Ameriprise Financial Reports $2 Billion in Advisor Loans Amid Recruiting Scrutiny
Ameriprise Financial’s total loans to advisors climbed 29% year-over-year to reach $2 billion at the end of the third quarter, according to a regulatory filing released on Friday. The balance increased by $447 million from approximately $1.55 billion a year ago. That figure marks a faster acceleration than the prior year’s term, when balances grew by $246 million, or about 19%, from roughly $1.3 billion. Over the preceding three months, the balance grew by $81 million, or 4.2%.
The loans cover “transitional cost assistance and practice operations,” and the firm forgives them as long as the advisor remains with the company. The figures reflect outstanding loan balances rather than new loans granted during the quarter.
Executive Pushback and Analyst Downgrades Over Retention Costs
The sharp jump in loans arrives as Ameriprise faces heightened scrutiny regarding its recruiting and retention expenses. Last month, Bank of America analysts downgraded the company’s stock to Underperform from Buy, pointing to departures of large advisory teams and margin pressure stemming from retention efforts.
During an earnings call on Thursday, prior to the filing containing the $2 billion figure, Chairman and Chief Executive James Cracchiolo rejected claims that Ameriprise was executing a broad retention program. He attributed the talk to “a lot of noise out there from anonymous thoughts, from recruiters with their own agendas.”
I would just say there’s no program,
Cracchiolo said on the call, while leaving room for individual arrangements with advisors who receive competing offers. He framed the firm’s capital deployment as a way to support succession planning and practice acquisitions “to help them accomplish their objectives at the same time accomplish our firm objectives.”
Chief Financial Officer Walter Berman added that the firm selectively adjusted recruiting offers to match heightened competition. Representing a network of approximately 10,000 independent and employee advisors, an Ameriprise representative chose not to offer any statements outside of the chief executive’s earnings call commentary.
Ameriprise shares recently traded around $489.80 to $497.90, with excess return models suggesting the stock may be undervalued despite ongoing questions surrounding advisor turnover and related legal disputes, including a recent lawsuit filed by Citizens Bank.
Brokerage Firms Face Rising Recruiting Costs as Wealth Profits Grow
Ameriprise stands alongside other regional brokerages facing questions about rising recruiting and retention costs. Raymond James executives recently defended their strategy to analysts after retention and transition-related compensation increased 28% year-over-year to $125 million, representing amounts paid out rather than outstanding balances. Raymond James CEO Paul Shoukry stated that his firm’s plan would generate longer-term returns in five or more years.
Even with these financial headwinds, the Advice & Wealth Management unit at Ameriprise posted a 12% rise in pretax earnings, reaching $989 million alongside a 29.3% pretax margin.
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