Ameriprise Financial, Inc.

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Slightly Bullish +25

Ameriprise V. Raymond James: The Tortoise And Hare Of Advisor Recruiting?

AI-generated analysis

📊 Raymond James reported strong net new asset growth of $23 billion in Q2, representing a 5.8% annualized increase.

🚀 The St. Petersburg-based broker announced it is boosting its recruitment and retention budget to capitalize on a robust pipeline.

📉 Ameriprise saw wealth and advice division net inflows slump by 59% to $4.2 billion during the first quarter ended March 31.

💸 This significant drop for Ameriprise was primarily caused by Comerica Bank shifting $18 billion in assets after its acquisition by Fifth Third Bank.

👥 An "aggressive recruitment environment" contributed to stagnant client asset growth and increased advisor attrition at Ameriprise, according to CEO Jim Cracchiolo.

💰 Raymond James revenue rose 13% year-over-year to $3.86 billion, with net income reaching a record $542 million for the quarter.

📈 Client assets in fee-based accounts at Raymond James grew 20% to $1.04 trillion, driven by growth in asset management and fees.

🤝 Morningstar analyst Sean Dunlop notes that Raymond James takes a balanced approach to recruiting experienced advisors who fit its culture.

⚠️ Ameriprise leadership questions the long-term viability of aggressive recruitment strategies involving high compensation packages that may lead to turnover.

🤝 CEO Jim Cracchiolo stated the firm focuses on core profitability rather than just cash earnings that markets might overvalue due to aggressive recruiting.

🛡️ CFO Walter Berman highlighted that advisor turnover often occurs when advisors leave for a better environment and support rather than just a big check.

🤝 Despite recent challenges, Ameriprise added 61 new advisors in Q1 with more expected in the second quarter.

🏦 Ameriprise secured a multiyear deal with Huntington Bank to manage its retail investment program, adding 260 advisors and $28 billion in assets.

📈 Total client assets for Ameriprise still rose 12% to $1.1 trillion despite the drop in wealth and advice business assets.

🔄 Wrap assets at Ameriprise jumped by 16% to $664 billion, driven by organic growth and improved advisor productivity.

📈 First-quarter operating revenue for Ameriprise increased 15% to $4.8 billion with earnings reaching a record $11.26 per share.

Bullish Signals
  • Raymond James reported its strongest quarter for domestic net new asset growth, adding $23 billion in Q2 (ended March 31), representing a 5.8% annualized growth rate.
  • Raymond James achieved record levels for revenue and pre-tax income despite a challenging market environment, with revenue rising 13% year-over-year to $3.86 billion.
  • Net income for Raymond James surged to $542 million ($2.72 per share), driven by a 17% increase in asset management fees which grew to over $2.0 billion.
  • Raymond James client assets in fee-based accounts jumped 20% year-over-year to reach an impressive $1.04 trillion.
  • Ameriprise total client assets rose 12% in the quarter to $1.1 trillion, driven by organic growth and advisor productivity despite a slump in the wealth and advice division.
  • Ameriprise wrap assets increased 16% to $664 billion, reflecting strong performance in that specific business line.
  • First-quarter operating revenue for Ameriprise grew 15% year-over-year to $4.8 billion, with earnings increasing double digits to a record $11.26 per share.
  • Ameriprise successfully onboarded 61 new advisors in Q1 and has secured a multiyear deal with Huntington Bank adding 260 advisors and $28 billion in assets starting later this year.
  • Morningstar analyst Sean Dunlop characterizes Ameriprise's approach to recruitment as 'judicious' and views sluggish recruitment as only a 'minor blemish' on the company's overall strong report.
Risk Factors
  • Ameripise saw total client net inflows in its wealth and advice division slump 59% to $4.2 billion, indicating significant stagnation compared to the prior year.
  • A one-time loss of Comerica Bank's $18 billion in client assets due to acquisition by Fifth Third Bank will have an ongoing negative impact on company performance over the next few quarters.
  • The aggressive recruitment environment is contributing to stagnant client asset growth and attrition in Ameriprise's advisor ranks, with CFO Walter Berman expecting departures to continue through the third quarter.
  • Morningstar analyst Sean Dunlop suggests that Ameriprise's relative underperformance compared to rival Raymond James might persist due to Ameriprise's focus on organic growth rather than recruiting experienced advisors, a strategy Morningstar views as a smaller growth lever.
  • Ameripise CEO Jim Cracchiolo expressed doubts about the long-term viability of aggressive recruitment packages, noting that high pay for new hires may not pay back in subsequent years.
  • Ameriprise CFO Walter Berman argued that the cost of acquiring advisors via big checks is inefficient compared to organic growth, highlighting that high turnover often follows when financial advisors leave for a better culture rather than just a larger check.
Full Analysis
This article provides a detailed comparison of quarterly financial results and recruitment strategies between two major financial advisory firms, Raymond James Financial and Ameriprise Financial. While Raymond James reported robust net new asset growth of $23 billion in the second fiscal quarter ended March 31, representing a 5.8% annualized increase, Ameriprise saw its wealth and advice division net inflows slump significantly to $4.2 billion in its first quarter ended March 31. This decline for Ameriprise was primarily attributed to a one-time event involving Comerica Bank, which shifted the management of $18 billion in client assets to Fifth Third Bank after an acquisition. A key focus of the article is the strategic divergence regarding advisor recruitment. Raymond James adopted a more aggressive approach, increasing its recruiting and retention budget by 25% to $111 million, which analysts like Morningstar's Sean Dunlop believe contributes to its tendency to outperform rivals in attracting advisors on the move. Conversely, Ameriprise executives acknowledged that an aggressive recruiting environment has led to higher advisor departures and stagnant client asset growth in this specific segment. Ameriprise CEO Jim Cracchiolo and CFO Walter Berman expressed skepticism about the long-term viability and cost-efficiency of purely aggressive recruitment packages, emphasizing a focus on core profitability, organic growth, and culture over simply chasing cash earnings that might not pay back in future years. Despite the underperformance in its wealth and advice segment, Ameriprise highlighted other strengths, noting that total client assets rose 12% to $1.1 trillion and wrap assets jumped 16% to $664 billion due to organic growth and improved advisor productivity. Furthermore, Ameriprise announced plans to handle a retail investment program for Huntington Bank, an agreement expected to add approximately 260 advisors and $28 billion in assets upon onboarding later in the year. Financially, both firms reported earnings that exceeded Wall Street expectations; Raymond James achieved record revenue and net income of $542 million, while Ameriprise reported first-quarter operating revenue of $4.8 billion and a record earnings per share of $11.26.