Ameriprise Financial

Ameriprise Financial reported solid second-quarter results, as $4.94 billion in net revenue grew 13% from the year-ago period and $11.07 in adjusted operating income per share reflected healthy 22% growth. Shares were basically unmoved after the July 23 release.

Why it matters: We saw little in Ameriprise's quarterly results to affect our long-term thinking about the firm. The most interesting discussions during the analyst call related to management's commitment to remaining disciplined in a competitive financial advisor recruiting environment and to the net impact of artificial intelligence on its business. Unlike peers, Ameriprise took a stab at quantifying the time-saving benefits tied to its e-meeting, meeting summarization, and Copilot premium tools (around 30 hours per week). Management said some deals are seeing paybacks as long as eight years on advisor recruiting efforts, implying a strikingly low cash return on investment of roughly 12.5%. If true, we would expect Ameriprise to outperform those peers, on average, over the medium term, particularly in a market correction. We'll be interested to see to what extent the purported time savings from AI map to higher advisor capacity, increasing client demands for personalization, or (less constructively) fee compression industrywide. At this stage, most executives view AI as a net positive for wealth management, although we'd note that Ameriprise's generally lower-wealth clientele would be the cohort most likely at risk of churning to automated solutions, given simpler investment needs.

The bottom line: After digesting these results, we've raised our fair value estimate for narrow-moat Ameriprise to $540 per share from $530, attributable primarily to strong market performance, which allowed the firm to beat our revenue and earnings estimates, as well as time value, with a partial offset from recalibrating our cost of capital assumptions.

From an investment perspective, we view Ameriprise as a diversified agglomeration of competitive, if not best-in-class, businesses that run the gamut from US wealth management to asset management (Columbia Threadneedle) and insurance (RiverSource Life). Our outlook for 10-year compound annual growth of 3.3% in net revenue, 3.8% in operating income, and 9.3% in diluted earnings per share (little changed from a quarter ago) is far less exciting for growth-oriented investors than peers Charles Schwab, LPL Financial, or even Raymond James. But in our view, Ameriprise is well managed, boasts an intriguing capital returns story, and can be attractive at the right margin of safety.

On a relative basis, Ameriprise is most attractive for its lack of sensitivity to net interest income derived from low-cost client cash sweeps, depending on investors' views on the risks of falling interest rates, the spread of AI-enabled cash yield optimization tools, or the low but perpetual risk of regulatory crackdown on low sweep cash yields. This is the difference between "cash" and "core" earnings that management alluded to on the analyst call. 

While this is fair, we continue to view the risk of widespread deployment of AI-enabled cash management tools as fairly remote, given the combination of a clear lack of incentives to introduce such a tool from within the system, the long pull of high customer acquisition costs for a tool introduced by a third-party provider, limited net benefit for the average client, and privacy and liability concerns tied to an agentic tool, which would have access to clients' financial accounts to make these changes. We discuss these dynamics at length in our recently published Charles Schwab stock pitch for investors seeking further reading.

We maintain a $540 per share fair value estimate for Ameriprise Financial, corresponding with a 12.6 times price/2026 earnings ratio.

Consistent with other wealth managers, capital market return expectations and net organic flows are the most critical drivers for Ameriprise, which also sees some sensitivity to fee rates, asset management net flows, and insurance policy-in-force growth.

With Ameriprise boasting 4.5% annual growth in organic new client assets and 9.8% compound annual growth in client assets over the past five years, we view 2.7% annual growth in client inflows, 8.3% growth in client assets, and 7.0% segment net revenue growth (considering fee compression, with a mix shift toward more lucrative fee-based accounts representing a partial offset) over the next five years as achievable. With the firm walking away from a few less-profitable or riskier insurance lines, such as variable annuities with guaranteed benefits, we expect insurance policies to grow substantially more slowly than client asset growth, estimating a 1.9% annual decline in retirement and protection services revenue over the same period. We expect a 1.1% annual growth in asset management revenue, with decent capital market performance mostly offset by fee compression and net outflows. Our consolidated forecast calls for 3.4% compound annual revenue growth over 2026-30. We project a 2030 operating margin of 24.4%.

Overall, the firm's medium-term outlook looks decent. We forecast five-year compound annual growth of 3.3% in revenue, 3.4% in operating income, and 8.9% in diluted EPS. This puts us behind management's guidance for 12%-15% annual growth in diluted EPS, largely because of our weak medium-term macroeconomic outlook, although the firm should comfortably hit its 30%-plus long-term return on equity target; our own estimate for the latter sees midcycle ROE (excluding accumulated other comprehensive income) of 51% in 2030.

We believe Ameriprise Financial warrants a narrow Morningstar Economic Moat Rating based on switching costs. Since its spinoff from wide-moat American Express in 2005, Ameriprise has steadily grown its competitively advantaged wealth management business, positioning itself well to capitalize on growing demand for financial advice. Quantitatively, Ameriprise has enjoyed an outstanding mid-40s average return on equity over the past decade, attributable in no small part to a gradual mix shift toward its higher-return wealth management segment, which now accounts for about 65% of consolidated operating income. While we don't conflate high leverage and an asset-light model with stronger competitive advantages, we believe that Ameriprise's solid advisor retention, consistent organic net inflows, and compelling economic profile are indicative of an economic moat.

Ameriprise has three segments: advice and wealth management, asset management (through Columbia Threadneedle), and retirement and protection services (through RiverSource Life). There are definite benefits to holding those businesses under the same umbrella, with Ameriprise consistently booking more than $1 billion in intersegment revenue each year—7%-8% of gross revenue—as it cross-sells asset management and insurance products into its wealth management arm, and as Columbia Threadneedle manages investments on behalf of the firm’s RiverSource insurance business.

Considering these in sequence, we believe that Ameriprise’s wealth management segment has carved out a narrow moat derived from switching costs. The wealth management business is quite attractive industrywide, with advisor retention rates just shy of 91% (per Cerulli) and with average client asset retention rates ranging from the low 90s for lower-income consumers to the high 90s for more affluent ones. Ameriprise looks slightly stronger than average, with 93% advisor retention over 2015-24—indicative of an average financial advisor tenure of more than 14 years—and with net headcount growth of 0.8% annually over that period, edging out anemic 0.3% industrywide growth (per McKinsey) and modest outflows at wirehouse firms.

Within wealth management, particularly for firms that cater to mass affluent clientele, we see switching costs as sitting predominantly on the financial advisor side of the ledger; advisors generally lose upward of 20% of their assets to unplanned client attrition when they transition between advisory firms (per Cerulli). This directly affects advisor earnings power in an asset-based business and can take years to rebuild. Further, retraining on a new set of systems and financial products comes with significant time cost, taking away from more valuable time spent with clients or rebuilding a book of business. Most advisors simply stay put, with average tenures exceeding 10 years industrywide despite a competitive recruiting environment.

Although Ameriprise’s wealth management return profile is extremely competitive, with 30% operating margins aligning with results at much larger peers (like Morgan Stanley), a reliance on franchise advisors who absorb many of their own operating costs naturally begets lower switching costs than experienced by employee advisors, who rely on an advisory firm for nuts-to-bolts services—from office space to branding and marketing to turnkey technology platforms. Married with quotidian advisor retention data and smaller scale than peers like LPL Financial and even Raymond James, we believe that this points toward a narrow, rather than wide economic moat for the segment.

Extending our discussion to the firm’s other segments, we believe the Columbia Threadneedle fund families warrant a no-moat rating on a stand-alone basis. Segment returns are high, with high-30s target operating margins and comparable returns on equity, and we like that the firm can “double dip” on management fees by selling first-party funds to its wealth management clients. Still, Ameriprise’s portfolio is poorly positioned relative to broader industry trends. Of its $678 billion in year-end 2025 assets, roughly 55% sat in the secularly pressured active equity category, while less than 5% sat in more insulated alternative assets. The firm has seen significant fee pressure, with blended management and advisory fees falling from 55 basis points in 2014 to just 48 basis points in 2025, and consistent net outflows, averaging 4% annually over that period. Overall, returns are attractive at current market levels, but we harbor some concerns regarding operating deleverage in a period of cyclical underperformance, given that more than half of segment expenses are fixed, at least in the short term.

Finally, we view the firm’s retirement and protection services business as having no moat, consistent with our view of life insurers in general, although we’re much more constructive regarding Ameriprise’s RiverSource than many of its industry competitors. The segment’s return profile is compelling, with returns on equity exceeding public benchmarks by 3-4 times in the firm’s mainstay variable annuity and life and health businesses, attributable to some combination of lower distribution costs, lower lapse rates, a deliberately capital-light product mix, and selective reinsurance to free up capital. Many riskier portions of the book, like long-term care (closed in 2002), have been wound down, and the firm has reinsured large portions of its now-closed fixed annuity business to free up capital. As it exists today, R&PS is little more than an ecosystem service, distributed exclusively internally, and largely retained for its ecosystem benefits. As a result, Ameriprise has roughly twice the industry-average penetration of variable annuities and life insurance among its wealth management clients, with self-reported attrition 50% lower among clients who own RiverSource annuity or life insurance products and 75% lower among those who own both.

Increasing willingness for regional banks to offload technology investment and risk management to large, trusted intermediaries could drive a durable uptick in organic asset growth.

A sizable mix of both first-party distribution and international assets under management could drive stabilizing net flows for Columbia Threadneedle and preserve its 35%-40% segment operating margins.

Fundraising challenges for private equity firms could lower advisor acquisition costs and/or required advisor payouts for wirehouses and independent broker/dealers, driving segment margins even higher.

Significant equity market declines or falling interest rates would drive a substantial decline in Ameriprise's near-term earnings power and margin profile.

Meaningful changes to mortality or lapse rates could drive heavy insurance losses among riskier policies like the firm's closed-block long-term care business or in its still-large book of variable annuities with riders.

Heightened regulatory scrutiny of internal distribution could derail distribution benefits that Ameriprise has enjoyed between its asset and wealth management businesses and its insurance segment.