Ameriprise Profits Rise on Record Advisor Productivity

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Ameriprise Financial (NYSE: AMP) said its first quarter net income was at $241 million, a 13 percent boost from $214 million a year ago. Meanwhile, the firm reported its best quarterly advisor productivity ever at $95,000, up 23 percent from 2010. Improving advisor productivity has been a focus at the firm for more than a year.

During an analyst conference call Tuesday morning, Jim Cracchiolo, chairman and CEO, attributed the boost in production to improved client activity, as investor risk appetite is returning, as well as to the addition of 1,000 new advisor recruits since the end of 2008.

But the total number of advisors at the firm has slipped lower versus last year. Total branded advisors, which includes franchisee and employee advisors, was at 9,653, compared to 9,656 in the fourth quarter of 2010 and 9,931 in the year-ago quarter. Cracchiolo said the firm has continued to see the attrition of lower producing advisors while brining on higher producers. Securities America, the firm’s independent b/d, has about 1,800 advisors, he said. Ameriprise announced plans to sell the b/d, which has been mired in expensive legal trouble, in its Monday earnings release.

Jim Ryan, Morningstar analyst, said the firm is trying to weed out the lower producers and focusing attention on company employee advisors, as these tend to stay with them longer. During the call, Cracchiolo said Ameriprise is still in the process of training new recruits in financial planning, which takes time.

Client assets rose 13 percent from a year ago to $315 billion, an all-time high for the firm, with quarterly net inflows of $2.8 billion in wrap account assets. Overall, net revenues for Ameriprise totaled $2.65 billion during the quarter, up from $2.27 billion in the 2010 period. Ryan said the firm’s performance met his expectations overall.

Securities America Sale

The results also included a $118 million pre-tax charge in the first quarter related to Securities America legal expenses, in addition to the $40 million expense in the fourth quarter. Excluding the legal expenses, the firm’s first quarter operating earnings were $347 million, up 54 percent from the year-ago period.

Securities America has been entrenched in a legal battle with investors involving SAI’s sale of allegedly fraudulent private placements from Medical Capital Holdings and Provident Royalties. In the quarterly report, Ameriprise said selling Securities America would allow the firm to focus on its branded advisors.

“It just seems like they want to step away from it,” Ryan said, to focus on its branded advisors. According to Ryan, focusing on its own advisors has been a theme throughout its ownership of SAI.

Earlier this month, Ameriprise and SAI reached a proposed settlement with investors for $150 million, although the independent b/d was originally on the hook for about $400 million in outstanding obligations.

“After careful consideration, we determined that a reasonable and expeditious solution to this unfortunate situation was in the best interested of all constituents,” Cracchiolo said. “The $150 million comprehensive settlement includes the $40 million previously reserved.”

“Just to be clear, the sale process will not affect our commitment to complete the settlement on its current terms.”

The legal expenses reported include the settlement as well as legal fees.

Some were surprised at the timing of the announcement to sell, given that the settlement hasn’t been finalized.

“We’re putting together a sales package for it,” Cracchiolo said during the call. The company is putting the sale out in the public channels in the weeks ahead, so it made sense to announce it in the earnings report, he added.

Cracchiolo said the move was appropriate so that SAI can continue to build out their independent model. Independence has been getting a lot of interest and attention, so it could provide an opportunity for the IBD.

“It should settle things down there.”

SAI is not the only firm dealing with angry investors; many IBDs have been hit by the Medical Capital and Provident scandals.