Profits plummet 47% at Ameriprise, but wealth unit shows strength
Ameriprise's wealth management unit reported robust growth — pretax profits rose 5% year-over-year, client assets jumped 10% — making it a bright spot during a quarter in which companywide profits plummeted 47%.
The company said net income attributable to Ameriprise fell to $215 million for the quarter from $397 million for the year-ago period. The firm's poor performance was due in part to its annuities business, which reported a pretax operating loss of $68 million compared to earnings of $176 million a year ago.
Ameriprise, which reported earnings on Tuesday, said the loss was attributable to unfavorable unlocking, which is the firm's annual review of insurance and annuity valuation assumptions as well as model changes. Low interest rates and policyholder behavior hurt the unit's performance, Ameriprise said.
Like other companies, Ameriprise is attempting to navigate how best to comply with the Department of Labor's fiduciary rule, which governs retirement accounts and goes into effect next April.
Commonwealth Financial, the nation's fourth largest IBD, said this week that it would cease offering commission-based products in all retirement accounts, mirroring a similar move undertaken by Merrill Lynch earlier this month.
Despite potential headwinds and changes to the business environment, CEO Jim Cracchiolo cited the wealth management unit performance as a reason for the firm's future success.
"In a more volatile climate and period of change for the industry, we are managing expenses well and have a strong business to serve our clients and advisers while consistently delivering meaningful shareholder value," he said in a statement.
The company reported having 9,747 independent and employee advisers, down from 9,758 for the second quarter and 9,814 for the year-ago period. Though the firm said it lured over 80 experienced advisers during the quarter.
CEO Jim Cracchiolo said the firm will still offer variety on its platform, but that it needs to make sure products are "appropriate for the client."October 26
Client assets for the firm's advisory business hit a record high.October 25
Wealth management profits rose to $231 million, a 5% increase year-over-year, boosted somewhat by a 1% drop in expenses.
The unit reported a pretax margin of 18.2%, up from 17.6%.
Client assets rose to $476 billion, up 10%. However, wrap net flows slowed to $2.8 billion, a decline of 8%.