Ameriprise Financial Inc. (AMP)
Special Conference Call
November 14, 2012 9:00 am ET
James Cracchiolo – Chairman, Chief Executive Officer
Kim Sharan – President, Financial Planning and Wealth Strategies, Chief Marketing Officer
Ted Truscott – Chief Executive Officer, Global Asset Management
Walter Berman – Executive Vice President, Chief Financial Officer
Alicia Charity – Senior Vice President, Investor Relations
Tom Gallagher – Credit Suisse
Alex Blostein – Goldman Sachs
Sumeet Kamath – UBS
John Nadel – Sterne Agee
Jeff Schuman – KBW
Eric Berg – RBC Capital Markets
Ian Gutterman – Adage Capital
Jay Gelb – Barclays
Gary Lu (ph) – (Indiscernible)
Previous Statements by AMP
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During the meeting, you will hear reference to various non-GAAP financial measures which we believe provide insight into the company’s operations. Reconciliations of the non-GAAP numbers to the respective GAAP numbers can be found in today’s materials on our website. Some statements that we make during this presentation may be forward-looking, reflecting management’s expectations about future events and the operating plans and performance. These forward-looking statements speak only as of today’s date and involve a number of risks and uncertainties. A sample list of factors and risks that could cause results to be materially different from forward-looking statements can also be found in today’s presentation, our 2011 annual report to shareholders, and our 2011 10-K. We undertake no obligation to update publicly or revise these forward-looking statements.
And with that, I will turn it over to Jim.
Thank you, Alicia, and good morning everyone, and for those joining us on the web, I appreciate your attention to Ameriprise today. What I’d like to do is give you a bit more of our story. We asked a number of you what you would be interested in learning about, and a little more focus on the strategic part of our company and how we think about our strategy and how we’re looking to continue to move forward, grow and invest for the future.
In so doing, we want to give you a little perspective of where we’ve been, how we’ve generated our performance, what that performance looks like, and how we’re using the strengths and capabilities that we have to build for the future. What I’d like to do today is leave you with three messages that you’ll hear in combination from my presentation as well as my colleagues that will follow me. One, and very important, is that we are a strong, powerful retail financial services company today. We’ve invested heavily through the financial crisis. We have a strong position today in the marketplace, and one that we think situates us well to capture a large and growing opportunity that we’ll talk to you about.
Second, since our spinoff we’ve generated very strong and differentiated financial performance in our firm, and we did while investing for the future. We did that by building capabilities, by strengthening our positioning in a number of our businesses, and from that we think that we’re in a great position to continue to build for the future and generate strong shareholder value by pulling a number of levers that we have in place today. So I’d like you to think about those messages as we go through our presentation.
Now many of you know where we came from - seven years ago, we were spun off from American Express, and at that time of spinoff we were mainly focused on the mass market. We were mainly built in profitability around our insurance and annuity business, but we had a strong distribution arm. We had a domestic asset manager as a proprietary asset management business, and we had traditional wealth management tools and capabilities. Our technology was somewhat limited because we’d under-invested previously, and there was a lot of questions regarding our financial strength.
Now since our spinoff, we’ve been able to prove that we can establish a very strong and growing retail financial services firm, and we have. Our focus has really been on the mass and mass affluent clientele, and most of our asset growth has really come from this area. We’ve built a new brand with significant recognition and we’ve gained a lot of trust through the financial crisis in our brand versus others of our competitors.
We also today have a large and profitable wealth management business. We invested heavily and we transformed ourselves, and we think this will be a strong growth engine for future growth and profitability. And we converted our proprietary asset manager to a global asset manager through both organic growth as well as acquisitions, and we think we’re situated well to take advantage of a growing opportunity that we want to talk to you about.
And today, we continue to be a leader in financial planning and advice, but we are also tapping, as I said, people who have more assets and people who have a greater need to serve for their financial future. We think that we’re situated unbelievably well in the sweet spot of that area. And we invested to have a real scalable infrastructure, one that we have as state of the art technology and tools and capabilities both in the real world as well as the online world that we’ve continued to invest in and you’ll hear more about. And so overall, I think we’ve demonstrated that we can deal with a financial crisis and we dealt with it quite well, and that we have differentiated financial performance, and we’ll talk about that in a minute.
Now as we look at some of the key attributes of our firm, and we looked at that compared to our competitors, we think that we’re in the strong part of these sort of rankings. And so whether it’s our strategic positioning against what we’ll talk to you about is the retail market and mass and mass affluent for retirement, our brand positioning and how it’s gained trust, our distribution that we have one of the strongest affiliated channels, but at the same time we’ve been able to develop a differentiated positioning also in the sense of building through third party distribution for our asset management business. We continue to build upon the persistency and strength that we have in our client relationships and this is one of the things that’s going to add to our value in the future as we look to serve people through 30 years and retirement.
Our financial strength – we’re stronger today than any time in our past, and I would say on a relative basis for our size, with our balance sheet and the size of our company, we have a stronger capital position on a relative sense. And we’ve been able to generate strong shareholder returns and one that I think that we have the flexibility and strength to continue in how we can give back to shareholders, based on the generation of our free cash flow for the businesses that we’re in today.
Now that didn’t come by chance. Since we separated and became a separate public company, we had a very focused strategy and we stuck to that strategy to advise and manage and protect assets and income for our clients, to really focus on the mass and mass affluent and establish ourselves, as well as in the asset management business to take further ground and be in more of a diversified company. In addition to that, I have a very strong leadership team, a leadership team that has remained with and part of this company since our spinoff, and during that time we’ve been able to add very strong additional leadership, either through acquisitions or organically from the industry as well as developing what we had as very good talent internally. And we have demonstrated both to our clients as we faced and dealt with the financial crisis and supported our activities, to our advisors how we’ve supported them and helped them grow and continue to build their productivity and their teams, as well as to you our shareholders from what we told you we would try to deliver through the financial crisis and what we have delivered. So that situates us well to continue the path for the future.
Now let me talk to you about some of the unique opportunities that are out there and ones that we are looking to continue to play in, and let start with the wealth management opportunity. Today there is a compelling market opportunity. I know sometimes we look at the headlines every week and look at the market and look at what’s happening with the consumer and economic growth, but over the last number of decades, the population in the mass affluent and the affluent has continued to grow. There are over 30 million people now in these two dark parts of the pie chart, and that will continue to grow in the future. As people need to continue to accumulate assets, as they look to figure out how they’re going to manage their financial assets to handle 30 years of retirement – remember, Social Security, even it stays the way it is, and we don’t address entitlements today, it will only serve a very small part of people’s real needs as they’ve actually increased their standards of living. And so of this pie of $26 trillion dollars, more than half of it is in that population that continues to grow and will be accelerating its growth as we come out of this economic downturn.
Now as you can see on the other part of the chart, what’s also happening and even more significant is the wave of baby boomers moving to retirement, and those first baby boomers have already started – 10,000 of them a day are turning 65. And over the next decade, that’s going to peak, and what do they need? They need to provide for 30 years in their retirement. They need to feel confident about their retirement. They need to have advice to help them do that, and we are situated quite well in that particular marketplace. Why? Only one in five of people turning 65 feel confident about their retirement, and they do need advice, and they are looking more for that as they move forward. They know there are a lot of good products out there, but how to have those products work together to satisfy them to generate a good retirement and an income check for their future, and that’s where we fit in.
So if you take these three concentric circles – the mass affluent, affluent population and it’s growth in asset accumulation, the baby boomers – largest part of our population moving to retirement, and then third their need for advice and solutions to help them satisfy that particular need, we’re right in the center of it. Ameriprise is well positioned there. We have a full range of wealth management and asset management solutions. We are the fifth largest player already in the retirement space and the advice space. We’re the seventh largest provider of the IRA for assets under administration. We have a very differentiated position in the marketplace built around financial planning advice. We’ve over the years established long-term relationships with millions of clients, and we have the strength and wherewithal to support that positioning the marketplace, continuing to invest and diversify and grow. We have built now a national brand to the mass and mass affluent population around who we are and what we stand for, and we have more qualified advisors, more CFPs around financial planning than anyone else in the industry. So very clearly, we’re situated well to take advantage of that opportunity.
Now what have we been doing? How have we been investing? What results are we already achieving, and why do we feel that we can continue to do that as we move forward over the next number of years? Well first of all, let me just give you one of those metrics. So let’s look at our retail client assets. They’ve gone up over 60%. Now remember, during this time frame from 2005 to 2012, markets have been relatively flat – up and down, but relatively flat over those years. We have grown those assets. Why? Because we actually have increased the population of our mass affluent and affluent clients by over 37%, and increased our advisor productivity strongly in that period. We have invested in advice and capabilities and tools. We have developed a brand strongly in the marketplace and delivered it through our face-to-face relationships. We’ve enhanced our technology capabilities and the way that we can actually manage our clients’ assets to help them diversify for the future, handle their full lifestyle needs, and we’ve been able to actually satisfy them. You’ll hear more from Kim on what that looks like, how it feels to the consumer, why they like working with Ameriprise and our advisors.
So we think that we have the great foundation in place to do that, not that we are finished. We will continue to invest, we’ll continue to evolve, we’ll continue to grow; but very clearly, we think that over the last number of years, we’ve made a good—tremendous progress, actually, in transforming in our business for growth and profitability, and Walter will talk a bit more about the profitability side of that.
Let’s look at our advisor side of the equation. Over the years, we’ve moved from building our advisor force organically with novices to now recruiting experienced people with books of business. We’re getting known in the marketplace. Our pipeline is strong, so we’ve moved from practically very few advisors coming in and joining us that way to now over 400 on a past 12 month basis. And their books of business and their productivity are stronger today than they were last year and the year before.