Ameriprise Earnings Suffer on Slower Client Activity

Ameriprise Financial’s (NYSE: AMP) fourth quarter 2011 net income dropped about 22 percent to $240 million from $306 million a year ago. The company attributed the fall to volatile markets, increased cash positions, and continued low interest rates. Overall revenues were down 2 percent to $2.455 billion from $2.5 billion a year ago.

“While the economy in the U.S. has been in recovery, the market environment remains quite challenging,” and the impact is being felt across the financial services industry, said Chief Executive James Cracchiolo, during a conference call Thursday morning.

Cracchiolo said clients have been more cautious in the quarter, seeking cash and low-risk investments. Transactions declined, and cash balances increased 10 percent during the quarter. Earnings from cash accounts remained low because of the low interest rate environment, the firm said.

The quarter’s earnings and revenues were also offset by expenses related to the firm’s new advertising campaign and its new brokerage platform for employee reps. Walter Berman, chief financial officer, said these investments increased expenses by $14 million and will continue at that pace for the next few quarters.

Greg Cherry, senior analyst with Aite Group, wasn’t surprised by the results. “Obviously, their business is impacted by market cycles,” he said.

In the firm’s advice and wealth management segment, pretax operating earnings slipped 14 percent from a year ago to $83 million on a revenue increase of one percent; total retail client assets increased two percent to $310 billion, a six percent boost over the third quarter.

Record Productivity for 2011
Despite the volatility, advisor productivity reached a record high of $384,000 for the year, up 12 percent from 2010. But net revenue per rep for the quarter remained stable from the year-ago period at $93,000, down from $97,000 last quarter. Ameriprise has been steadily improving the productivity of its advisors since the firm started focusing on the strategy over a year ago. This quarter’s productivity is a drop from the high of $99,000 reached in the second quarter.

The decline in productivity was also related to the market environment with transactions down, Cherry said.

Recruiting activity for the quarter and year heated up: 105 new advisors joined during the fourth quarter making for 337 new recruits for the year, Cracchiolo said. This brings total advisor headcount, including the employee and franchise channels, to 9,730, compared to 9,656 in the fourth quarter of last year. January was one of the firm’s best recruiting months on record with 52 new advisors, he added.

During the call, there was not mention of Securities America, Ameriprise’s former independent broker/dealer subsidiary, which was sold to Ladenburg Thalmann in November.