figured it would be easier just to do what the competitors are doing right now and not disclose that.”
