Ameriprise Financial, Inc.AMPNYSE
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Operator: Welcome to the Third Quarter 2025 Earnings Call. My name is Tina, and I will be your conference operator today. [Operator Instructions] As a reminder, the conference is being recorded. I will now turn the call over to Stephanie Rabe. Stephanie, you may begin.
Stephanie Rabe: Thank you, and good morning. Welcome to Ameriprise Financial's Third Quarter Earnings Call. On the call with me today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer. Following their remarks, we'd be happy to take your questions. Turning to our earnings presentation materials that are available on our website. On Slide 2, you will see a discussion of forward-looking statements. Specifically during the call, you will hear references to various non-GAAP financial measures, which we believe provide insight into the company's operations. Reconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website at www.ir.ameriprise.com. Some statements that we make on this call may be forward-looking, reflecting management's expectations about future events and overall 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 actual results to be materially different from forward-looking statements can be found in our third quarter 2025 earnings release, our 2024 annual report to shareholders and our 2024 10-K report. We make no obligation to publicly update or revise these forward-looking statements. On Slide 3, you see our GAAP financial results at the top of the page for the third quarter. Below that, you'll see our adjusted operating results, followed by operating results excluding unlocking, which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitates a more meaningful trend analysis. We completed our annual unlocking in the third quarter. Many of the comments that management makes on today's call will focus on adjusted operating results and adjusted operating results excluding unlocking. And with that, I'll turn it over to Jim.
Jim Cracchiolo: Good morning, everyone, and thanks for joining our call. I'll begin with my perspective on the business, and Walter will follow with more detail on our third quarter metrics and financials. As you saw in our release, Ameriprise delivered another strong quarter and generated significant value as we built on our performance from the first half of the year. Regarding the operating environment, clearly, it remains fluid. We've continued to see strong bull markets, but investors still have many variables to navigate. Inflation remains elevated. In terms of interest rates, the Fed announced yesterday that they cut rates by another 0.25 point. Meanwhile, there are signs of softening in the labor market along with lingering questions around tariffs and ongoing geopolitical impacts. And our business continues to demonstrate both its relevance and resilience in that regard. In a dynamic landscape, Ameriprise consistently generates strong results driven by a diversified business and disciplined management. And our third quarter financials, excluding unlocking, reflect this momentum. Assets under management, administration and advisement grew to a new high of $1.7 trillion, up 8% year-over-year. We continue to deliver strong earnings and also generated double-digit EPS growth, up 12%. And our firm-wide margin of 27% is exceptionally strong as we continue to invest significantly in the business. I would also highlight that the Ameriprise ROE is best-in-class year after year and one of the highest in financial services at nearly 53%. In fact, Ameriprise is well-positioned even if the environment becomes more challenging. Our complementary mix of revenue streams, effective expense management and strong margins help enable us to sustain strong financial performance. Regarding the overall business, we're driving nice progress across many areas. Our advisers are leveraging our proven advice value proposition and generating high client value satisfaction and practice growth. Overall, we have continued strong AWM client asset growth, up 11%. Wrap assets were also up nicely, up 14% year-over-year. And our adviser count is up and adviser productivity continues to be very strong, increasing another 10%. And we're back to strong recruiting levels, bringing in 90 experienced advisors in the quarter, one of our best. The Ameriprise value proposition as well as the strength and stability of the firm continue to differentiate us in the recruiting space, and our pipeline in the fourth quarter is strong. Across the business, we're leveraging our investments to further elevate our value proposition and drive long-term economic returns. In September, we launched a new advertising that reinforces our premium brand and helps create strong awareness among our target market. And we continue to invest in advanced capabilities that empower our advisers to further engage clients and deepen relationships. Our digital and AI investments are creating strong experiences and streamlining workflows. In fact, we're seeing record digital adoption from our clients and our mobile app satisfaction hit an all-time high in the quarter. And our Advice Insights is a next-generation capability that uses big data and machine learning to create client-centric insights to drive engagement, save time and support business growth. We're also investing to enhance our comprehensive solution suite, both to broaden our offering and position the business for sustainable growth. Over the summer and into the fall, we've been working closely with advisors to integrate new capabilities. As an example, the launch of our Signature Wealth platform is proving to be quite successful. It's early, but it's already helping advisers attract new assets and manage client portfolios more efficiently and it has great potential. At the bank, we recently launched HELOCs and also began a soft launch of our checking accounts with a full rollout planned for later this year. These solutions add to our suite of savings and lending products, including CDs, mortgages, pledged lending, and credit cards. They also help to enhance our client experience and deepen relationships. We're also growing our AFIG business, partnering with banks and credit unions who can benefit from our sophisticated wealth management solutions and advisor support tailored to institutional clients. And we continue to add new financial institutions and have a strong pipeline into the year-end and 2026. At RPS, performance remains strong, driven by demand for annuities and insurance solutions that align with our clients' financial planning goals. We're seeing solid interest in variable universal life, structured annuities and variable annuities without living benefits, highlighting the relevance of our offering in today's market. We're also pursuing growth in our disability insurance business, including streamlining with an approval process for clients applying for life insurance. In addition, we're using data analytics in our digital insurance underwriting, and I'll reinforce that we built one of the most profitable insurance businesses in the industry. In Asset Management, we continue to make good progress as well as enhancements to the business. Our investment performance remains strong over all time periods. Over 65% of our funds outperformed the medium on an asset-weighted basis for 1-year period, more than 70% for the 3- and 5-year periods, and over 80% for the 10-year. And we maintain a good asset base with assets under management administration up to $714 billion. In addition, net outflows improved across the board from last quarter as redemptions slowed in both retail and institutional, and we had an increase in retail gross sales, particularly in North America. As I shared, we're investing and adding to our solutions in high-demand areas where we differentiate our capabilities. We're also using data and analytics to better target and segment advisers, and we're gaining traction with SMAs and models as well as our alt business and active ETFs in the U.S. In addition, we'll soon be launching our active ETF capability in the U.K. and Europe. Regarding institutional, we also had an improvement in flows in the quarter. Looking forward, we'll continue to manage expenses effectively in Asset Management with the ability to generate good margins and profitability. And that applies across Ameriprise as we continue to drive transformation and operational efficiency. What's clear, our disciplined approach delivers results, and that's evident in our strong margins. And our digital transformation is not only enhancing the client advisor experience, it is also reducing costs and positioning us for sustainable growth. We're also enhancing our global operating platform for asset management. A recent example is the announcement of our expanded partnership with State Street, establishing a unified global back office for many Columbia Threadneedle funds. These initiatives further strengthen profitability and our ability to reinvest in innovation and growth. As you know, we manage the business with rigor and consistency. Ameriprise consistently delivers profitable growth, robust free cash flow and a strong return. In fact, the return on capital remains exceptional, supported by healthy dividends and robust share repurchases. That includes a capital return in the quarter that we increased to $842 million. Our financial strength and stability enables us to reinvest strategically and act opportunistically. We believe that what also sets Ameriprise apart are our relationships and consistent recognition we earn for how we operate. Core to our success is how our clients feel. We consistently earn top client satisfaction, continues to be exceptional 4.9 out of 5, and our advisors are also very engaged in being selected for top awards. In fact, we had 20 Ameriprise advisors on the Barron's Top 100 Independent Financial Advisors list for 2025. Also key, our employee engagement consistently best-in-class across industries as confirmed by our latest internal survey results received in the third quarter. And J.D. Power once again recognized Ameriprise with their outstanding customer service certification for our phone support. for the seventh consecutive year for advisers and the second year for clients, which is tremendous. In addition, Forbes named Ameriprise one of America's Best Companies. Newsweek honored us as one of America's most responsible companies. Fortune listed Ameriprise among America's most innovative companies, and I also highlight that Newsweek recently ranked us as one of America's greatest companies. In closing, I feel very good about Ameriprise and the totality of the firm. Earlier this month, we officially marked 20 years of independence and our listing on the New York Stock Exchange. Over the last 2 decades, Ameriprise has built an exceptional track record for achieving high client satisfaction and industry-leading results guided by our proven strategy and management principles, and that includes generating the #1 total shareholder return within the S&P 500 Financials Index since our spin-off in 2005. As I look ahead, Ameriprise is well positioned and represents attractive value at these levels regardless of market momentum. With that, I'll turn it over to Walter for his perspective, and then we'll take your questions.
Walter Berman: Thank you, Jim. Ameriprise delivered another quarter of solid performance, underpinned by exceptional balance sheet strength. Our focus on sustainable profitable growth continues to serve us well in delivering consistently strong financial results and client satisfaction, demonstrated by adjusted operating EPS, excluding unlocking, up 12% to $9.92 with a strong margin of 27% across the firm. Adjusted operating net revenues, excluding unlocking, increased 6% to $4.6 billion, driven by asset growth. Expense discipline remains strong from our ongoing firm-wide transformation initiatives. In the quarter, G&A expenses improved 3%. It was another solid quarter driven by the sustained benefit from the leverage within our integrated business model. Our stable 90% free cash flow generation across our segments, combined with the foundation of strong balance sheet and enterprise risk management capabilities enabled us to increase our capital return to 87% of operating earnings in the quarter. We remain committed to returning capital to shareholders at a differentiated pace and are targeting an 85% payout ratio for the fourth quarter based upon our share price and substantial free cash flow. On Slide 6, you'll see EPS growth of 12%, demonstrating the strength and leverage across our businesses. Assets under management, administration and advisement increased 8% to a record high of $1.7 trillion. We delivered strong firm-wide margins from 6% revenue growth while reducing G&A expenses by 3%. On a full year basis, we are targeting a G&A decline of 3%. We continue to generate a best-in-class return on equity of 53%. Let's turn to Slide 7. Underlying performance metrics in Wealth Management remained strong across all measures. Client assets grew nicely to a record $1.1 trillion with $29 billion of flows over the past year. Wrap assets were up 14% to $650 billion with Wrap flows at $30 billion over the past year. In the quarter, client and Wrap flows were impacted by the departure of two large advisor teams. Excluding those departures, client flows were solid at $6.5 billion and Wrap flows were $8 billion when also adjusted for administrative change. The flows from our legacy adviser and client base have been consistent. In addition, transactional activity levels remain strong, near record levels, reflecting the full scope of our planning model. Cash sweep balances were stable at $27.1 billion compared to $27.4 billion in the prior quarter. We are also seeing strong momentum in our experienced advisor recruiting with 90 advisors joining Ameriprise this quarter. Our value proposition is resonating with advisors, and we remain focused on ensuring our transition packages are attractive to experienced advisors that share our values and commitment to the client experience. And more importantly, advisor productivity grew 10% to a new high of $1.1 million. Let's turn to Wealth Management financial results on Slide 8. Adjusted operating net revenues increased 9% to $3 billion. The core business is performing very well. Our fee-based and transactional revenues were quite strong, increasing in the low-teen percentage range, benefiting from higher client assets and activity levels. Our cash revenues, which include net investment income, distribution fees related to off-balance sheet cash and banking and deposit interest expense were impacted by the Fed funds rate reduction over the past year and declined in the mid-single-digit range, as you would expect. Adjusted operating expenses in the quarter increased 10%. In the quarter, distribution expenses increased 11%. I would note that advisor compensation within distribution expenses increased in line with the revenues advisors generate. G&A expenses increased 5% to $439 million in the quarter, primarily driven by volume and growth-related expenses, including investments in Signature Wealth and banking products. Expenses remained well-managed for the full year. We continue to expect low to mid-single-digit growth in G&A. Pretax adjusted operating earnings increased 7% to $881 million. We saw continued strong contributions from both core and cash earnings in the quarter. Our core earnings grew in the high-teen percentage range, benefiting from higher asset levels strong transactional activity and well-controlled G&A. The strong level of core earnings that we generated is unique and demonstrates our focus on profitable growth. Cash earnings had a mid-single-digit percentage decline as expected from rates. Our strategy of leveraging Ameriprise Bank has been important in minimizing the impact from Fed funds effective rate reductions on our AWM business. In fact, net investment income in the bank was flat this quarter. We continue to take actions to build the bank investment portfolio in a way that supports stable earnings contributions going forward. The overall bank portfolio has a yield of 4.6% with a 3.7-year duration. In the quarter, new purchases at the bank were nearly $700 million at a yield of 5.3% with a 4.4-year duration. Last, our margins remain excellent at 29.5%. Turning to Asset Management on Slide 9. Financial results were solid in the quarter. Operating earnings increased 6% to $260 million. The strong quarter reflected equity market appreciation and the positive impact from expense management actions, partially offset by the impact of net outflows. Total assets under management and advisement increased to $714 billion, up both year-over-year and sequentially from higher ending market levels. Net outflows significantly improved on a sequential basis to $3.4 billion, with improvement in both retail and institutional. Retail flows benefited from higher gross sales, which included a nice win in model delivery. Institutional flows benefited primarily from lower redemptions in both the U.S. and EMEA. Revenues increased 3% to $906 million with a stable fee rate at 46 basis points. G&A expenses increased 1%. For the full year, we expect mid-single-digit G&A expense decline, excluding performance fees. Margin reached 42% in the quarter, which is above our target range, driven by favorable markets and continued expense discipline. Let's turn to Slide 10. Retirement & Protection Solutions continued to deliver strong earnings and free cash flow generation, reflecting the higher quality of the businesses that was built over a long period of time. Pretax adjusted operating earnings, excluding unlocking in the quarter were $200 million, in line with our expectations. The strong and consistent performance of the business reflects the benefit from strong interest earnings and higher equity markets. Overall, Retirement and Protection Solutions sales were solid at $1.4 billion with a continued demand for structured variable annuities. These high-quality books of business continue to generate strong free cash flow with excellent risk-adjusted returns and continue to be an important contributor to the diversified business model. The company completed its annual actuarial assumption update in the quarter, which resulted in an unfavorable after-tax impact of $5 million. In Retirement & Protection Solutions, there was a favorable insurance model change, which was partially offset by unfavorable changes to variable annuity surrender and utilization assumptions. In long-term care, there was an immaterial impact from changes to morbidity and mortality assumptions. Overall, LTC policyholder behavior is in line with expectations. Before we move to the balance sheet, I'd like to take a moment to address the Corporate segment. The pretax operating loss, excluding unlocking, was $93 million, which was a significant improvement from a year ago due to lower severance and cloud migration expense as well as favorable share-based compensation expense. Turning to balance sheet on Slide 11. Balance sheet fundamentals and free cash flow generation remains strong. We have an excellent excess capital position of $2.2 billion. We have $2.5 billion of available liquidity, and our investment portfolio is diversified and high quality. We have a diversified source of dividends from all our businesses enabled by strong underlying fundamentals. This supports our ability to consistently return capital to shareholders and invest for future business growth. Ameriprise's consistent capital return strategy is a key element of our ability to consistently generate strong long-term shareholder value. In summary, on Slide 12, Ameriprise delivered solid results in the third quarter, which is a continuation of our long track record navigating various market environments over the longer term. Over the last 12 months, revenues grew 7%, adjusted EPS increased 12%, return on equity grew 210 basis points, and we returned $3.1 billion of capital to shareholders. We had similar growth trends over the past 5 years with 9% compounded annual revenue growth, 18% compounded annual EPS growth, return on equity improving 17 percentage points, and we returned $13 billion of capital to shareholders. These trends are consistent over the long term as well. This differentiated performance across multiple cycles speaks to the complementary nature of our business mix as well as our consistent focus on profitable growth and maintaining our strong values as a company. With that, we'll take your questions.
Operator: [Operator Instructions] And our first question comes from the line of Suneet Kamath with Jefferies.
Suneet Kamath: First question on AWM. Can you comment on the Comerica relationship given the M&A that we saw recently and maybe remind us of what the assets under management or account values are with respect to that relationship?
Jim Cracchiolo: Sure, I can comment on the first part. I'll ask Walter on the asset level. First of all, we have an excellent relationship with Comerica since we have done the arrangement and put them on our platform and capability, working with their advisors and their clients. We have gotten very strong favorable reviews from Comerica themselves, from their executives, from their wealth management group and their advisors. They love the platform, the capabilities, the tools, et cetera. So we feel very good about that relationship. We know an acquisition has occurred. We'll be working with them as they decide how they want to proceed. And we feel very comfortable with the arrangement we had in place with them. and the contract and agreements. So it's more of a stay tuned as I guess they're going through their own decisions on what they need to do or look at. But we have great capability to support them.
Walter Berman: Suneet, on the asset side, it's around $15 billion. And like in any contract of this nature, there is protections.
Suneet Kamath: Okay. And then in your prepared comments, you called out two practices that have left that were pretty sizable. Can you maybe just unpack what happened there? And is this an indication that the recruiting environment is just getting incrementally more competitive?
Jim Cracchiolo: Well, as we had mentioned the previous quarter, you're always going to have some one-offs. Some other firms have similar things over the last few quarters. These two practices went RIA. And listen, there are checks being given out and other things. But overall, it's fine for them. We've recruited very strongly. We have 90 people joining us. Our pipeline is quite good. Our underlying organic business is very solid. Our advisor satisfaction is very strong. But you're always going to have some one-offs, as we mentioned. But we look at the totality of what we're doing and how we're doing it. Environments will change. There's always a price to pay. We feel very good about our position.
Operator: Your next question comes from the line of Wilma Burdis with Raymond James.
Wilma Jackson Burdis: Given your excellent track record of managing the wealth business, and I know you just touched on this a little bit, but you've seen a little bit lower flow activity this year. Is that an indicator that just maybe the market is a little bit too hot or pricing is a little bit irrational? Maybe just comment a little bit on that.
Jim Cracchiolo: I think it's a combination of those things. I would probably say that as we look at the underlying of our client base and activity, it's still quite good. People have done a lot of rebalancing and allocations. Transactions are quite strong. The balances of the book are very good. The clients are highly engaged. But again, the market has gone up pretty substantially. There is money on the sidelines. Our cash balances are very high. So there is a bit of that going on. And then there's a bit of exactly what you said on the environment on recruiting and what's happening in that regard. I think there has to be -- over time, there will be rational. We've always played in more of a balanced equation, which is good for us long term, for our advisors long term, for clients long term, and that's how we approach things.
Wilma Jackson Burdis: I guess kind of a follow-up, and you mentioned the high cash balances, but some of these advisor roll-up operations, they seem potentially a little bit overlevered, maybe they're getting a little bit aggressive. Do you see that as something that could present an opportunity in the future?
Jim Cracchiolo: The answer to that is absolutely yes. People forget that you go through downturns and changes in the market. I've been in the industry many years, over many decades, many years ago. So I do understand that, and I don't think people do. That's why we have really good sound fundamentals, strong margins. We invest for the long term. Our capabilities are strong. Our client satisfaction is excellent. We have a strong branded premium value proposition in the marketplace. So those are all the things that I think are really important as you go through these events where things always look rosy until they're not.
Operator: Our next question comes from the line of Brennan Hawken with Bank of Montreal.
David Giunta: David Giunta on behalf of Brennan Hawken. I just wanted to do a quick follow-up on the net new asset side. On top of the two teams that you mentioned were leaving, you also stated that there were some administrative changes. Could you just dive into a little bit of what those are? Also on top of that, the advisor headcount was 10,427 at year-end 2024. Could you just give an update on where that number stands today? Appreciate it.
Jim Cracchiolo: Yes. As far as the adjustment, we went through all of our Wrap programs and set up things consistently. Certain clients, we had adjusted out of the various programs. Some of that will come back in and make changes. So we feel very good. It's a onetime sort of an adjustment as we adjusted how we looked at each program and the arrangements we had, and it made sense for both us and the client. In regard to the business overall for Wrap, I think it will be quite strong and et cetera. Also from an adviser count, it is up nicely year-over-year. We stopped giving numbers, so I'm not going to give that, but there was no change in sort of what you were in sort of our normal way of looking at that advisor growth over the years. So it's still consistent with that.
David Giunta: Great. And then I just had one quick follow-up. Do you expect the risk from the regional bank M&A to limit deals in the bank channel? Does any of this uncertainty provide maybe an opportunity?
Jim Cracchiolo: I think you see some recent mergers in the bank as they feel the regulatory environment has eased a bit. So I think some of that regional activity will continue from our perspective. Yes, that always presents certain adjustments out in the marketplace. We, from our own banking, we look at it as more of growing that as an organic wealth management business that we have to our clients. So we're not looking to get into the banking business in a further light at this point in time.
Operator: Our next question comes from the line of Jeffrey Schmitt with William Blair.
Jeffrey Schmitt: In Asset Management, could you discuss some of the expense actions you've taken there over the last year or 2? And when do you expect those initiatives to be complete?
Jim Cracchiolo: So we did a more comprehensive review of our operating environment globally. We've made a number of adjustments over the last 2 years that streamlined their operations, particularly after our integration of the BMO acquisition 2 years ago. And with that, put them on consistent platforms, systems, technology, trading and also in addition to that, looked at geographically where we're located for certain services we perform so that we got real scale out of that and right demographics that would give us some efficiency and lower price cost. We are completing that transformation with now the back office, as we mentioned, with our arrangement with State Street. So we'll be in a really great position to really operate on a more scaled basis as we move forward. A lot of that change has been already completed. The last one is what we're doing with the back office. And so those savings are being baked in as you see. So the expenses have gone down in the G&A. And we've been investing now in new products and capabilities and AI to support the asset management business.
Jeffrey Schmitt: Okay. And is there any guidance you could provide on how to think about crediting rates coming down for both the bank and certificates as the Fed cuts rates?
Jim Cracchiolo: Well, of course, those will be adjusted in light of the environment. Same thing with CDs as you're investing at different levels, you would adjust the rates that you provide from a client. Walter, do you have any more?
Walter Berman: Obviously, in the service business, which is a spread business, we will manage that as rates come down. And certainly, we're investing at higher levels. And as the rates come down, we'll credit less. So that will be a positive. And as it relates to sweep counts, I think we've adjusted like the industry has. So there's not much room in that. So -- and our core investments are now longer dated as to because of the way we reposition the portfolio will be less impacted by the drop in interest rates.
Jim Cracchiolo: And the reason we really developed the bank and part of that is so that we can maintain that spread as interest rates do decline at the same time of giving us -- get a greater engagement with the client for giving them favorable treatment with the banking products that we can offer. So for us, it was -- it's a good capability, but also ensures a bit more of our spread revenue continuing.
Operator: Our next question comes from the line of Steven Chubak with Wolfe Research.
Steven Chubak: So maybe to start just on the investment philosophy. So looking at the last 2 quarters, despite strong top and bottom line results, helped in large part by good expense discipline, the core brokerage KPIs, including NNA and sweep cash have lagged peers. And I was hoping you could speak to some of the factors that are driving the softer organic growth. But bigger picture, your willingness to lean more heavily into investing to maybe help reaccelerate growth, which admittedly could eat into margins as well.
Jim Cracchiolo: Yes. So listen, I can't speak to who you're referencing competitors. I know there's been a lot of roll-ups and acquisitions and paying up to bring advisors in at, what I would say, top dollar. So maybe that's part of their incremental growth that they're doing. We look at it as bringing good people on that have quality books that will generate good value for them and us based on what we can provide to them as well as what we look to have associated with us. From a core perspective, I think we've been very consistent. Our flow rate around the industry. You can't look at just 1 quarter, but over the course of a year, 2 years, 3 years, our flow rate has been very good and consistent out there and very competitive in that regard. From an investment perspective, we're making quite strong investments in our capabilities, in technology, in solution sets. And I would compare us to having one of the best platforms out there and leading in many areas. So I feel very good about that, and those investments will continue. As far as recruiting investments, we've upped our packages a bit in this competitive frame, but still for us, very rational and appropriate for long-term profitability. And we always will look at the environment and make adjustments, but we always look at not just in the short term, but the longer term, and that's where maybe people are getting a bit overlevered.
Walter Berman: On the cash, certainly, from our standpoint, it's stable, and we do see it growing in its normal pattern in the fourth quarter. So we feel quite comfortable with that.
Steven Chubak: So Walter, maybe unpacking that a little bit further, just given the sweep cash trends in 3Q, you didn't see the uptick that we saw at some of your peers. I was hoping you could speak to what you saw in terms of cash behavior following the September rate cut since that was the month where it appears most of your peers did see an uptick. And just in anticipation of additional cuts, how are you thinking about the pace of sweep cash growth looking ahead to next year?
Walter Berman: Well, we saw a pattern when the cuts, it really didn't deviate that much from that standpoint. And -- but with the cuts that we anticipate in this fourth quarter, we will see an increase like we normally will. So we don't really anticipate the cuts will have an impact on the rates -- the volume in sweep. And we certainly -- as we indicated, we've already planned for with lowering the amount of cash exposure we have on the short-term to ensure that we actually have the profitability sustained throughout AWM. So we feel comfortable with the balances and certainly with the positioning of our investments and the duration of it. So not concerned.
Operator: Your next question comes from the line of Alex Blostein with Goldman Sachs.
Alexander Blostein: Just building on some of the questions around cash revenues really related to the bank. If we look at the bank's average earning assets and really zoning in the securities portfolio, I think the earning yield there is running at around 5%, maybe high 4s. So maybe just kind of help us think about the reinvestment yields you expect on that book as that rolls off over the next couple of quarters, couple of years relative to that installed base of kind of 4.5% to 5% and the implications that will have on the NIM at the bank.
Walter Berman: So as we indicated, we anticipate with the roll-offs and certain maturities that we see coming that we'll be reinvesting in the high 4s, low 5s. So we will be able to maintain our net interest income at the bank from that standpoint. And we feel quite comfortable about that as we go for the next -- certainly, I would say, 3 quarters. Beyond that, it becomes a little more difficult depending on where the Fed goes with and where the long-term rates go. But we certainly plan for this, and we feel comfortable with that strategy.
Alexander Blostein: Right. Understood. Okay. And then when it comes to the certs business, certificates business, those balances have been coming down now for several quarters, which makes sense, I guess, given how elevated they've been running at. So now we're sitting, I think, at around $9 billion. Just looking back, where do you guys expect these balances to ultimately stabilize? And how would you frame that level?
Walter Berman: It will -- I think directionally, it will come down certainly as we manage our spread for that. But it gets to a set level and it won't deviate that much, but it depends on the movement in the rates. But it follows a pattern strictly based on the spread and then the money gets recirculated. So that's -- I wouldn't see a precipitous drop coming off.
Alexander Blostein: Yes. I guess like before the dynamic in 2023, the balances used to run at like a $5 billion, $6 billion range. Is that sort of where you expect it to sort of normalize?
Walter Berman: I would -- let me just say, I think it's certainly that is a range where it is normal where it gets to when you start managing it, but I don't know if it's going to drop that precipitously at this stage. But certainly, that will be the bottom, in my opinion.
Operator: Our next question comes from the line of John Barnidge with Piper Sandler.
John Barnidge: Others with asset management businesses in life insurance have gone out and partnered with other asset managers, which is actually rather unique for new product creation of interval or evergreen funds. Is this something under consideration or that needs to happen for Ameriprise?
Jim Cracchiolo: There's a number of different arrangements. I mean, not a lot has come to market for some of the stuff that has been out there. So we'll see what actually takes hold. We are looking at various arrangements ourselves. We just -- we launched our own Interval fund that's in the marketplace that we brought out. There's other things that we're working on in the alternative space. Some will be with partners, some will be organic for us. But yes, that will be an opportunity that we're looking at.
John Barnidge: My question is about AWM and the competitive environment. There's been a deceleration in inflows since the $11.1 billion high watermark in the fourth quarter. Are you outflowing more from -- on a net basis from teams leaving than you're adding? Or is there a way to dimension how much of that has been an impact to you this year?
Jim Cracchiolo: Yes. So what I would say there is in the past, we were more inflow than outflow there. As we said, when you lose a large team or 2, et cetera, in the short term, then your outflow becomes a bit more than your inflow, and that's exactly what has occurred, but now our pipeline is strong, et cetera. As an example, we just brought in someone with $1.7 billion coming in. So that's sort of what is occurring. But overall, we've been in a good state there, but you do have a little bit in a quarter-to-quarter basis that does occur. But our organic under that is what we really rely on and focus on. That's really what we work with our advisors to increase their productivity and what they do. People don't really concentrate in this market environment. They look at the top line and momentum. We look at -- so look at the margins, look at the core business, look at the client satisfaction, look at what you see as a consistent basis over time. People move away a little more from fundamentals, but that's really what's important over the long-term and even the medium and short-term when you -- but people right now are so much focused on some of the near term of what they see in the top. We look at -- we look through that to look at what that provides us longer term and what's good for the client and the advisor. And that's how we invest.
Operator: Our next question comes from the line of Tom Gallagher with Evercore ISI.
Thomas Gallagher: Just a follow-up on the two large advisor teams that left. Will that have any tail to it? Meaning would you expect continued outflows for the next few quarters related to that? Or would you expect Wrap flows to bounce back closer to $8 billion in 4Q?
Walter Berman: Okay. So as it relates to advisor, we'll have some carryover into the fourth quarter. As it relates to what we're seeing on our -- basically our attrition patterns now, no, it's actually stable, and we feel comfortable from that standpoint, as Jim has indicated.
Thomas Gallagher: Got you. And then I guess just a follow-up on this more broadly, guys. The -- you think -- and Jim, I think you referenced you're upping some of your packages for new recruits, just that's the reality of the market. What about payouts on existing advisers? Have you kind of reexamined or examined your payout grid? And do you think you need to make any tweaks to payouts on your advisors more broadly in order to make sure that during a more competitive market that your retention holds in?
Jim Cracchiolo: Yes. We will look and have always looked at that in a bid on a balanced equation and what we provide the advisors and the support we give in combination with payout and those things that we've invested heavily to help them grow and support them. So it's all in a balanced equation.
Thomas Gallagher: Okay. But no broad-based changes or anything like that, that you're considering?
Jim Cracchiolo: I'm not at the point to talk about anything like that because we're in a good position right now of how we're thinking, but we always make adjustments periodically, and that's what we'll continue to do.
Operator: Our next question comes from the line of Kenneth Lee with RBC.
Kenneth Lee: One on asset management. It looks like there's some benefit from operating leverage that you saw in the quarter. Wonder if you could just talk a little bit more about any sorts of variable expenses that could increase as markets or AUM grow over time? And relatedly, any updated margin outlook with that business?
Walter Berman: Well, as far as the expenses, you have the normal volume-related variable expenses. And certainly, from that standpoint, we've managed that well. And we feel comfortable with our transformation management of that. So that will still continue. And so on the expense side, it will be strictly volume-driven type of expenses that you would have in a normal course of increasing your activity.
Kenneth Lee: Got you. Very helpful there. And just one follow-up, if I may, just piggyback on the previous question there within AWM. Sounds like the distribution expense ratio outlook most likely would remain within that previous range you had articulated, that 66%, 67% range. But just want to make sure that, that's still the case?
Walter Berman: That is the case.
Operator: Your final question comes from the line of Ryan Krueger with KBW.
Ryan Krueger: On the client cash within the wealth management platform that is in non-Ameriprise products, have you started to see any movement there as the Fed is starting to get another cutting cycle? Or has it remained pretty stable so far?
Walter Berman: No, the cash has remained stable. That's what I was indicating before.
Jim Cracchiolo: Yes. I mean, it was -- you got a quarter cut last time and a quarter cut now. So I don't think there will be a fundamental change from that.
Ryan Krueger: Okay. Just to clarify, I wasn't referring to the cash on Ameriprise's...
Jim Cracchiolo: No, no, I know you're talking about...
Ryan Krueger: The third-party product.
Jim Cracchiolo: Yes, the third party and money markets, et cetera. You're still as now probably 3.25 or something -- so it's not a move fundamentally. I think as people start to rethink based on markets and fixed income, et cetera, they'll start making adjustments. But right now, I think it's still been pretty stable that way.
Ryan Krueger: Okay. Got it. And then just any update on the Signature Wealth rollout and how that's been going so far? I know it's probably early stages.
Jim Cracchiolo: Yes. It's very early, but it's going very well. We're getting the advisor to really look at that platform and understand what they do and take the training for it. And people who have opened accounts really like it and are starting to move. We're getting both new assets as well as conversion of some assets from other of their Wrap programs over it. And so those things, as you roll them out, they're very substantial for them. And -- but I think it will be a great platform. So far, the flows into it is probably one of our best launches. So -- but it's early stages. We think it has a good opportunity.
Operator: We have one final question from the line of [indiscernible] with Bank of America.
Unknown Analyst: My first one is on the Asset Management business. It was kind of like nice to see the deceleration in growth redemptions on the institutional side year-to-date and like gross sales kind of like have been stable, around like $9 billion to $10 billion. I was wondering if you could kind of like maybe unpack for us, some of the deceleration in the outflows. Is that mostly from Lionstone? And are there any kind of like remaining assets that will be onboarded -- off-boarded, sorry, relating to Lionstone in the fourth quarter?
Walter Berman: No. Lionstone is still [indiscernible], but the majority of it has been outflow at this stage is maybe $0.5 billion left.
Unknown Analyst: Got it. And then my final question is on the wealth side. So you guys called out that there are some -- I guess, like last quarter, you said some irrational bids out there for advisors. I was wondering if you could maybe -- is it safe to assume that in light of the disruption in M&A consolidation in the environment, that this level will persist over the next, call it, 6 to 12 months?
Jim Cracchiolo: Listen, I can't -- I think you'd probably have to speak to others on that. From my perspective, I know people look at the favorable markets and spread revenue right now and the way the equity markets continue to go up. And so maybe they bake that into all their rationalization. But if that changes a bit, I think you'll see a little different environment for that type of arrangement.
Operator: We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect.