Q2 2025 Ameriprise Financial Inc Earnings Call
Welcome to the Q2 2025 earnings call. My name is Julianne, and I'll be your operator for today's call.
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 1 on your touchtone phone as a reminder, this conference is being recorded.
Speaker Change: I will now turn the call over to Stephanie Raby Stephanie. You may begin.
Stephanie Raby: Thank you, operator, and good morning. Welcome to America price financials second quarter, earnings call.
Speaker Change: On the call with me today are Jim carollo, chairman and CEO and Walter Berman Chief Financial Officer.
Speaker Change: Following their remarks, we'd be happy to take your questions.
Speaker Change: Turning to our earnings presentation materials that are available on our website on slide 2. You will see a discussion of forward-looking statements.
Speaker Change: Specifically, during the call, you will hear references to various non-gaap Financial measures.
Speaker Change: Which we believe provide insight into the company's operations.
Speaker Change: Reconciliation of non-gaap numbers to their respective Gap. Numbers can be found in today's materials and on our website at
Speaker Change: 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,
Speaker Change: These forward-looking statements speak only as of today's date and involve the number of risks and uncertainties.
Speaker Change: The sample list of factors and risks that could cause actual results to be materially different from forward-looking statements.
Speaker Change: Can be found in our second quarter, 2025 earnings release.
Speaker Change: Our 2024 annual report to shareholders.
Speaker Change: And our 2024, 10K report.
Speaker Change: We make no obligation to publicly update or revise, these forward-looking statements.
Speaker Change: On slide 3. You see our gaap financial results at the top of the page for the second quarter.
Speaker Change: Below that you see our adjusted operating results, 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.
Speaker Change: Many of the comments that management makes on today's call will focus on adjusted operating results.
And with that, I'll turn it over to Jim.
Good morning everyone. And thanks for joining our call as we shared in our release. A meas had another good quarter and first half of 2025, continuing our record of generating strong results of the many years of Market environments.
Speaker Change: We feel very good about those strategic Direction and competitive strengths of our business. And importantly, our ability to help clients achieve their long-term goals.
Speaker Change: Reflecting externally Equity markets moved around quite a bit in the quarter and investors paused and kept more cash on the sidelines. That said markets proved to be remarkably resilient given ongoing trade Dynamics.
Speaker Change: As we saw economic conditions were on a firm footing in the first half.
Speaker Change: However, questions, remain around the next steps and impact of tariffs.
Speaker Change: With that backdrop, our assets on the management Administration and advisement.
Speaker Change: Grew to a new high of 1.6 trillion dollars.
Speaker Change: In terms of financials adjusted, operating results were also good.
Speaker Change: Total revenues increased 4% from asset growth and strong transactional activity.
Speaker Change: Earnings per share increased, another 7% and our return on Equity remains among the industry's best at a very strong 52%.
Speaker Change: Across the business. We continue to implement a significant investment agenda.
Speaker Change: that includes investments in our leading client experience, technology, digital capabilities Advanced analytics and AI
Speaker Change: And this is made possible by our consistent expense discipline and ongoing transformation efforts across the firm.
Speaker Change: On the welt side, we're delivering strong value through our quality client advisor engagement centered on our goal base of ice experience.
Speaker Change: And we see it as reflected in the excellent client satisfaction that we consistently earn a 4.9 out of 5.
Speaker Change: Was up 11%.
Speaker Change: Total wrap assets were also up increasing 15%.
Speaker Change: Raphnet inflows with 5.4 billion and reflected the higher Market, uncertainty and seasonal impact of client tax payments.
And transactional activity was also good.
Client total cash Holdings, increased in the quarter and remained very high, as we would expect based on the market situation in near-term rates. And these assets on the sidelines. Represent a future growth opportunity. We continue to provide exceptional support and capabilities to our advisors and teams. They're staying closely connected with clients and benefiting from the Investments. We're making, for example, our intelligence dashboards provide in-depth analysis of key areas of advisors practice like Klein contact, prospects and acquisition.
Speaker Change: We also using Automation and analytics to drive efficiency help advisors enhance personalization based on client needs and identify opportunities to deepening and engagement. And in June, we made a significant addition to our wealth management capabilities with the launch of signature wealth, which we feel will help. Advise us to manage client assets. Even more holistically and efficiently. It brings the best of our current advisory platform into a flexible unified management account. And frees up capacity for our advisors to further, focus on client engagements and practice growth.
Speaker Change: With the excellent platform, we built and the integrated support, we provide our advisors continue to be highly productive and engaged and productivity grew another 11% to 1.1 million per advisor.
Speaker Change: Regarding recruiting, we continue to bring in good recruits. Another 73 experienced advisors joining, the mer prize in the quarter and we feel good about our pipeline as well as our differentiated advisor value proposition.
Speaker Change: These advisors appreciate our reputable brand, practice support, and financial strength and stability. We're also hearing how their clients feel overwhelmingly positive about moving to America prize, which is terrific.
Speaker Change: The bank is also doing well total assets, were up 6% and were earning good spread loan growth at the bank is also good driven by pledge.
Speaker Change: as we've shared with launching new products, like our new CD that came out in the second quarter and in the coming months we'll be bringing out helocs and checking accounts to add to our product offering
Speaker Change: and I would highlight that our wealth business, consistently delivers best-in-class margin, it was 29% for the quarter.
Speaker Change: As part of our larger solution, set, our retirement income and protection products helped serve, clients full Financial picture.
Speaker Change: We're driving good sales and our targeted areas like variable universal, life variable annuities without living benefit Riders and structured annuities. In fact, we saw a nice pickup of 25% from the first quarter within our structured Solutions.
Speaker Change: Advisors appreciate having these strong consistent offerings on the platform that have been developed and seamlessly integrated with our client experience, and we're working closely to support them to engage clients to meet more of their needs.
Speaker Change: It was another strong quarter for RPS.
Speaker Change: The business consistently generates good returns for the company and strong free cash flow.
Speaker Change: The RPS business is 1 of the most profitable Insurance businesses in the industry.
Turning to Asset Management, we continue to deliver attractive earnings and drive operational efficiencies.
Speaker Change: Total assets on the management Administration increased to 690 billion dollars up 2% year-over-year and 5% sequentially.
Speaker Change: An investment performance continues to be strong across both equity and fixed income. We had excellent long-term performance More than 70% of our funds were above the meeting. And asset weighted basis for the 5-year period and more than 80% over. 10 years regarding the 1 year Equity performance slipped a bit. However, short-term fixed income performance is very strong at more than 80% above the medium.
Speaker Change: And 99 of our funds were rated 4 or 5 Stars by Morning Star.
Speaker Change: Regarding flows. We had 8.7 billion of outflows in the quarter, largely driven by higher institutional impacts
Speaker Change: In global retail, gross sales increased about 10% year-over-year, but like others, we had higher underlying redemptions April was especially tough for the industry, given the markets, looking at a flow rate in the US versus active peers where a bit ahead in terms of equities and a bit below and fixed income. But with narrowed, the gap,
Speaker Change: The asset strategies.
Speaker Change: On the retail product front, we're adding to our active research, enhanced index ETF lineup in the US and gaining flows. And in coming months we will be extending this capability in EMA with the launch of a series of active ETFs in the UK and Europe.
Speaker Change: In terms of the institutional business, we have some higher redemptions that included the previously announced Limestone Alpo.
Speaker Change: As we move forward, we're adding more cos and earning key Equity, fixed income and hedge fund mandates across regions, as we had some good results. In terms of cross-selling, deepening relationships with current clients.
In Asset Management, we continue to manage expenses extremely well.
Speaker Change: We're driving efforts to realign resources. Streamline systems and enhance our processes in the US and globally.
Speaker Change: with significantly transforming the business while at the same time, maintaining our fear rate
Speaker Change: Asset Management margin was 39% in the quarter at the top end of our target range up nicely from our expense discipline.
Speaker Change: So Mr. Price overall, a compliment. The businesses has enabled us to perform very well over different environments and Market Cycles.
Overall, we continue to generate very strong, free, cash flow and we had 1 of the highest Returns on Equity at more than 50%.
Speaker Change: We also having a good balance of shared BuyBacks and dividends.
Speaker Change: And we continue to return to shareholders in a significant way and we'll be looking to increase and targeting an 85% pay out ratio for the balance of the year.
I'd highlight that America's received some new recognition that adds to the portfolio of accolades that we've earned
Speaker Change: We were recently recognized in 2025 by Kipling's Rita's Choice, Award for a standing overall satisfaction quality of advice, trustworthy advisors and for being the most recommended among wealth managers.
Speaker Change: And second a prize was also named 1 of America's, most Innovative companies 2025 by Fortune.
Speaker Change: Looking forward. We feel very good about our ability to continue to manage and adjust for the environment. We're staying focused on a strategic priority, and generating good returns for the business.
Walter Berman: Now Walter will provide additional color on our financials Walter.
Walter Berman: Thank you, Jim.
Walter Berman: Amer prize delivered continued, solid performance. With exceptional balance sheet strength and a volatile and uncertain environment.
Adjusted operating EPS increased 7% to $9.11 with a strong margin of 27%.
Walter Berman: Adjusted operating net revenues increased 4% to 4.3 billion from asset growth or absorbing the market and rate impacts across our businesses.
Walter Berman: Expense discipline remains strong from our ongoing firmwide transformation initiatives.
Walter Berman: Year to date GNA expenses, improved 3% and we will maintain GNA expenses at this level for the remainder of the year.
Walter Berman: It was a solid quarter across our businesses and we'll get into the details of our segment results on the upcoming slides.
Walter Berman: As we exited the quarter.
Walter Berman: Our balance sheet fundamentals remained, very strong and we are well positioned to navigate potential volatility going forward.
Walter Berman: a stable, 90% free cash flow generation across our segments combined, with our strong, balance sheet, fundamentals,
Walter Berman: Enabled us to return 81% of operating earnings to shareholders in the quarter.
Walter Berman: We remain committed to returning Capital to shareholders at a differentiated pace and plan to increase our payout ratio to 85% with a second half of the year.
Walter Berman: On slide 6, you'll see the EPS growth of 7% was impacted by the market dynamics, in the quarter.
Walter Berman: Assets under management Administration and advisement increased to a record high of 1.6 trillion dollars, benefiting from strong wealth management client flows over the past year and Equity Market appreciation.
Walter Berman: We delivered strong profitability with Consolidated margin of 27% from 4%, Revenue growth and continued expense discipline.
We continue to generate a best-in-class return on Equity of 52%.
Walter Berman: on slide 7, you see the solid metric results from wealth management given the elevated Market volatility and normal seasonal, tax payment trends,
Walter Berman: Ion.
This resulted from 11% increase in client assets to 1.1 trillion with client net inflows of 34 billion over the past year.
Walter Berman: Wrap assets were up 15% to 615 billion with rap Flows at 33 billion. Over the past year, representing a 6% annualized flow rate, consistent with the prior year.
Walter Berman: with the volatility in the early part of the quarter and tax season in April,
Walter Berman: We saw slow of flows in the second quarter falling, a strong first quarter.
Walter Berman: In total this year, graph flows have been 14 billion consistent with the prior year.
In addition transactional activity levels, remain strong.
Walter Berman: Cash sweep bounces were in line with expectations at 27.4 billion compared to 28.6 billion in the prior quarter, reflecting normal seasonal. Tax payments we are seeing nice momentum in our experience advisor. Recruiting
Walter Berman: Being affiliated with a firm that has an excellent reputation and strong balance sheet, fundamentals is attractive to advisors particularly in the volatility and uncertain environments. We've seen this year.
Walter Berman: if I just find a value proposition to be compelling,
Walter Berman: and we are focused on making sure our transition factors are attractive to experience, advisors that share our values and commitment to the client experience.
Walter Berman: On slide 8, you'll see strong financial results from Wealth Management.
Walter Berman: Adjusted operating net revenues increased 6% to 2.8 billion.
Walter Berman: Revenue growth benefited from strong cumulative W net inflows and Market appreciation, over the past year.
Walter Berman: which more than offset lower spread revenues and the impact from unfavorable markets within the quarter,
Adjusted operating expenses in the quarter increased 9% with distribution expenses up, 10% reflecting growth in advisor productivity.
Walter Berman: GNA expenses, increase 6% to 435 million in the quarter.
Walter Berman: Which was a result from higher growth Investments and volume related expenses due to business growth.
however,
Walter Berman: For the year, we expect low to mid single-digit growth in GNA.
Walter Berman: Pre-tax adjusted. Operating earnings were 812 million.
Walter Berman: Which included the impact on rap assets from the Dip in equity markets in April.
Walter Berman: However we saw a substantial recovery in the equity markets by the end of June which positions us. Well, as we enter, the third quarter, in fact, advisory wrap assets on June 30th were 6% higher than the average for the second quarter.
Walter Berman: We saw continued strong contribution from both core and cash earnings in the quarter.
Walter Berman: Our core earnings grew in the low to mid single digit range after absorbing the market impact in the quarter.
Walter Berman: Cash. Earning saw a high single digit decline from the impact of the FED funds effective rate reduction since the latter part of 2024,
Walter Berman: our strategy leveraging. A me price bank has been important in minimizing the impact from fed funds effective rate reductions on our awm business. In fact,
Walter Berman: we continue to see a modest increase in net investment income. In the bank, this quarter
Walter Berman: Margins remain Best in Class at 29%.
Walter Berman: Return to Asset Management on slide 9.
Financial results were solid in the quarter.
Walter Berman: Operating earnings increased 2% to 222 million.
Walter Berman: This strong quarter reflected Equity Market appreciation. And the positive impact from expense management actions, partially offset by the impact of net. Outflows
Walter Berman: total assets under management and advisement increased to 690 billion up both for year-over-year and sequentially from higher pending market levels.
Revenues were 830 million with a stable fee rate of 46 basis points.
Walter Berman: Adjusted operating expenses improved 3% and importantly, GNA expenses. Approved 5%.
Walter Berman: As Jim said, we are proactively driving operational transformation across our Global footprint.
Walter Berman: Including leveraging capabilities Across America prize.
Walter Berman: And the benefits from these initiatives is evidence in our GNA expense reductions
Margins reached 39% in the quarter, which is at the high end of our target range.
Walter Berman: Let's turn to slide 10.
Retirement and protection Solutions. Continue to deliver strong earnings and free cash flow generation reflecting the high quality of the business that was built over a long period of time.
Walter Berman: Earnings in the quarter, increased 9% to 214 million.
Walter Berman: The strong and consistent performance of the business. Reflects the benefits from favorable life claims, strong interest earnings and higher Equity markets.
Walter Berman: 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.
Overall, retirement and protection Solutions sales for solid at 1.4 billion.
Walter Berman: Structured annuity sales, remain strong but were down relative to a very strong level in the prior year.
Walter Berman: Turning to the balance sheet on slide 11.
Walter Berman: Balance sheet fundamentals and free cash flow generation remains strong.
Walter Berman: We have an excellent excess Capital position of 2.3 billion above regulatory requirements and we have 2.1 billion of available liquidity and our investment portfolios Diversified and high quality.
Walter Berman: We have Diversified sources of dividends from all of our businesses enabled by strong. Underlying fundamentals.
Walter Berman: This supports our ability to consistently return Capital to shareholders and invests for future business growth.
Walter Berman: Mayor prizes, consistent, Capital, return, strategy, drives, long-term shareholder value in summary on, slide 12.
Walter Berman: The Enterprise delivered solid results in the second quarter.
Walter Berman: Which is a continuation of our long track record, navigating various Market environments.
Over the last 12 months, revenues, grew 8% adjusted EPS, increased 13%, return on Equity grew 240 basis points and we returned 3 billion dollars of capital to shareholders.
Walter Berman: We had similar growth Trends over the past, 5 years with 8% compounded, annual revenue growth. 17% compounded, annual EPS, growth return on Equity, improving 16% points and we returned over 12 billion dollars of capital to shareholders.
Walter Berman: These Trends are consistent over the long term as well.
Walter Berman: This differentiated performance across multiple Cycles speaks to the complimentary nature of our business, mix as well as our focus on profitable growth with that, we'll take your questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you have a question, please press star 1 on your touchtone phone.
Walter Berman: If you wish to be removed from the queue, please, press star 1.
If you're using a speaker-phone, you may need to pick up the handset. First before pressing the numbers, once again, if you have a question, please press star 1 on your touchtone phone.
Speaker Change: Our first question comes from Stephen chewbox. From Wolfe research. Please go ahead. Your line is open.
Stephen Chewbox: Hi. Good morning again. Thanks for taking my questions.
Speaker Change: So Jim, it's encouraging to hear your commentary on the recruitment backlog. Um improving I was hoping you could speak to some of the drivers of the software Flows In 2q recognizing a lot of that related to The Liberation day law. And are you seeing any indications of Na react back to that more normal mid single digit growth rate.
Speaker Change: Yes. So um really at the beginning part of the quarter uh between the combination of the tax payments but also the Liberation day um you know those the flows you had the tax payments out but then the flows did not bounce back because of the Liberation and people a bit more on the sidelines, that started to recover as you got later in the quarter. Um, but we're still seeing that pick up a little bit more as we get into July. There was also some lumpiness between, you know, the net inflow from some of the recruiting coming in versus some of the, the terms. I think there was some big, uh, checks that were a little irrational given, uh, so it it impacted a little lumpiness there, uh, for some of the outs that we had.
Speaker Change: Uh overall, uh, we feel good about the overall positioning, um the core client base continues to do well uh but our base doesn't react so quickly to you know, the markets. Um and so it's more of an on average over time and we'll see that recover.
Speaker Change: That's great. And and since you alluded Jim to some of the irrational behavior in this space, as I look at distribution expense within awm that has steadily crept higher year on year, at the same time 1 of your peers had alluded to some indications that there's some more rational behavior on tha, um, maybe less aggressive recruitment packages, at least from some of the sponsored back firms. In particular, just curious if that's consistent with what you're seeing in the marketplace and how should we be thinking about that year-on-year trajectory for the awm distribution expense line in particular?
I'll get to the recruiting, um, on the distribution. Uh, when we look at the average gross production that we have at the advisor base, it's up 9%. And that's what they get compensated on. And so, if you look at that, that's up 9% versus the idea of total revenue being up 6, um, and because you got the cash business Etc. When you look at the production that matches and then you had a little more increase because people moved to higher production levels. So their payout rates go up a bit and so that's uh, that the difference, um, regarding the the the packages itself that only had a small incremental piece of it year-over-year. Uh, it's a little bit but it's not to the extent of what you're looking at, is the total and most of that's production based. Um, in regarding to the recruitment package, you're right. That there are some rational, but there's still some people irrational particular for certain, advisors that, you know, unless you have a perfect Market going forward and high short-term rates, Etc. The economic
Speaker Change: Uh, going to look a little iffy. Um, but, you know, sometimes people will take a huge. Check a particularly if if it's its way above what the, the normal economics will call for
Speaker Change: Very helpful caller. Thanks for taking my questions.
Speaker Change: Hey, good morning. Um, just to follow up on the last question. I need to talk a little bit more about the recruiting strategy. Uh, going forward, how you're seeing the market, how you expect to grow their thanks?
Speaker Change: Okay. Yes. So, um, the pipeline looks like it's increasing.
Speaker Change: And we are really focused on selling our total value process.
Speaker Change: Which is healthy prices. Grow their productivity have average higher productivity from our core as a base than most that just associate advisors out there. And say, you know, provide a network Services, we do a lot in capabilities that we provided, but new technology AI support Etc. In addition to the coaching training, uh, support we provide. So we feel good about that and we do look to track certain types of advisors and we're not just looking to associate anyone by giving them a big check. Um, and so, uh, we we do have to, we have to raise our, our packages, a bit to be, um, you know, based on the competitive frame. Um, but that, that's where we bring it in alignment with how we can help people really grow and become more successful.
Thank you. If you could talk a little bit more about clients are thinking right now I know you talked a little bit about annuities and popular. Um how are they kind of positioning themselves and are you seeing them wanting to deploy? Thank you.
Speaker Change: Yes. So if it's on the annuity business, what we see is a continuation of people being interested in the structure to notice as well as annuities because of the, you know, just the overall tax environment Etc, and annuities without uh, living benefits. And those are the only 2 that we really have in the marketplace right now, we're not playing in the fixed annuity area. I know that's might have been an area, we have other people on the shelf that we sell. Um, uh, but in that regard, um, we're focused on just those 2 areas and they are complimentary as that people, look at their retirement and and long-term income that they're looking to achieve.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Jeffrey Schmidt, from William. Blair, please go ahead. Your line is open.
Hi, good morning.
Speaker Change: With Topline growth flowing in wealth management. Is there an opportunity to maybe get more aggressive on some of the the Outsourcing deals or to do larger, Outsourcing deals, um, or even just get more aggressive on on recruiting in general. Um, you know, how do you think about that?
Speaker Change: Works, Etc, like others. Uh because we want to continue to maintain a very strong focus on how do we uh, very deliver? A very good client experience. Associate people who actually want to use the advice value. Proposition appropriately, etc, etc.
Speaker Change: Okay, that's helpful. Um and then on share BuyBacks, you mentioned you're targeting a payout ratio of 85% of the second half. Um, historically it's actually moved higher than that um in in in certain years um you know closer to 90%. I mean should we expect it to stay up at that level or maybe even move higher? Um if if Topline weakness sort of continues next year
Walter Berman: So, it's Walter. Uh, so as we indicated, we, our Target is the 85%. We certainly have the capacity to, and we'll, we'll evaluate that on an opportunistic basis, uh, and see within the best interest of the shareholders, but that is the current Target that we have elevated, uh, for the second half.
Speaker Change: Okay, thank you.
Speaker Change: From Gallagher from evercore isi, please go ahead. Your line is open.
Speaker Change: Good morning. I'm Jim just coming back to the competitive environment in awm, would you?
Speaker Change: just just considering what's going on with competition and how
Speaker Change: You know, it sounds like you think there's some irrationality to it, would you expect?
Speaker Change: To shrink overall advisors in the next year or so, or would you still expect to be able to grow?
Speaker Change: Yeah. I mean, even now Tom, we are growing. I mean, we're not reporting like others don't report. But our net advisor count is actually up. Um, that's not, um, a, a, a, a concern that we have per se. I I think what I would probably say is, listen, people will put out, um, more to buy up, what they would call, you know, people putting on the system. We look at it as a long term. Um, we have a very strong business over time. I have 10,000 advisors that I look to really help them grow and keep their productivity strong, uh, through all Market environments. Um, we have good profitability of what we do where the, the advisor does. Well, the firm does well, Etc. In a, in a very consistent balance proposition and we deliver very strong value to them. That's what we're looking for. We're not just looking to like, add people because we can show you short-term Topline growth and then suffer the consequences later on or have some issues with the type of people being
Speaker Change: Associated. So, I mean, others have different philosophies. I'm not saying their philosophy is incorrect. I'm just saying, that's, that's where we are. We always stick to this knitting, you know, in the past we never even recruited externally. We always developed internally. We're still doing that. Um, but we do now a combination of both, um, and that's the way we look to maintain ourselves. And again, we'll be very competitive, but when people get a little over the top, you know, they can do that. Maybe it works for them, but we don't look at it that way.
Speaker Change: Okay, that's, um, that's helpful. And then just, uh, follow up on RPS, uh, the results in the quarter looked quite strong. I guess none of investment income was up lot, sequentially, any, anything in particular going on there? Um, it looks like mortality was favorable on the life insurance side. Um, just curious what you're seeing there and then, finally, any, any updates on potential risk transfer, you've had a bunch of peers doing different deals on long-term care. Well, priced variable, annuity deal.
Any updated thoughts there? Thanks good. Walter Tom. Uh, so as it relates to strong fundamentals as you indicated we did have an improvement on life claims which are certainly contributed to the increase. Uh so we feel very good about certainly the overall underlying profitability drivers, uh, within the business and as it relates to risk transfer again, the same thing we talked about is
Speaker Change: Um, and so listen, if there's a good strategic relationship or something that makes sense, uh, we will entertain it, uh, but right now, I probably say we generate a very good return on it that only complements the business.
Speaker Change: Okay, thanks. Thanks.
Speaker Change: Our next question comes from Alex Blowin, from Goldman Sachs, please go ahead. Your line is open
Alex Blowin: Hey, good morning, thank you. Um, 2 questions for you guys around the bank um to kind of related. But um 1 was hoping you guys can give us a sense of uh roll on roll on, roll off, Dynamics in the bank Securities portfolio right now. Uh, well, if there's ever a call, you guys put this in place uh in in sizable amounts a couple of years ago, spreads were wider um security as as that security portfolio rolls over over the next call a year or 2, what kind of a spread difference you're seeing on the money, you putting on versus what's coming off? And secondly, um, I heard you guys on the loan strategy, obviously, that's an important part of the bank balance, uh, Bank buildout going forward, um, what's the funding structure for that? Um, the deposits are running relatively light on balance sheet at this point. So as you sort of thinking about growing the loan book, how are you guys planning on funding it? Thanks,
Sure. So, on on the portfolio, uh, as we see pay downs and maturities taking place, you should see a spread increase as it relates to that. Uh, and that is, uh, certainly contributing towards the net interest income Improvement year-over-year.
So we feel comfortable with that and that's part of our strategy that we talked about uh, that we the executing certainly. We talked about in the fourth quarter of the last year as a funding for it. We are certainly launching liability products that will fund it. But and so we feel very comfortable with our ability to have that increasing and diversification of our liability portfolios that grows and matching off onto the asset uh, strategy that we have.
Alex Blowin: And the liability product you launching is that kind of high yield savings CDs, things like that.
Yes.
Alex Blowin: Yes, we are for that same way. Yes.
Alex Blowin: All righty. Great. Thank you very much.
Speaker Change: Our next question comes from Craig. If you can caller from Bank of America, please go ahead. Your line is open.
Hey, good morning, Jim hope everyone is doing well. Uh, my question is on recruiting the wealth management business and I know you got a few on this topic but um, a new source supported that in America is offering up to 125% of trailing revenue for Commonwealth advisors. So, I'm curious if you can comment on a mirror Price's ability, to take advantage of Karen mate disruption, and if we could see a pick up in recruitment from us,
Speaker Change: Yeah, we don't comment on. Was that in the marketplace or what? People, comment, what we would say is we continue to to um, recruit out in the environment, more broadly. Um, and uh, we offer relatively appropriate competitive packages, but as I said, we sell the entire value proposition for people that really want these support the technology, the capabilities when advisers join us from the competitors, no matter who they are, they rate everything they get from a member at 9 times out of 10, as being better than where they came from, particularly on our technology Suite, the support Etc. Our availability of Technology, um, the idea of even how to get on boarded and uptake, what we do, that helps their business. The people we brought on board their productivity improvements have been tremendous coming to us. So after being here for a few years. So um, that's what we would say and that's what we recruit on.
Speaker Change: Thanks Jim, just for my follow-up and other wealth manager, question, but, um, can you update us on your bank and credit union? Uh, pipeline. I'm just curious if we could get some lumpy wins, um, announcements in the second half. Thanks,
Speaker Change: Yeah, the pipeline looks good. I won't comment on any anything in particular, but we feel good about our position in the, in the business there. And uh, uh, we continue to, as I would say, uh, uh, build that Pipeline and try to execute and get, uh, some deals done.
Thank you.
Speaker Change: Garnish from Piper Sandler, please go ahead. Your line is open
Speaker Change: Good morning, thank you for that opportunity. My questions around asset management and flow performance. I know there were some comments about
Speaker Change: Higher redemptions. Even when reflecting the Lions don't a on that left. Can you maybe talk about large client Breakers? In the quarter distribution environment? What your outlook is for the pipeline converting, thank you.
Speaker Change: We did experience some some outflows as we mentioned from the lionstone termination of that business, some ldi and things like that. Um, some move to the people repositioning their portfolios, including some that move the little more to the passive Arena. Uh, but we are getting some nice, underlying winds in good products, um, and the various equities and portfolios like that. But the, the Redemption increase that we did see in the second quarter, sort of Outreach strip that from some of those other things. I just mentioned. Now on the retail side, we did see, we were going to do a really good on the gross sales pickup through the first quarter. Again, what happened is Drew that uh, April period, uh, things on the growth slowed down redemption's, picked up now, sales are picked up again on the growth side, but the redemptions are Upstream that I think you saw that in the pure Active Space. I'm not talking about where people have ETFs and stuff like that, that picked up a little quicker.
Speaker Change: Because of the trading, they do, um, but we see a pickup there, um, and overall we feel good about some of the things that we're doing in the market. Some of the products we're putting, uh, we're launching some additional ETFs even in Europe now. Uh, we're going to do that, uh, we're putting out a bit more on the CLS, um, you know, we just launched an interval fund. So, we're we're starting to do some more product development than launch in combination and SMA.
Continues to to build for us. Um, so those are the areas but I would say it was a little more volatile period on the Redemption side. And as I looked at the competitive frame, it was no different against the pure active there.
Speaker Change: Thank you for that answer and my follow-up question. Um,
With the focus on the recruitment environment and being competitive and packages that need to come over.
Speaker Change: And clearly a focus on General administrative expenses. Can you maybe talk about how the company weighs added human capital versus automating and AI is there an internal process that determine whether you want to add it? Or it can be automated or using a offshore Center of Excellence to kind of fund that more competitive recruitment environment. Thank you.
Speaker Change: Who is?
Speaker Change: A technology and what we try to really do in that regard, like it what investments in Ai and giving our advisors more, um, informed dashboards about their practice, what they can do, where the opportunities may be. We also do, uh, intelligent automation, uh, for processing and other activities that we do. Um, we invest in, uh, what I would call more on the data and analytics side on the information that we can process and how to bring that information to bear. And so, all those things have been
Add into our capabilities. As we do that, we've been able to adjust some of our expense space. Some of it is offshore, uh, some of the is just where we then use that money for the Investments that we've been making. And so um, our investment base is very strong. Um, we have driven good productivity improvements. We think there's still good opportunities for further improvements, as we get our advisors, to uptake more of the tools and capabilities more fully, um, and use some of the servicing that we put in place. So, uh, that's the way we look at it. We don't necessarily just do a 1 for 1 trade off. But over time we continue to transform. Adjust the business and reinvest
Speaker Change: Thank you.
Speaker Change: Our next question comes from Michael Cyprus from Morgan Stanley. Please go ahead. Your line is open.
Michael Cyprus: Hey, good morning. Thanks for taking the question. Uh, maybe just circling back on recruiting. I was hoping maybe you could elaborate a little bit on how you're seeing the pipe finding opportunities at across the different affiliation channels where you operate in the marketplace and you see the mix of that business evolving as you look out. And then just related to that on the distribution expense certainly like to, to to expense distribution expense ratio. Right relative to convincible revving is picked up compared to like the low 60s percent years ago. You know, I think it's getting to like high 60s now and nearly 67% in the quarter up. 120 basis points are so you're
Michael Cyprus: Maybe just remind us like what's driving that mix over a multi-year Arc of time. And how do you see the different contributing factors? And as you look out from here, is this a good run rate to be thinking about, or what would drive that higher as we move forward?
Michael Cyprus: To recruit so a combination of Independence wires regionals Etc. Um, both independent and employee type things as well as as you mentioned in the egg or institutional Channel. And and so we just look for appropriate advisors that really can really um uptake. Our type of value proposition want that want to grow their productivity and that's what we focus on. We just don't gobble up and roll up people and just associate Network or big big checks that just put people on. Um, so that's what we do. The pipeline looks very good for the third quarter, um, and, uh, that's proceeding. Um, and so we feel good about that in regard to the distribution expense, some of the distribution expense has picked up because of a lot of, you know, what you would. First of all, Managed IT expenses. So, smas other things that we the, the expense for that is in the in the bottom line.
It's a lot more trading activities from all the wrap type activities, all that. Um, so all of that is booked in the volume. You got FDIC Insurance, all that s*** stuff that goes on there. Um, and I'll turn it over to Walter for some of the other stuff. So basically, it is consistent. And when you it is impacted on Mark, to Market on the advisory Deferred Comp and that's what takes it up and down, but we are staying fairly consistent within that point. The 60.666% as we indicated is that you correlated. So it is consistent, but it does.
Michael Cyprus: Go up and down based on movement on Deferred Comp.
Michael Cyprus: It sounds like you wouldn't expect that to move meeting to the higher from here from that 6667 percent level. It should stay in that range. Definitely for sure, again subject to the Deferred Comp, which we'll take it.
Michael Cyprus: Up. Okay. Thank you. Thank you. You're welcome.
Speaker Change: Our last question today will come from Senate commas from Jeffrey. Please go ahead jolanda's open.
Speaker Change: Great, thanks. Um, I appreciate all the questions on recruiting on the call, but if I think back to some of your comments in the past, I I had always thought that most of the growth in A&W M comes from your existing advisors, uh, you know, selling business to their existing clients and then existing, advisors finding new clients and then the third piece was the, the new advisors. So I'm not expecting you to give me specific numbers. But is that the right way to think about it in terms of order of magnitude, in terms of what drives the growth and is there any additional color you can give us on the mix? That would be helpful. Thanks any you your 100% correct that has not changed the the core growth of our business comes from the organic part of adding new business from our advisors new clients flows from current clients Etc. Um the on the top of that you always have some lumpiness of where when you add recruits versus where you have some terms Etc with those things happen and in that basis it's always been more positive. What I'm saying?
Speaker Change: And in the second quarter, you had some undue level of volatility that affected the flow pitcher. Uh, because second quarter is usually weaker anyway, with the tax payments, Etc. So you had that, plus, you had the weakness because of the, you know, the the Tariff situation at the beginning of the month as that starts to uh had an effect. And then on top of that, as I said we had a little more lumpiness on the competitive frame but um, the underlying consistent and if you look at it over quarters, it's been very consistent and and and strong. So I think as Walter even said, if you look at the first half of the year, it looks fine. When you look at the second quarter, it looks a little lower.
Speaker Change: Okay, that that makes sense. And then I guess that maybe a bigger picture question to end the call. Um, if I think about are price over time, I mean I think we're approaching the 20-year anniversary from the spin. And you know, notwithstanding today's stock price, I think by all measures, uh, it's been a incredible success. I guess that question is, how is the board thinking about the next 5 to 10 years is is the next layer of management sort of identified. And in place does a mirror prize do any significant strategic pivots in terms of perhaps partnering with a larger organization or joint ventures. Just trying to think about you know what we're at a pivot point here with this 20 year anniversary, does anything dramatically change? As we move forward, thank you.
Speaker Change: Individual segments. So you go through Market environments where 1 business segments does a little better because people hop on it. But overall we generate very strong return to shareholders very strong cash flow. We generate the business itself is very good and strong core against it. We have 1 of the premium value proposition premium Brands out in the marketplace for the businesses that we're in. We created a global asset manager from a proprietary house. I mean, if you look at it, uh, you know, there's always questions called the quarter or what the competitive frame Etc, but go back to all those years, you've been a strong follower of us, and you've had it right for a long time. Um, I would say, uh, the board feels very good about that position that we're in today. It was stronger than we ever been before, uh, we're at a 50 billion dollar market cap from being at, you know, coming out at 6 or 8 or whatever the number was at the time. Um, and so a lot of the larger competitors at the time who were much larger are now either small,
Speaker Change: Smaller than us or not as strong. So I would probably say we're in a great position and that's the way I think both myself and the board we do have succession. We always look at the the next levels of talent. Not just 1 level but boom down. Uh so no we feel very good and all the accolades we can get 1 of the best managed companies, most Innovative companies, all these things uh just prove to our strength. Uh we got rid of 1 of the best wealth managers again uh trust for the advisors serving our clients.
Well, all those things that people missed them were focused on whether it's a recruit or this or that for a quarter, but I think if you follow us long term, you'll find that this is a very good strong company uh that operates with high level of focus and integrity client service and client satisfaction.
Speaker Change: I appreciate that. I mean that's certainly been our view and it's good to hear you express that so thanks very much, very much. Thank you Senate.
We have no further questions at this time. This concludes today's conference. Thank you for participating.
Have this connect.