Client assets in cash products ended 2023 at twice the normal level: Ameriprise

Client assets in cash products ended 2023 at twice the normal level: Ameriprise
In its earnings report, the firm cites all-time highs in both advisor productivity and client assets.
JAN 25, 2024

The stock market has been surging this year, but investors had started out 2024 with a lot of money in cash products, Ameriprise executives said during the firm’s earnings call Thursday.

Cash-related holdings totaled $81.5 billion among the clients of Ameriprise advisors at the end of 2023, representing about 9 percent of the total client assets of $901 billion reported by the firm.

“It is sort of the double the amount clients are holding compared to where they used to be,” CFO Walter Berman said. “They’re getting a 5-plus [percentage] yield on it just to sit tight, unsure about the market moves … It’s not an uncomfortable thing for clients of our advisors to keep cash there.”

Of the $81.5 billion in cash-related products, more than half was in third-party money market products or brokered CDs, according to the firm. As it develops more bank products, there will be an opportunity to capture a bigger share of those client assets, Berman said.

But Ameriprise also expects that a considerable portion of the assets currently in cash will go to wrap accounts and asset allocation products as advisors and their clients seek higher returns through stock exposure.

HIGH PRODUCERS

The wealth management business has been the biggest contributor to Amerprise’s recent growth, with the $901 billion in client assets at the end of last year a record figure for the firm, up 19 percent from the $758 billion it saw in the fourth quarter of 2022. Client flows represented $53.3 billion during the full year, up 25 percent from $42.5 billion in 2022. Part of that was due to its partnership with Comerica Bank, with $15 billion among about 100 advisors from that company.

But a big part of the story is advisor productivity, or the revenue generated per advisor, which at $916,000 was also at an all-time high, up from the $827,000 per advisor a year prior.

Earnings in Ameriprise's wealth management segment increased by 9 percent during the quarter, according to the earnings release.

At the end of the year, the firm’s advisor head count totaled 10,367, with 166 advisors added during the fourth quarter.

ASSET MANAGEMENT UNDER PRESSURE

Although the firm’s asset management segment increased its AUM by 9 percent, that was attributable to market appreciation and foreign exchange, as the unit saw net outflows of $5.2 billion. Columbia Threadneedle, its asset manager, has been faced with redemptions reflected in the wider U.S. retail fund business.

“Our US retail mutual fund outflows were in line with the industry. Though they remain pressured, we had a bit of a pickup in gross sales, and redemptions have slowed from a year ago,” CEO Jim Cracchiolo said in prepared remarks.

Last year, investors put a net of $79 billion into U. mutual funds and ETFs, the second-lowest annual figure on record since Morningstar began tracking data in 1993, according to a recent report from that company.

About $2 billion of the outflows reported by Ameriprise were related to the closure of an institutional fund and layoffs of about dozen portfolio managers. The firm has sought to reduce expenses in asset management, in the fourth quarter paying $19 million in severance to an undisclosed number of employees. A company spokesperson declined to specify how many employees were affected by layoffs but said that the job cuts were largely in asset management.

For the full year, the firm reported adjusted operating earnings per diluted share of $30.46, up 24 percent from 2022. Ameriprise's total assets under management and under administration reached $1.4 trillion, up 15 percent.

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