Ameriprise Financial - Earnings Call - Q3 2025

Executive Summary

• Ameriprise delivered a clean beat in Q3: Adjusted operating EPS was $9.87 vs $9.76 consensus* and total revenues were $4.89B vs $4.57B consensus*, with firmwide pretax adjusted operating margin of 26.2% (27.1% ex-unlocking), driven by asset growth and cost discipline.
• Advice & Wealth Management (AWM) remained the engine: net revenues +9% to $2.99B and pretax AO earnings +7% to $881M (29.5% margin), as higher client assets and transactional activity offset expected pressure on cash/spread revenue.
• Asset Management profitability improved (42.1% net pretax AO margin) despite modest outflows (-$3.4B), as expense actions and market appreciation supported a 6% increase in pretax AO earnings to $260M.
• Capital return stayed a differentiator: $842M returned (87% of AO earnings) and a new Q4 payout target of ~85% signals continued shareholder-friendly policy; board declared a $1.60 dividend payable Nov 24, 2025.
• Near-term catalysts: continued core margin strength, improving Asset Management flows, and stabilized bank NII position; watch AWM net flows after one-off large team departures and the Comerica channel (~$15B AUA) amid regional bank M&A.

*Estimates marked with * are from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Core profitability and margins: Firmwide pretax adjusted operating margin was 26.2% (27.1% ex-unlocking), reflecting strong expense discipline and operating leverage.
• Wealth momentum and productivity: AWM net revenues +9% to $2.99B; pretax AO earnings +7% to $881M (29.5% margin). Revenue per advisor (TTM) hit $1.093M (+10%); 90 experienced advisors joined in the quarter.
• Asset Management margin expansion and cost control: Pretax AO earnings +6% to $260M; net pretax AO margin improved to 42.1% on stable fees and disciplined G&A (+1% YoY).

What Went Wrong

• Weaker AWM net flows headline: Total client net flows fell to $3.4B (from $8.6B YoY), with wrap net flows $4.8B; management cited two large advisor team departures and a one-time administrative change (ex these, client flows $6.5B; wrap $8.0B).
• Asset Management still in net outflow: Total AUM/AUA flows of -$3.4B despite sequential improvement; institutional -$1.4B and retail/model delivery -$1.1B.
• Cash/spread revenue headwinds persisted: AWM net investment income declined YoY (banking & deposit expense dynamics), and cash revenue categories remained pressured as rates eased; cash balances stable at $27.1B.

Transcript

Operator (participant)

Welcome to the third quarter 2025 earnings call. My name is Tina and I will be your conference operator today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star one on your touchtone phone. As a reminder, the conference is being recorded. I will now turn the call over to Stephanie Rabe. Stephanie, you may begin.

Stephanie Rabe (SVP of Investor Relations and Mergers and Acquisitions)

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. With that, I'll turn it over to Jim.

Jim Cracchiolo (Chairman and CEO)

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 Financial 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, influencing interest rates. The Fed announced yesterday that they cut rates by another quarter 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 Financial 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 firmwide margin of 27% is exceptionally strong as we continue to invest significantly in the business. I would also highlight that the Ameriprise Financial ROE is best in class year after year and one of the highest in financial services at nearly 53%. In fact, Ameriprise Financial 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 advisors are leveraging our proven advice value proposition and generating high client value, satisfaction, and practice growth. Overall, we had continued strong AWM client asset growth, up 11%. Wrap assets were also up nicely, up 14% year over year, and our advisor count is up and advisor productivity continues to be very strong, increasing another 10%. We're back to strong recruiting levels, bringing in 90 experienced advisors in the quarter with 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 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 advisors 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. Our Advice Insights is the 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 advisors 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 a 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 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, have a strong pipeline into the year end in 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 variable 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 it with the approval process for clients applying for life insurance. In addition, we're using data analytics and our digital insurance underwriting, and I'll reinforce that we've built one of the most profitable insurance businesses in the industry. In asset management, we continue to make good progress as well as enhancements through the business. Our investment performance remains strong over all time periods.

Over 65% of our funds outperform the median on an asset-weighted basis for the one-year period, more than 70% for the three- and five-year periods, and over 80% for the 10-year, and we maintain a good asset base with assets under management and 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 advisors, 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 UK 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 Financial 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. Our digital transformation is not only enhancing the client and 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 Financial 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 include a capital return in the quarter that we increased to $842 million. Our financial strength and stability enable us to reinvest strategically and act opportunistically. We believe that what also sets Ameriprise Financial apart are our relationships and consistent recognition we earn for how we operate. Core to our success is how our clients feel. We consistently earned top client satisfaction. It continues to be exceptional, 4.9 out of 5. Our advisors are also very engaged in being selected for top awards. In fact, we had 20 Ameriprise Financial advisors on the Barron's Top 100 Independent Financial Advisors list for 2025.

Also key, our employee engagement is consistently best in class across industries as confirmed by our latest internal survey results received in the third quarter. J.D. Power once again recognized Ameriprise Financial with their outstanding customer service certification for our phone support for the seventh consecutive year for advisors and the second year for clients, which is tremendous. In addition, Forbes named Ameriprise Financial one of America's best companies, Newsweek honored us as one of America's most responsible companies, FORTUNE listed Ameriprise Financial 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 Financial 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 two decades, Ameriprise Financial has built an exceptional track record for achieving high client satisfaction and industry-leading results guided by a proven strategy and management principles, and that includes generating the number one total shareholder return within the S&P 500 financials index since our spin-off in 2005. As I look ahead, Ameriprise Financial 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 (EVP and CFO)

Thank you, Jim. Ameriprise Financial 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 firmwide 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 firmwide 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 remain 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 of $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 an administrative change, the flows from our legacy advisor 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. 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 % 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%.

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 remain well managed for the full year. We continue to expect low to mid single digit growth in G&A. Pre-tax 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 % 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 % 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. This 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 benefit 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 market and continued expense discipline. Let's turn to Slide 10.

Retirement and protection solutions continue 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. Pre-tax 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 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 variable 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 pre-tax 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 the balance sheet on slide 11, balance sheet fundamentals and free cash flow generation remain 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 diversified sources 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 Financial'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 Financial 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 five 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 (participant)

Thank you. We will now begin the question and answer session. If you have a question, please press Star one on your touchtone phone. If you wish to be removed from the queue, please press Star one. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers once again. If you have a question, please press Star one on your touchtone phone. Our first question comes from the line of Suneet Kamath with Jefferies. Please go ahead.

Suneet Kamath (Managing Director and Senior Equity Analyst)

Great.

Thank you. Good morning. First question on AWM. Can you comment on the Comerica relationship given the M&A that we saw recently, and maybe remind.

sense of what the assets under management or account values are with respect to that relationship?

Jim Cracchiolo (Chairman and CEO)

Sue, I can do a comment on the first part as Walter on the assets level. First of all, we have an excellent relationship with Comerica since we've 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. 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.

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 (EVP and CFO)

Suneet, on the assets, it's around $15 billion, and like in any contract of this nature, there is protections.

Suneet Kamath (Managing Director and Senior Equity Analyst)

Okay, in your prepared comments, you called out two practices.

That have left that were pretty sizable.

Can you maybe just unpack what happened there?

Is this an indication that the recruiting environment is just getting incrementally more competitive?

Jim Cracchiolo (Chairman and CEO)

As we had mentioned the previous quarter, you know you're always going to have some one off. 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. We 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. You're always going to have some one offs as we mentioned. We look at the totality of what we're doing and how we're doing it. You know, environments will change, there's always a price to pay. We feel very good about our position.

Suneet Kamath (Managing Director and Senior Equity Analyst)

Okay, thank you.

Operator (participant)

Your next question comes from the line of Wilma Burdis with Raymond James. Please go ahead.

Wilma Burdis (Director)

Hey, good morning. Given your excellent track record of managing the wealth business and I know you.

Just touched on this a little bit.

You've seen a little bit lower flow activity this year. Is that an indicator that just maybe the market's a little bit too hot or pricing's a little bit irrational? Maybe just comment a little bit on that. Thanks.

Jim Cracchiolo (Chairman and CEO)

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. The market has gone up pretty substantially. There is money on the sidelines. Our cash balances are very high. There's a bit of that going on. 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. That's how we approach things.

Wilma Burdis (Director)

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 over levered. Maybe they're getting a little bit aggressive. Do you see that as something that could present an opportunity in the future?

Thanks.

Jim Cracchiolo (Chairman and CEO)

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. I do understand that. I don't think people do. That's why we have really good, sound fundamentals, strong margins. We invest for the long term. Capabilities are strong. Our client satisfaction is excellent. We have a strong brand, the premium value proposition in the marketplace. 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.

Wilma Burdis (Director)

Thank you.

Operator (participant)

Our next question comes from the line of Brennan Hawken with BMO. Please go ahead.

David Giunta (Equity Research Associate)

David Ginser here on behalf of Brendan Hawken. Appreciate you guys taking the questions. 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 (Chairman and CEO)

Yeah. As far as the adjustment, we went through all 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. We feel very good. It's a one-time 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, et cetera. Also, from an advised account, it is up nicely year over year. We stopped giving numbers, so I'm not going to give that. There was no change in what you were in, in sort of a normal way of looking at that advisor growth over the years. It's still consistent with that.

David Giunta (Equity Research Associate)

Great. We 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 (Chairman and CEO)

I think you see some recent mergers in the bank as they feel the regulatory environment has eased a bit. 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, look at it as more of growing that as an organic wealth management business that we have to our clients. We're not looking to get into the banking business in a further light at this point in time.

David Giunta (Equity Research Associate)

Great. Appreciate you guys taking the questions.

Operator (participant)

Our next question comes from the line of Jeffrey Schmidt with William Blair. Please go ahead.

Jeffrey Schmitt (Senior Equity Research Analyst)

Hi. Thank you. In asset management, could you discuss some of the expense actions you've taken there over the last year or two, and when do you expect those initiatives to be complete?

Jim Cracchiolo (Chairman and CEO)

We did a more comprehensive review of our operating environment globally. We've made a number of adjustments over the last two years that streamlined their operations, particularly after our integration of the BMO acquisition two years ago. With that, we 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. We'll be in 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.

Those savings are being baked in, as you see. 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 (Senior Equity Research Analyst)

Okay, 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 (Chairman and CEO)

Of course, those will be adjusted in light of the environment. Same thing with CDs as you're investing in at different levels. You would adjust the rates that you provide from a client. Walter, you have any more?

Walter Berman (EVP and CFO)

Obviously in the service business, which is a spread business, we will manage that as rates come down, and certainly we're invested at higher levels. As the rates come down, we'll credit less. That will be a positive. As it relates to sweep counts, I think we've adjusted like the industry has, and so there's not much room in that.

So.

Our core investments are now longer dated because of the way we repositioned the portfolio, and will be less impacted by the drop in interest rates.

Jim Cracchiolo (Chairman and CEO)

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 giving us greater engagement with the client by giving them favorable treatment with the banking products that we can offer. For us, it's a good capability, but also ensures a bit more of our spread revenue continuing.

Jeffrey Schmitt (Senior Equity Research Analyst)

Okay, thank you.

Operator (participant)

Our next question comes from the line of Steven Chubak with Wolfe Research. Please go ahead.

Steven Chubak (Managing Director)

Hi, good morning and thanks for taking my questions. Maybe to start just on the investment philosophy. If you are looking at the last two 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.

Was hoping you could speak to some.

The factors are driving the softer organic growth. 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 (Chairman and CEO)

Yeah, 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. 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 one quarter, but over the course of a year, two years, three 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 and solution sets, and I would compare us to having one of the best platforms out there and leading in many areas. 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. 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. That's where maybe people are getting a bit overlevered.

Walter Berman (EVP and CFO)

Yeah. On the cash that you asked. On the cash, certainly from our standpoint it's stable, and we do see it growing in its normal pattern in the fourth quarter. We feel quite comfortable with that. 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, but 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? We saw a pattern when the cuts, it really didn't deviate that much from that standpoint.

With the cuts that we anticipate in this fourth quarter, we will see an increase like we normally will. We don't really anticipate the cuts will have an impact on the rates, the volume in sweep. 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. We feel comfortable with the balances and certainly with the positioning of our investments and the duration of it. Not concerned. Helpful caller. Thanks for taking my questions.

Operator (participant)

Your next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.

Alex Blostein (Managing Director)

Hey Jim, Walter.

Good morning, guys. 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. 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 we'll have on the NIM at the bank.

Walter Berman (EVP and CFO)

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.

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, three quarters. Beyond that it becomes a little more difficult depending on where the Fed goes with it and where the long-term rates go. We certainly plan for this and we feel comfortable with that strategy.

Alex Blostein (Managing Director)

Right, understood.

Okay.

When it comes to the 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. 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? That level,

Jim Cracchiolo (Chairman and CEO)

I think directionally will come down certainly as we manage our spread for that. It gets to a set level and it won't deviate that much. It depends on the movement in the rates, but it follows a pattern strictly based on the spread and then the money gets recirculated. I wouldn't see a precipitous drop coming off.

Alex Blostein (Managing Director)

Before the dynamic in 2023, these balances used to run at like a $5, $6 billion range. Is that sort of where you expect it to sort of normalize?

Jim Cracchiolo (Chairman and CEO)

I would just say I think certainly that is a range where it is normal, where it gets to when you start managing. I don't know if it's going to drop that precipitously at this stage, but certainly that'll be the bottom in my opinion.

Alex Blostein (Managing Director)

Okay, that makes sense. Thanks guys.

Operator (participant)

Our next question comes from the line of John Barnidge with Piper Sandler. Please go ahead.

John Barnidge (Managing Director and Senior Research Analyst)

Good morning. Thank you for the opportunity.

Others with asset management businesses and 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 (Chairman and CEO)

There's a number of different arrangements. Not a lot has come to market for some of the stuff that has been out there. We'll see what actually takes hold. We are looking at various arrangements ourselves. 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. That will be an opportunity that we're looking at.

John Barnidge (Managing Director and Senior Research Analyst)

Thank you for that answer.

My question's about AWM and the competitive environment.

There's been a deceleration in inflows since.

The $11.1 billion high water mark in.

The first year order. 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 that has been?

Impact to you this year? Thank you.

Jim Cracchiolo (Chairman and CEO)

Yes. What I would say there is, in the past we were more inflow than outflow there. As we said, when you lose some, you know, a large team or two, in the short term, then your outflow becomes a bit more than your inflow, and that's exactly what has occurred. Now our pipeline is strong. As an example, we just brought in someone with $1.7 billion coming in. That's sort of what is occurring. Overall we've been in a good state there. You do have a little bit on a quarter-to-quarter basis that does occur. 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 the margins, look at the core business, look at the client satisfaction, look at what you see on 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. People right now are so much focused on some of the near term of what they see in the top. 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.

John Barnidge (Managing Director and Senior Research Analyst)

Thank you.

Operator (participant)

My next question comes from the line of Tom Gallagher with Evercore ISI. Please go ahead.

Tom Gallagher (Senior Managing Director)

Good morning.

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 (EVP and CFO)

Okay, as it relates to the two advisors, we'll have some carryover into the fourth quarter. As it relates to what we're seeing on our attrition patterns now, no, it's actually stable and we feel comfortable from that standpoint as Jim has indicated.

Tom Gallagher (Senior Managing Director)

Gotcha. I guess just to follow up on this more broadly, guys, do you think, and Jim, I think you referenced you're upping some of your packages for new recruits. That's the reality of the market. What about payouts on existing advisors?

Have you kind of re-examined 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 (Chairman and CEO)

Yeah, we look and have always looked at that a bit 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. It's all in a balanced equation.

Tom Gallagher (Senior Managing Director)

No broad based changes or anything like that that you're considering.

Jim Cracchiolo (Chairman and CEO)

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. We always make adjustments periodically and that's what we'll continue to do.

Tom Gallagher (Senior Managing Director)

Okay, thank you.

Operator (participant)

Our next question comes from the line of Kenneth Lee with RBC, please go ahead.

Kenneth Lee (VP and Senior Equity Research Analyst)

Hey, good morning. Thanks for taking my question. On asset management, 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 assets under management grow over time, and relatedly, any updated margin outlook with that business. Thanks.

Walter Berman (EVP and CFO)

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. That will still continue. On the expense side, it will be strictly volume-driven type of expenses that you would have in normal course of increasing your activity.

Kenneth Lee (VP and Senior Equity Research Analyst)

Gotcha. Very helpful there. 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 articulated that 66, 67% range. Just want to make sure that that's still the case. Thanks.

Walter Berman (EVP and CFO)

That is the case.

Kenneth Lee (VP and Senior Equity Research Analyst)

Great, very helpful there. Thanks.

Operator (participant)

Our final question comes from the line of Ryan Krueger with KBW. Please go ahead.

Ryan Krueger (Managing Director)

Hey, thanks. Good morning. 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 hit another cutting cycle, or has it remained pretty stable so far?

Walter Berman (EVP and CFO)

No, the cash has remained stable. That's what I was indicating before.

Jim Cracchiolo (Chairman and CEO)

Yeah, I mean it was a quarter cut last time and a quarter cut now. I don't think there'll be a fundamental change from that.

Ryan Krueger (Managing Director)

Okay, just to clarify, I wasn't referring to the cash on Ameriprise's.

Jim Cracchiolo (Chairman and CEO)

No, no, I know, yeah. The third party and money markets, et cetera, you're still, you know, as to now probably 3.25 or something. 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. Right now I think it's still been pretty stable that way.

Ryan Krueger (Managing Director)

Okay, got it.

Does any update on the Signature Wealth Platform roll out and how that's.

Been going so far?

I know it's still probably early stages.

Jim Cracchiolo (Chairman and CEO)

Yeah, 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, take the training for it, and people who have opened accounts really like it and it's starting to move. We're getting both new assets as well as conversion of some assets from other of their wrap programs over it. Those things as you roll them out are very substantial for them. I think it'll be a great platform. So far, the flows into it are probably one of our best launches, but it's early stages. We think it has a good opportunity.

Ryan Krueger (Managing Director)

Thank you.

Operator (participant)

We have one final question from the line of Kareem Safa with Bank of America Merrill Lynch. Please go ahead.

Karim Assef (Chairman of Global Investment Banking)

Hi, good morning and thank you so much for taking my questions. My first one is on the asset management business. It's kind of like, you know, nice to see the deceleration in growth redemptions on the institutional side year to date, and gross sales have kind of been stable around $9 to $10 billion. I was wondering if you could maybe unpack for us some of the deceleration in the outflows. Is that mostly from, you know, Limestone? Are there any remaining assets that will be onboarded or offboarded, sorry, relating to Limestone in the fourth quarter?

Walter Berman (EVP and CFO)

No, Limestone is still in progress, but the majority of it has been outflowed at this stage. Maybe $0.5 billion left.

Karim Assef (Chairman of Global Investment Banking)

Got it. My final question is on the wealth side.

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 (Chairman and CEO)

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. Maybe they bake that into all their rationalization. If that changes a bit, I think you'll see a little different environment for that type of arrangement.

Karim Assef (Chairman of Global Investment Banking)

Okay, thank you so much for taking my questions.

Operator (participant)

We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect.