Advisor recruiting getting "irrational," says Ameriprise CEO

In a market with stiff competition for experienced brokers and less financial advisor movement, recruiting is becoming more expensive and less rational, said James Cracchiolo, CEO of Ameriprise Financial Inc., Tuesday morning during a conference call with analysts to discuss first quarter earnings.

Indeed, Ameriprise saw another year of decline in 2023 of net gains of financial advisors, according to InvestmentNews data, an indication of how competitive the hiring and recruiting market is at the moment. In 2021, Ameriprise posted a net increase of 181 financial advisors, followed by 172 the next year.

But in 2023, with the broad stock market booming and the S&P 500 posting returns of more than 24%, Ameriprise had a net gain of 68 financial advisors, a little more than one-third the amount just two years earlier. Many executives this year have pointed to the strong stock market as an incentive to keeping financial advisors in place.

When asked about the financial advisor recruiting market at the moment, Cracchiolo responded: "I think the recruiting is a little slower in the first quarter with the markets that ran, people were staying put a little more."

"I do believe that the market is very competitive and some of the competitors are actually, I think, being a little more irrational in that regard," he said. "So, we’re much more focused on quality people that really think about where they need to associate."

Meanwhile, Ameriprise loans to financial advisors, a recruiting tool, have grown in the neighborhood of 20%, according to another analyst, an indication of the rising costs and competition associated with hiring experienced financial advisors.

"On advisor loans, yes, we have increased and certainly we are competitive," said Walter Berman, Ameriprise's chief financial officer.

One industry recruiter noted that large independent broker-dealers and competitors to Ameriprise are becoming increasingly aggressive with financial arrangements, like competitive bonuses to move assets to advisors platforms, that keep advisors in their chairs and make it more difficult financially to move to a new firm.

"With the amounts of money that some firms are putting on table, along with the stock market being up, this is a much more competitive market," said Simon Hoyle, a recruiter. "In the end, it's better to keep the advisors you have than bring new ones on."

Ameriprise reported 10,364 financial advisors at the end of March, an increase of 1% when compared to the same time last year. Most of the increase came in its employee channel, the company reported.

According to Ameriprise, adjusted operating net revenue per advisor on a trailing 12-month basis was $942,000, up 11% from the end of March 2023. The company added 64 experienced advisors in the quarter.