With market cooking, Ameriprise advisors see boost in revenue

Bad markets make clients realize they need their advisors, says industry expert.

Financial advisors appear to be shaking off the pain of the bear market that ended last month, as financial results released Wednesday after the close by Ameriprise Financial Inc. indicate; the firm’s 10,274 financial advisors saw a year-over-year increase of 7.4% in productivity as measured by revenue, a sign of advisors’ resiliency after 2022 saw the S&P 500 stock index fall by 18%.

Ameriprise Financial reported adjusted operating net revenue per financial advisor of $874,000 at the end of June, compared to $814,000 a year earlier, an increase of 7.4%. That’s a 3.2% increase from March, when Ameriprise reported net revenue per advisor of $847,000.

Terms such as “revenue per advisor” at brokerage firms like Ameriprise are synonyms for “gross dealer concession,” industry shorthand meaning the total fees and commissions an advisor generates from clients in a 12-month period. Financial advisors who are employees typically keep 40 cents per dollar of revenue, with the firm taking the rest; those who are independent contractors typically keep in the neighborhood of 80 cents per dollar of revenue.

Ameriprise has 2,108 employee financial advisors and 8,166 so-called franchise advisors, who work as independent contractors. Not all firms report average revenue per advisor.

Over the first half of the year, the S&P 500 stock index was up more than 15%, so the bump in revenue per advisor was both to be expected and welcome, one industry recruiter noted.

“With hindsight, the bear market made clients appreciate their financial advisors more, and firms that are pure wealth management operations reflect that,” said Danny Sarch. “The best financial advisors do a good job of talking their clients off the edge when the market hits the skids.”

“Covid was terrible, of course, but its aftermath, including inflation and the fear of a recession, was easy to explain to clients as to why the stock market was so bad last year,” said Sarch, president of Leitner Sarch Consultants. “My experience is that bull markets make people think that they can invest on their own and do it themselves, and bad markets make clients realize they need their financial advisors.”

Ameriprise ended June with 10,274 financial advisors compared to 10,245 a year earlier, essentially flat. It hired and recruited 99 new financial advisors to its platform in the three months ending in June.

The advice and wealth management business unit at Ameriprise reported adjusted operating net revenues of $2.34 billion for the quarter, an increase of 14% when compared to the same period last year. Advice and wealth management’s pretax adjusted operating earnings for the quarter saw an increase of 49% when compared to a year ago, reaching $731 million.