Ameriprise Financial (NYSE: AMP) has been steadily improving the productivity of its advisors since the firm set its sights on this goal over a year ago—until now. Average FA production declined from a record high of $99,000 last quarter to $97,000 in the third quarter of 2011. The firm’s third quarter net income fell to $271 million, or $1.12 a share, from $346 million, or $1.33 a share, a year ago, missing consensus estimates of $1.21 a share for the quarter.
During a conference call Thursday morning, Chief Executive James Cracchiolo attributed the lower earnings to the current market environment and low interest rates. “Both the equity markets and interest rate environment worked against us this quarter,” he said. “We certainly are feeling the impacts of the markets, but the conditions are very manageable for us.”
Third quarter profits were also impacted by a $106 million year-over-year change from the market impact on deferred acquisition costs (DAC) and deferred sales inducement costs (DSIC), the company said in its earnings release.
In late August, Ameriprise announced plans to sell its troubled independent broker/dealer unit Securities America to Ladenburg Thalmann (AMEX: LTS). Ameriprise said in April it would sell SAI after the IBD was pounded by litigation over its sale of allegedly fraudulent private placements from Medical Capital Holdings and Provident Royalties.
Despite coming in under earnings estimates, Cracchiolo said the firm had one of its best recruiting quarters, taking in 88 recruits, including 37 in September alone. On a net basis, the firm added 51 advisors, bringing the total number of employee and franchisee advisors to 9,714, up from 9,663 in the second quarter. He added that the recruiting pipeline is “quite full.”
Bill Williams, executive vice president of Ameriprise Financial’s franchise group, who stopped by Registered Rep.’s offices recently, said the majority of the franchisee reps are “home-grown,” but most new reps are joining from outside the industry. “Most of our new hires, because we stopped novice hiring, are coming from outside the industry. So in the last four years, I’ve probably hired close to 1,000 from outside.”
The firm has also started rolling out its new brokerage technology platform from Thomson Reuters, which Cracchiolo said has lead to strong advisor retention and recruiting.
According to Williams, the new brokerage platform gives reps access to block trading and real-time streaming quotes. “It gives much more insight into the portfolios.”
Overall, AUM and AUA were down 4 percent from the year-ago period to $600 billion, but retail client assets within the advice and wealth management segment grew 2 percent from last year to $293 billion. This was down from the second quarter, which saw client assets of $319 billion. Mutual fund wrap account net flows fell 48 percent from last year to $800 million, “as advisors held more cash in their clients’ accounts,” Cracchiolo said.