Ameriprise Financial Inc. (NYSE: AMP), one of the nation’s largest independent broker-dealers, reported strong growth in the fourth quarter of 2017, including net revenues of $3.2 billion which the company said was driven by strong growth in advice and wealth management.
“Recently, I met with our field leadership team to kick-off the year and reminded them how a year ago, our industry was facing a great deal of uncertainty with the Department of Labor [fiduciary] rule,” said chairman and CEO Jim Cracchiolo on yesterday’s earnings call. “Ameriprise devoted considerable time and resources to ensure we were well prepared. We kept our advisers focused on serving clients and running and growing their practices, while managing significant regulatory changes.”
Cracchiolo also noted that over the course of 2018, the company plans to deploy and invest in technology and other capabilities, including digital advice tools, to help its advisers.
“We’re actually going to do a bit more in helping the advisers grow this year, now that we’re not concentrating on the DOL activities,” he said. “We’re investing both in technology as well as in capability over the course of the year to bring our client experience to life.”
The company reported fourth quarter 2017 net income of $181 million, or $1.18 per diluted share, and operating earnings of $182 million, or $1.18 per diluted share. This represented a 55 percent decrease in net income and a 59 percent decrease in operating earnings.
The drop was the result of a one-time $320 million, or $2.08 per diluted share, negative impact due to the enactment of the Tax Cuts and Jobs Act during the fourth quarter. As reported by The DI Wire last week, Ameriprise noted that the Tax Act will be an ongoing benefit to the company, with the estimated effective tax rate in the 17 to 19 percent range over the near term.
Excluding the impact of the Tax Act, fourth quarter 2017 operating earnings increased 13 percent to $502 million, with operating earnings per share up 19 percent to $3.26.
Full year 2017 net income per diluted share was $9.44 and operating earnings per diluted share was $10.23, both up 23 percent compared to last year. Excluding the impact of the Tax Act, operating earnings per diluted share was $12.27, up 45 percent compared to 2016.
“The lower corporate tax rate will increase cash flow generation, providing additional flexibility to invest for business growth and to generate a differentiated capital return to shareholders,” said Cracchiolo. “While our fourth quarter earnings were negatively impacted, we expect the ongoing benefits from tax reform will more than offset the one-time accounting impacts in short order.”
Net revenues were $3.2 billion which the company said was driven by strong growth in advice and wealth management that was partially offset by the impact of 12b-1 fee changes.
Expenses of $2.6 billion decreased 1 percent, or $33 million, from a year ago.
Operating net revenue increased 10 percent to $3.2 billion after normalizing for the net impacts of 12b-1 fees and the one-time impact of the Tax Act.
Advice and wealth management net revenues increased 17 percent driven by growth in client assets after normalizing for the net impacts of 12b-1 fees.
Operating expenses of $2.5 billion increased 4 percent from a year ago.
General and administrative expenses increased 6 percent, which the company said reflects the timing of accruals and payments for performance-related compensation, as well as foreign exchange translation. Adjusting for these items, the company said that G&A expenses were essentially flat.
Fourth Quarter and Year-End 2017 Highlights
Total assets under management and administration increased 14 percent to a record $897 billion reflecting ongoing strength in Ameriprise advisor client net inflows and market appreciation.
Advice and wealth management and asset management generated 73 percent of pretax operating earnings in the quarter, excluding the corporate and other segment.
In the quarter, the company repurchased 1.9 million shares of common stock for $302 million and paid $123 million in quarterly dividends.
For the full year, the company repurchased 9.9 million shares for $1.3 billion and paid $502 million in quarterly dividends, which represented 96 percent of 2017 operating earnings, excluding the tax impact.
Total retail client assets increased to a new high of $560 billion driven by client net inflows, client acquisition and market appreciation. Wrap net inflows were $5 billion in the quarter and wrap assets grew 23 percent to $248 billion. Client cash balances were $26.2 billion, down slightly from a year ago, and certificates balances grew 8 percent to $6.4 billion.
Operating net revenue per advisor on a trailing 12-month basis increased to $558,000 after normalizing for the net impact from eliminating 12b-1 fees in advisory accounts. Operating net revenue per advisor on a quarterly basis increased 15 percent after normalizing for this item.
Total advisors increased to 9,896, with 99 advisors moving their practices to Ameriprise in the quarter.
Ameriprise Financial oversees a nationwide network of approximately 10,000 financial advisors and has $897 billion in assets under management.