by Bruce Kelly and featured in Investment News
New York – Turning another page on its history, Ameriprise Financial Inc. is dramatically simplifying the payout grid for its brokers and advisers, essentially doing away with a complicated system that stressed a number of sometimes movable parts.
Gone is the payout grid with as many as five components, some of which could vary, including the number of financial plans an adviser wrote each year or the growth of advisers’ assets. Now, the firm’s 7,441 independent contractor registered representatives who run franchises have two components to their pay: assets under management and insurance, and gross dealer concession.
The changes bring Ameriprise more into line with the rest of the brokerage industry, said advisers who were pleased with the moves. Ameriprise just last year spun off from American Express Co. of New York and changed its name from American Express Financial Advisors.
The payout grid change in how the firm measures advisers’ payouts takes place July 1 and hits registered representatives’ pay in January.
“I’m actually very excited about it,” said David G. Miller, whose Altoona, Pa., firm, Miller & Associates, has more than $100 million in client assets. The new grid is an indication that Ameriprise is listening to its advisers, Mr. Miller said, adding, “I’d say that about everything since the spinoff.”
As part of the overall changes, Minneapolis-based Ameriprise also is offering stock to both its franchise and 3,035 employee registered reps. With its gussied-up compensation package in place, the firm also is embarking on a new recruiting campaign.
Other parts of the general overhaul include plans to open a bank and distributing its mutual funds and insurance products outside the firm through other advisers at banks and broker-dealers.“These changes will be a positive,” said Jonathan Henschen, a brokerage recruiter based in Marine on St. Croix, Minn. “Reps hate anything that’s difficult and convoluted.” “They’ve had a history of making a lot of changes,” Mr. Henschen said, adding that the firm also is “opening up to more outside products,” such as mutual funds and variable annuities from other firms.
Ameriprise in the past has run into trouble with securities regulators for its sale of proprietary financial services products. Last year, the New Hampshire Bureau of Securities Regulation in Concord hit Ameriprise with a $7.4 million settlement over the firm’s pressure on reps to sell house, or proprietary, funds.
Advisers said that company executives first discussed the changes with the sales force in January and March.
Ameriprise chief executive James M. Cracchiolo on April 25 outlined some of the changes with analysts in a conference call about the firm’s first-quarter earnings.
“We are looking at probably the third quarter for a start of distribution of our funds into the third-party channel,” he said.
The firm’s goal is to reach the client with at least $100,000 in assets to invest, dubbed the “mass affluent,” Mr. Cracchiolo said.
Forty-four percent of the firm’s advisers’ clients in 2005 had financial plans, up from 38% in 2001, according to a presentation given to investors this March.
Ameriprise is putting its money where its mouth is by linking new bonuses to financial planning and by doing business with the mass affluent, a company official said.
Gross dealer concession, the total fees and commissions a broker or adviser generates before the firm takes its cut, also was up last year, hitting $155,200, an increase of 9% compared with the level a year earlier.
At the time of the spinoff last fall, many in the industry, including some top Ameriprise franchise advisers, were nervous and doubtful about the firm’s ability to hang on to the sales force (InvestmentNews, July 25). In his discussion with securities analysts, Mr. Cracchiolo dispelled that notion, saying that franchisee adviser retention “remains high at 91%, down slightly from 92% last year and unchanged over the past three quarters,” although he did not break out specific numbers for retention of top-performing advisers.
As part of the changes, the firm has been closing some of its offices and creating new targets for employee reps, Mr. Cracchiolo said. Employee brokers have “higher productivity standards,” he said.
“We will see some greater level of attrition if they cannot achieve those targets quicker than they were in the past,” Mr. Cracchiolo said.
“Now, if they are not generating commissions after a certain amount of time, we will terminate them, because they are not really growing appropriately to sustain themselves,” he said.
Ameriprise is one of the largest brokerage firms in the country. Including its independent-contractor registered representatives with Securities America Inc. of Omaha, Neb., the firm has 12,339 brokers and advisers in its various platforms.