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Presentation

Ameriprise Financial, Inc. beats earnings expectations. Reported EPS is $11.26, expectations were $10.21.

Operator: Welcome to the Q1 2026 Earnings Call. My name is Jale, and I will be your conference operator for today’s call. [Operator Instructions] As a reminder, the conference is being recorded. I’ll now turn the call over to Stephanie Rabe. Stephanie, you may begin.

Stephanie Rabe: Welcome to Ameriprise Financial’s first quarter earnings call. On the call with me today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer. Following their remarks, we’d be happy to take your questions. Turning to our earnings presentation materials that are available on our website, on Slide 2, you will see a discussion of forward-looking statements. Specifically, during the call, you will hear references to various non-GAAP financial measures, which we believe provide insight into the company’s operations. Reconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today’s materials and on our website at www.ir.ameriprise.com. Some statements that we make on this call may be forward-looking, reflecting management’s expectations about future events and overall operating plans and performance.

These forward-looking statements speak only as of today’s date and involve a number of risks and uncertainties. A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in our first quarter 2026 earnings release, our 2025 annual report to shareholders and our 2025 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 first quarter. 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.

Many of the comments that management makes on the call today will focus on adjusted operating results. And with that, I’ll turn it over to Jim.

Jim Cracchiolo: Good afternoon, and thanks for joining us. As you saw in our earnings release, Ameriprise delivered a strong start to the year, driven by our disciplined execution and the benefits of our diversified business. While the first quarter was marked by ongoing market volatility and economic uncertainty, contributing to a more cautious client behavior, our value proposition continued to clearly differentiate us. Across the firm, we remain deeply engaged with clients and delivered excellent financial performance. We’re focused on maintaining a high-quality, well-positioned business, while continuing to invest and innovate to support deep long-term client relationships. Our business generates consistent earnings across market cycles.

Equally important, we maintain a disciplined approach to capital allocation that enables Ameriprise to deliver strong value to shareholders. For the quarter, adjusted operating revenues were up 11% to $4.8 billion. Earnings and EPS were also up double digits with EPS up 19% to a record $11.26, and we continue to deliver best-in-class ROE, which increased to more than 54%. In addition, our assets under management administration advisement grew 12% to $1.7 trillion, driven by our client net inflows and positive markets. The consistency of these results reflect the strength of our integrated business and the benefits of our approach. Very clearly, Ameriprise is distinguished by the compelling experience we deliver to both clients and advisers.

Across the firm, we remain focused on serving client needs and best interest exceptionally well. That differentiation is reflected in consistently earning excellent client satisfaction, which continues to be 4.9 out of 5 and also by the recognition our firm receives year after year. On the adviser side, our distinctive value proposition drives sustainable practice growth, higher productivity and recurring revenue over time. Turning to our results. Total client assets grew 12% to $1.1 trillion with wrap assets growing 16% to $664 billion. In the quarter, we were lighter on flows based on more cautious client behavior and some lumpiness in recruiting and terminations. We ended the quarter with $6 billion of wrap net inflows. Importantly, underlying activity was good.

For the quarter, we kept clients closely engaged and delivered strong transactional activity up 10%. Our cash business remained stable with nearly $30 billion in sweep balances. As you saw, our advisers again generated meaningful productivity and revenue growth with productivity increasing another 10% in the quarter to a record $1.2 million per adviser. Our strategy remains grounded in organic growth, built, not bought. Advisers consistently value Ameriprise for the depth of our value proposition and the strength of our partnership. We continue to prioritize our core adviser team productivity, and we complement it by recruiting high-quality advisers who view us as a strategic partner, supporting strong client outcomes and practice growth. 61 advisers joined during the quarter and were seeing a pickup of activity in the second quarter.

And in AFIG, we continue to expand this channel as a premier platform for banks and credit unions. During the quarter, we signed a multiyear agreement to become the retail investment program provider the Huntington Bank. This relationship is expected to add approximately 260 advisers and $28 billion in assets with onboarding beginning later this year. Huntington selected Ameriprise for our leadership in advice, strong culture and capabilities. As we shared, we consistently invest across the firm to meet client needs today and further strengthen the business for the future. These are intentional multiyear investments across technology, systems and new capabilities. We’re focused on clear high-impact outcomes that deepen engagement, deliver relevant and actionable information while enabling highly personalized quality experiences.

In particular, we’ve designed our tech platform around how advisers work, not individual tools. It connects multiple capabilities like our CRM platform, eMeeting, advice insights and practice the workflows into an intelligent ecosystem, enhanced with embedded AI and automation. To that end, we feel good about the progress we’re making. Our focus is on using AI and intelligent automation capabilities at scale to help advisers deliver a consistent, high-quality client experience, while improving how they operate day to day. In terms of investments in solutions, at the initial launch of our Signature Wealth UMA mid-last year, we’re now expanding the product capabilities and seeing positive early asset movement and engagement. There is meaningful upside as we continue to expand capabilities, including the introduction of SMAs and as we broaden the strategy set over time.

With regard to our bank solutions, which complements our overall offering, bank assets now exceed $25 billion with continued strength in pledge lending. With the recent introduction of products, including HELOCs and checking accounts, we now offer a complete suite. As we reach more of our advisers and clients, we expect this will present opportunities to bring additional assets to the firm. To close out AWM, we received new recognition in the quarter. For the 2026, J.D. Power U.S. Investor Satisfaction Study, Ameriprise ranked 3rd out of 23 firms overall, a terrific result that underscores the quality of the experience we deliver. Turning to our Retirement and Protection business. As advisers deliver more comprehensive advice, they are thoughtfully incorporating annuity and insurance solutions to address clients’ increasingly complex needs.

Sales were solid in the quarter supported by continued demand across annuities and VUL. In addition to meeting client needs, this business continues to generate attractive margins and consistent earnings over time. RiverSource again recognized as one of the most profitable insurers in the industry. Moving to Asset Management. Assets under management and advisement increased 8% year-over-year to $706 billion in the quarter. Investment performance remains a strength. More than 70% of our funds are performing above the peer median of a 1-, 3- and 5-year periods and 85% are above the medium over 10 years. This sustained performance continues to be recognized externally. In the most recent Barron’s Best Fund Family rankings, Columbia Threadneedle placed in the top 10 across all time periods, and our U.S. fixed income team recently earned 4 2026 Lipper Awards.

Importantly, net outflows improved significantly year-over-year to $5.9 billion, reflecting better trends across both retail and institutional channels. Gross retail sales in North America continued to improve, up 26% even in a volatile market environment, and we’re seeing nice sales within Ameriprise from good initial sales in Signature Wealth. Retail flows in EMEA also improved. However, they were impacted by headwinds from the geopolitical volatility during the quarter. On the product side, we continue to advance our strategy across ETFs, SMAs and alternatives with a clear focus on scale, consistency and performance. Our ETF platform surpassed $10 billion in assets under management, supported by a differentiated offering across North America and EMEA.

In SMAs, we benefit from long-standing track records and remain a top 10 provider with continued positive flows. In alternatives, our technology and health care hedge fund strategies delivered strong performance and sales momentum, and we see good opportunities ahead. Consistent with our approach in wealth management, we’re applying advanced analytics and technology within asset management, including an investment research where these capabilities are contributing real value. At the same time, we’re transforming how we leverage our global platform. We’re driving greater efficiency across the front, middle and back office, while continuing to strengthen our data foundation. We’re also making good progress on back-office outsourcing with a substantial portion of the conversion expected to be completed later this year.

These initiatives complement our broader efforts to streamline systems and support operating leverage over time. Now for Ameriprise overall, our focus is having a premium branded client-focused business that delivers strong financial performance and attractive returns. Over the past year, we have achieved record earnings and generated best-in-class return on equity now exceeding 54%, as I mentioned. Given this performance and our current valuation, we continue to view our shares as an attractive buying opportunity. As a result, as you know, we increased our share repurchases in the fourth quarter and continued our strong return to shareholders with 88% returned in the first quarter, and our board just approved another 6% increase in our dividend.

Ameriprise is built to perform across market cycles. We’re well positioned to deliver meaningful value over time, manage risk responsibly and generate resilient performance. Before I close, I want to highlight the iconic Ameriprise reputation, which remains an important competitive advantage. We are proud to have a company that continues to be widely recognized in the marketplace for who we are, and how we operate. In the minds of consumers, employees and investors, Ameriprise has been named one of America’s Most Trustworthy Companies in 2026 by Newsweek. And from Fortune, Ameriprise is also one of America’s Most Innovative Companies for 2026, affirming our leadership in technology and driving transformational change. In closing, Ameriprise offers a differentiated combination of an excellent client and adviser value proposition, sustainable, profitable growth and attractive capital return.

With that, I’ll turn it over to Walter to discuss our financials in more detail.

Walter Berman: Thank you, Jim. Ameriprise delivered strong financial results in the quarter, with adjusted operating earnings per share up 19% to $11.26 and an operating margin of 28%. These results reflected the strength of our diversified earnings profile and the operating leverage embedded in our businesses as well as the return from significant investments we have continued to make. Our ability to generate attractive growth in margins across cycles underscores the durability of our platform and the discipline we bring to execution. Total assets under management, administration and advisement increased 12% to $1.7 trillion, which coupled with strong client engagement drove an 11% increase in revenues to $4.8 billion. In the quarter, we returned 88% of operating earnings to shareholders through share repurchases and dividends.

Our balance sheet remains exceptionally strong with $2.3 billion of both excess capital and holding company available liquidity. Let’s turn to Wealth Management financials on Slide 6. Adjusted operating net revenues increased 14% to $3.2 billion. The core distribution business is performing well given the value of our planning model and the multiple touch points we have with the client to meet their needs holistically. Our fee-based and transaction revenues remained quite strong, increasing 17%, benefiting from growth in client assets and higher activity levels. In addition, our bank revenues increased 6% from business growth, including the expansion of our lending products, while revenues from cash sweep and certificates declined. Adjusted operating expenses in the quarter increased 12%, with distribution expenses up 14%.

I will note that adviser compensation within distribution expenses increased in line with the revenues advisers generate. G&A expenses were up 4%, primarily driven by volume and growth-related expenses, including investments in Signature Wealth and banking products. This level was consistent with our expectations. Pretax adjusted operating earnings increased 20% to $951 million with continued strong contribution from core distribution and core cash earnings. In the quarter, Comerica exercised their option for early termination of their relationship with us. This resulted in a onetime $25 million make-whole payment for onboarding costs and future earnings, which finalized all payments that were due to us for this termination. Excluding this benefit, earnings increased 17%.

Our core distribution earnings grew in the mid-30% range, benefiting from higher client assets and advisory fees as well as strong activity levels. The strong level of core distribution earnings that we generated is unique relative to other independent wealth managers and demonstrates our focus on ensuring that our growth is profitable. Bank earnings grew 6% in the quarter, while certificate earnings declined. In total, core cash earnings were essentially flat from a year ago. We continue to take actions to build the bank portfolio in a way that supports stable earnings contributions going forward. The overall bank has a yield of 4.6% with a 4-year duration with now only 7% of portfolio on the floating rate securities. In the quarter, new purchases at the bank were $1.9 billion at a yield of 5% with a 4.1 year duration.

Last, our aggregate margins remained excellent at 30%, up from 28% a year ago. Underlying that, our core distribution margin is over 20%, with a solid contribution from cash. Let’s turn to Slide 7. Advice & Wealth Management generated solid asset growth in the quarter. Client assets grew 12% to $1.1 trillion and wrap assets increased 16% to $664 billion, driven by solid organic growth, strong adviser productivity and equity market appreciation. Our new Signature Wealth program continues to gain momentum and a significant portion of the assets are new money to Ameriprise. Client flows were $4.2 billion and wrap flows were $6 billion in the quarter. This reflected several moving pieces that I will explain. Same-store sales levels remained strong and consistent aside from the normal seasonal impacts and client caution resulting from volatility in the quarter.

However, in the quarter, we had some lumpiness in our flows caused by a combination of the aggressive recruiting environment, which drove higher adviser departures, as well as the acceleration of Comerica advisers departing as a result of their acquisition. We anticipate the higher pace of outflows related to Comerica will continue in the second and third quarters culminating with the conversion occurring near the end of the third quarter. While we have significant capacity to recruit, the recruiting deals we are seeing today in this perceived risk-on environment exceed what we believe is a balanced risk return approach given the long cash paybacks and marginal P&L benefits over the extended life of these arrangements. We will continue to evaluate the facts and circumstances, whether for recruiting or retention to assess the trade-offs between sustained profitability versus flows and associated risk.

This approach will ensure decisions are driving sustained shareholder value creation. Lastly, I will note that in the latter part of the quarter, we’ve seen improving trends. As we look ahead, the addition of Huntington Bank is anticipated in the fourth quarter and will bring approximately 260 advisers and $28 billion of client assets onto our platform. Separately, we are further enhancing our adviser succession strategies for both internal and external advisers, including expanding and leveraging Ameriprise’s personal wealth group, our centralized advisor group as a potential succession option. Let’s turn to Slide 8. Advice & Wealth Management generated solid productivity growth. Our adviser productivity continues to grow, reaching a new high of $1.2 million, up 10% year-over-year, driven by strong growth in wrap assets and related fees as well as enhancements to adviser efficiency from the integrated tools, technology and support we provide.

In addition, transactional activity remained strong, increasing 10% compared to the prior year. This is primarily from nice growth in annuity products and brokerage transactions. Total client cash of $86 billion was essentially flat year-over-year and sequentially. Bank assets increased 6% year-over-year to $25.5 billion, with the bank representing a stable source of earnings going forward. Cash sweep balances decreased slightly to $29.4 billion compared to $29.9 billion in the prior quarter, which is consistent with the seasonal tax pattern we would expect to see. Certificate balances declined to $7.6 billion from $8.2 billion in the prior quarter, given the interest rate environment. We continue to have elevated cash balances in third-party money market funds at nearly $48 billion.

We have seen that decline for the first time in January and February. But with the volatility later in the quarter, we saw cash levels build modestly again. This remains an important opportunity when rates decline to see these cash balances deployed into other products on the platform. Turning to Asset Management on Slide 9. Financial results were strong in the quarter. Operating earnings increased 13% to $273 million. Results reflected asset growth and the positive impact from transformation initiatives. Total assets under management and advisement increased to $706 billion, up 8% year-over-year from higher ending market levels. As Jim mentioned, net outflows improved in the quarter. Revenues increased 8% to $910 million, and the underlying fee rate remained stable at approximately 47 basis points.

Expenses increased 5% in total. In the quarter, general and administrative expenses were up 4%, driven by volume-related expenses and unfavorable foreign exchange translation. Margin reached 44% in the quarter which is above our targeted range of 35% to 39%. Let’s turn to Slide 10. Retirement & Protection Solutions continued 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. Pretax adjusted operating earnings was $190 million, which reflected higher distribution expenses associated with strong sales levels and continued outflows from variable annuities with living benefits, partially offset by higher equity market levels. However, we continue to expect earnings over time to be in the $800 million range per year.

This business has excellent risk-adjusted returns and continues to be an important part of AWM’s client value proposition. Turning to the balance sheet on Slide 11. Balance sheet fundamentals and free cash flow generation remain strong, which is a core to our ability to invest for growth on a sustainable basis while also continuing to return capital to shareholders. We have an excellent excess capital position of $2.3 billion. We have $2.3 billion of available liquidity. Our asset liabilities are well matched and our investment portfolio is diversified and high quality. We have no exposure to middle market lending directly or through funds and BDCs in our owned assets. Similarly, we have limited direct exposure to broadly syndicated loans in our own assets.

Our disciplined capital return is a key element of our ability to consistently generate strong long-term shareholder value. In the quarter, we returned $936 million of capital to shareholders, which was 88% of operating earnings. This included the opportunistic repurchase of 1.6 million shares to take advantage of the decline in our PE multiple in the quarter. We also raised the quarterly dividend by 6%. These actions are a demonstration of the confidence we have in our continued free cash flow generation and commitment to return capital to shareholders. As we go through 2026, our strong foundation, coupled with our ERM capabilities and decisioning framework positions us well to continue investing for growth in a targeted way and return capital to shareholders at a differentiated pace.

In summary, on Slide 12, Ameriprise delivered solid results in the first quarter. Over the last 12 months, revenues grew 8%. Adjusted EPS increased 12%, return on equity grew 140 basis points, and we returned $3.6 billion of capital to shareholders. We had similar growth trends over the past 5 years, with 9% compounded annual revenue growth, 20% compounded annual EPS growth, return on equity improving over 17 percentage points, and we returned $14 billion of capital to shareholders. These trends are consistent over the long term as well. We have an excellent foundation and capacity moving forward that enables consistent and sustained profitable growth. With that, we will take your questions.

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Operator: [Operator Instructions] Your first question comes from the line of Wilma Burdis of Raymond James.

Wilma Jackson Burdis: First question, why didn’t Ameriprise lean in more to return more than 88% of operating earnings in 1Q ’26 especially given the stock was back to kind of Liberation Day levels at certain points. And should we expect 2Q ’26 capital return levels more in line with 4Q ’25 if the stock stays at the current level?

Walter Berman: Okay. You can — as we indicated, we will be buying back 85% to 90%, certainly looking at the P/E ratio and where we are right now, that it’s a reasonable expectation that we would take advantage of that and be purchasing up to a higher number and then evaluate it because we certainly have the capacity to do that and invest in the business continually.

Wilma Jackson Burdis: Okay. And could you quantify the outflows from the Comerica advisers just to help us arrive at a more normalized net flow number for 1Q ’26. And along the similar lines, if you could talk about the remainder of the year. Should we expect additional outflows from Comerica and talk a little bit about the Huntington Bank inflow expectations.

Walter Berman: Okay. So the Comerica outflow started as it relates to the acquisition in the fourth quarter and certainly continued in the first. They were a reasonable portion of the outflows that we had. We are certainly seeing because of the acquisition, a more accelerated pattern. We expect that pattern to continue and accelerate actually in the second and third quarter. And as I indicated, based on our current plans, it should — we should finalize the contract by the end of the third quarter. And it’s — yes, that’s the level it’s certainly — we’re seeing that activity.

Jim Cracchiolo: Well, the contract was executed and finalized. And so any financial impact from that is already in what we collected. So we’re fine, but those flows will continue to come out, and they will be completed at the end of September, I think. And then Huntington will come in, in the fourth quarter, and that will be moved in, in the fourth quarter.

Walter Berman: And that would be, as I indicated in my remarks the — about $28 billion.

Operator: Your next question comes from the line of Brennan Hawken of BMO Capital Markets.

Brennan Hawken: I’d like to follow up on that last one. So it’s — I’d like to get a mark-to-market on Comerica. I believe it was $18 billion of assets. I think you said that it started to come out in the fourth quarter. You saw a little this quarter and you expect some the next 2. I know you just chose not to quantify, but is it reasonable just to take that $18 billion and kind of like allocate it across four quarters and call it a day? Or will there be some lumpiness in concentration in particular quarters?

Jim Cracchiolo: It’s hard to know exactly what that trend line. I mean it really — this is — Fifth Third has taken over the activity. I think from our perspective, just so we know, the deal was concluded. That’s why after receiving back what we needed to receive back and the compensation and the reimbursements, et cetera, we booked the $20-some-odd million in the quarter for a make whole. And so it will come through the flows, but the impact financially to us is immaterial. And so — but we can’t give exactly how they’ll transfer it. But we’re mentioning it is in the flows. And maybe as we go forward, we’ll try to break things to be a little clearer on it. But that’s — I can’t sit here to tell you exactly what will come out quarter-to-quarter. I assume that all of it will be out by the end of the third quarter.

Walter Berman: Yes. So clearly, again, we are seeing because we are getting — certainly advisers giving us notice on terminations. And that’s why I say it’s built up. And like Jim said, we can’t really predict the amount, but we are certainly seeing heavier activity take place in the first and starting now in the second quarter.

Brennan Hawken: Okay. But is my $18 billion at least, right?

Walter Berman: $18 billion is right. $18 billion is right.

Jim Cracchiolo: $18 billion in total. Correct. Absolutely correct.

Walter Berman: Sorry we didn’t answer that.

Brennan Hawken: Yes. Okay. Cool. And then obviously, it doesn’t matter your made whole all that. It just helps to know what the amount of noise is so that people can get to on those lines…

Jim Cracchiolo: We understand, and we’ll try to be clearer as we go forward.

Brennan Hawken: I appreciate it. Okay. And then there’s a lot of focus within the wealth space on the cash and whether or not these AI tools are going to allow for optimization of cash. It’s not a huge central feature for you guys in your business model. But how are you thinking about that as you move forward? I know you’ve got the bank as part of the strategy now. But have you considered looking at some of these tools within your own network? And how are you considering that development that’s likely to come down the pike?

Jim Cracchiolo: Good question. So first and foremost, and I think Walter tried to give you some further information of the cash contribution as we looked at it for this quarter as we reported. And you can see, as cash adds a certain amount to our margin, but the bulk of our earnings and profitability is from the real wealth management part of that component with the fees and the transactions and things that we conduct on behalf of the clients. Our transaction revenue from the sweep, as we said, is a very, very small part. It’s only a few percent. And so from our perspective, it’s not the bulk of our earnings, number one. And honestly, I don’t know why that people wouldn’t look at the core margin and give it even more valuation than where people are making all of their earnings from cash.

Now in our case, what we tried to do is then develop the bank in a way that we can add value added from both lending activities and savings programs that we’ll be ramping up with even on checking and activities. But the amount of cash that will still be in transaction, whether AI assisted or not, is so low that money will be moving in and out to do that, just like a basic checking account to some extent. From — looking at it, we already provide so much in capability and ease for our advisers to do that on behalf of their clients and with their clients, but that’s why our cash levels that we maintain is, on average, $100. So we’re not as concerned with it. And if there are other capabilities that come about that makes sense, we will look at them.

But we’re not looking at that as a major change to what’s being held there.

Walter Berman: So just let me emphasize again as we — our average balance now is $6,000. We — as Jim said, very active. And certainly, it’s at transactional levels that meet that minimum standard in the account. So again, we are constantly evaluating it, but I think we’re at a very good level. And the percentage of our earnings that come from cash is certainly at the level that is probably lower than most of our peers. And therefore, certainly manageable because we’ve had that balance.

Operator: Your next question comes from the line of Michael Cyprys of Morgan Stanley.

Michael Cyprys: Just wanted to ask about the bank with the new initiatives that you have across lending, savings. I was hoping you could elaborate on how those are contributing today. I realize it’s early days. I was hoping you could talk about the steps you’re taking to drive broader engagement, how you see that ramping? And what are some of the other initiatives you guys are thinking about in the coming quarters?

Jim Cracchiolo: Thank you for the question. So the one that we had launched previously that is growing nicely, and there’s still a very large opportunity for us is pledge. And as more of our advisers get familiar with it and activate their activities around it. So that’s the one that’s probably the one that’s a little more mature in our channel, but the opportunity compared to someone like a Morgan Stanley and others, there’s a lot more opportunity for us there that we are focused on. We just completed the launch of the checking account, which is always a core component of banking. And that in complement with things like HELOCs, mortgages and now some of the savings programs, we’re starting to now ramp that up as we start to get that out to advisers and also have that types of information for the client to access.

And so this is at the early stages of what we think we can do there. We see some early signs as we did some initial launches with advisers, and they like what we’re providing and the benefits. So we’re hoping that this becomes a much stronger contribution as we go, but we’re at the early stages of it.

Michael Cyprys: Great. And then just as a follow-up question on AI. I was hoping you could update us on the AI tools that you have available for advisers today. How you see that evolving over the next year or so? And where do you see some of the biggest opportunities? How meaningful could this be as you think about adviser productivity and ultimately, efficiency saves for Ameriprise?

Jim Cracchiolo: Yes. So I know AI has come up and every time someone comes out with a new tool or say that they have some kind of service. So let me give you a little — and I tried to in my talking points in opening. We view AI as more of an extension of our total technology strategy that we’ve been building for many years. So first of all, it’s not a stand-alone initiative. What differentiates what we’re trying to do is that these capabilities are embedded in an integrated platform built around how advisers work, supported by the data foundation, which is very critical in a highly regulated business and the governance for it. Now the integration allows us to deploy AI directly into everyday workflows, it’s across advice, ops, service and rather than layering it as a tool in a fragmented system.

The result is greater efficiency, better insights and more time that our advisers can really spend on the client relationships, which actually drives the outcomes that you’re looking for. In the near term, we see productivity gains and selective automation. Longer term, we see capabilities supporting the growth by enabling advisers to serve more clients with higher standards of advice. Now that’s embedded, as I’ve said previously into many of the tools and capabilities that we have. And so if you look at things like client acquisition, meeting planning, meeting schedule, meeting preparation, goal-based advice, the products and solutions, meeting follow-up and summarization and business planning, those are the things that we’ve embedded in the tools.

So our eMeeting, as an example, capability that’s already integrated can pull all the data from adviser engagement with the client, the past cases that they’re in, the opportunities that we get from adviser insight so that they can say, what’s the next thing possibly the client may be interested based on where they are in their financial situation. So that’s what we do, and we’ll continue to enhance. Over time, we’ll introduce more AI agents to do some of the actual adviser work, whether it’s necessary or appropriate to ease and give them more productivity rather than adding more staff. So those are the things we’re embedding from the adviser, but we also do that from a company perspective. And so does that help you understand how we’re thinking?

Michael Cyprys: Yes. That’s helpful. Just curious if you’re able to quantify any of the productivity gains that you’ve seen so far?

Jim Cracchiolo: I would say, it’s at the — we see clear productivity where advisers have enabled it. We see, as an example, our meeting takes away hours of work within an adviser practice every week. Okay. We haven’t extrapolated what advisers then do with that productivity. But those are things that we will try to figure out the metrics appropriate for them.

Operator: Your next question comes from the line of Suneet Kamath of Jefferies.

Suneet Kamath: I wanted to come back to AWM organic growth. If I remember correctly, last quarter, I think you guys expressed some confidence in the 4% to 5% target for the year. I think 3 quarters now, we’ve been talking about increased competition. You’re talking about it again now. But based on what you’re seeing, do you still think you can achieve that 4% to 5% this year? Or is the increase in competition that you’re talking about sort of taking you off that glide path?

Walter Berman: Okay. So let’s break it. For the — what we talk about the organic, the same store, we are seeing good growth. Yes, the area that deviates on that is on the attrition side of it. And certainly, in this quarter, Comerica certainly contributed towards that. And that’s the variable that affects when you look at these arrangements that are being offered at this stage, both on the attrition side and then on the recruiting side. But the solid core of our growth is there, and that’s what we feel very comfortable with. And then managing the net on the inorganic is the element that deviates. So the answer is, certainly, as you saw in last quarter, we were up this quarter, it was down. It’s going to be — one of these things that are going to be — I have to use the word lumpy, but that’s exactly what it is as we manage through it depending on how aggressive we see the environment and then how we gauge the appropriateness of responding on that basis.

But our objective, yes, because we think that is a good because the core is solid. Now it’s a matter of the implication of it as it relates to aggressive bidding on the recruiting side on retention.

Jim Cracchiolo: It’s sort of funny because people — I mean, I know how much focus is on this metric. But you think about it, so as an example for us, our core assets and all that grew strongly over the year, and we generated the revenue from it that translated into real profitability we brought to the bottom line. You can always — you can do — for instance, we’re, I would call an appropriate acquirer, but we would never pay way more on an acquisition for a business just because we want to grow our size if we don’t see a good appropriate return over time. Advisers like that will take a big check. It doesn’t mean they’ll stay with you after that check is up in some fashion. So what you want to do is recruit people that know that you can help add value and give them a good practice support, development and really a good, strong client value proposition.

And so our firm stands out in that regard. Our client satisfaction, the idea of one of the most trusted firms out there. If you look at some of the players out there, they don’t register. And so it depends on what you want to play in. In our case, we could — we have a lot of capital, as you know, to buy up. We could buy some of these firms. We can put advisers on it. We don’t look at that’s the best way for us to grow our business to deliver a strong premium value and really have a good culture of the type of advisers that we really think are important to work with clients. And so that’s what we do. And listen, some of our advisers will take a big check, especially when they know it’s more value than what it’s pertaining to. So — but just like in the fourth quarter, Walter say, we attracted more in than left.

In the first quarter, we had a little more, not so on the number, but the size. And now our pipeline is ramping up again for the second quarter. So to Walter’s point, it will be a little bumpy. But the underneath it of where we focus productivity growth across 10,000 is what we think will drive true profitability.

Suneet Kamath: Yes. That makes sense. I mean — and I get it that people sometimes over-index to 1 number in 1 quarter. So obviously strong last quarter…

Jim Cracchiolo: No, I know I appreciate you asking the question, honestly.

Suneet Kamath: Yes. My other question, I just wanted to drill into this AFIG opportunity. And I’ll just tell you the way I’m thinking about it and maybe get your response. So it seems like the cost of being in this business are going to go up. Maybe AI helps that, maybe it actually adds to that, who knows. But if you have these banks out there that want to be in the wealth management business, but don’t want to make the investments that are required, it seems to me that, that’s just — that’s like plays into your hand in terms of this AFIG opportunity and that we’ll likely see more of these. And I just want to make sure that I’m thinking about it right.

Jim Cracchiolo: You’re thinking about it 100% correct. But let me give you an example. Don’t — when we spoke to Huntington Bank, they kicked the tires and they were out there looking at who would be the best provider, et cetera. Their goal is having excellent banking complemented by this. And they knew that they wanted to focus their energies with this being of where they can get the type of support, the capabilities, the culture, the environment to deliver great for their clients. And so they kicked the tires on any other firm out there, and they clearly chose us for those reasons. We think we’ll have a great partnership. Comerica actually was working fabulously for the bank. You can speak to their Chief Executive, who’s now stepped down, the people who headed their wealth management.

We helped them grow their advisers. Their productivity advisers love us, would love to stay. So it’s not that we lost the business. Fifth Third purchased them, and they wanted to keep it with what they’re operating. So I think that capability is there. And I think as people understand what we provide them, I think there’ll be a lot more opportunity for us.

Walter Berman: One of those is really the deepening of the relationship is what we do with our clients. And certainly, they recognize our capability of doing that with their bank clients.

Operator: Your next question comes from the line of Crispin Love of Piper Sandler.

Crispin Love: So just first, the operating margins in the asset management business, very strong at 44% in the quarter. Are the expense management actions from that segment complete or still ongoing? And then any other key call-outs for the margin strength. And is that level sustainable? Or would you expect it to trend back to your — that 35% to 39% targeted range?

Walter Berman: So the transformation certainly is working its way through. And the back-office transformation is really not taken hold yet. So that you’ll see as it goes through. And as part of the way we operate, you’ll see continual certainly transformation and streamlining of that. But again, also, you see the operating expenses go up because of volume and other related things. But yes, we are certainly committed to the transformation and improvement of our processes and getting the benefit of that. And the biggest one right now is that the back office has not worked its way through the numbers yet.

Jim Cracchiolo: Yes. And we are advancing. We’re extending our product line in ETFs, SMAs, et cetera. We’re adding other capabilities. And so I think we’re trying to — we will continue to drive the progress on how we leverage our global platform we put in place with the back office being — but at the same time, we are investing. So we’ll keep the expense base in check. And hopefully, that will continue to maintain good margins.

Crispin Love: Perfect. And then just on the Huntington Bank win you announced earlier in the quarter. Can you just give a little bit more color there? Was this a competitive takeaway and just a little overview on the process or competition to get this win? And how long did it take to get over the finish line? How long were you working on that one?

Jim Cracchiolo: No. This was — actually Huntington Bank ran their own activities, broker-deal, et cetera. And so they were very careful because they did not want to give up that unless they had someone that would really provide what they were looking for and take it to another level for them. And so those things are very important because we love clients that really care about their clients.

Walter Berman: And the process was over a year by the way.

Operator: Your next question comes from the line of Steven Chubak of Wolfe Research.

Steven Chubak: So I wanted to double-click a little bit into the discussion around NNA and appreciate the disciplined approach to recruitment or reluctance to chase given the more aggressive TA packages in the market. Our channel checks indicate that TA rates have been and should remain relatively sticky. I just want to better understand; one, how that informs your outlook for core NNA over the course of the year, so ex the noise related to Comerica, but also the interplay with the distribution expense, which surprised positively and declined about 100 bps year-on-year.

Walter Berman: I’m sorry on that one. Could you just repeat? I hate to do that. I’m sorry, I just didn’t get the essence of it.

Steven Chubak: Just trying to understand like the interplay with core NNA expectations over the remainder of the year, recognizing that TA rate should be sticky and that the distribution expense was also a big source of positive surprise in the quarter. And presumably, that should be lower if you’re not at least chasing some of these more aggressive packages in the marketplace?

Walter Berman: Well, again, we’ve been fairly stable on that rate as you saw. And yes, it does — we will continue to certainly — it’s not that we’re not going to compete. And certainly, the — we’ve told you before, we will move up in our tolerances. So — but I would say that you should see that number pretty much stay in that range as it relates to — as we go through the year. And we would participate both on the basis of where appropriate increase our compensation for it. But it’s pretty much going to be in that range.

Steven Chubak: Okay. And then…

Jim Cracchiolo: I’m sorry, I want to make sure…

Steven Chubak: No, no, that is. I think it’s really also about the interplay around NNA expectations. I know you touched on a little bit with an earlier question. [indiscernible]

Walter Berman: As I said, on the NNA, the core is there, certainly, we’re going to see — and Comerica is going to play through that. But the issue there is the core is there. And when we — certainly, it’s on recruitment, those elements should marginally affect it going up, but it should be aligned with our objective set to certainly as it relates to NNA and that correlation to that rate.

Jim Cracchiolo: Yes, because the bulk of our activity is organic. So it should be pretty stable.

Steven Chubak: Got it. And just for my follow-up on Signature Wealth, you highlighted really strong momentum there. I was hoping you could provide some KPIs just in terms of the level of penetration across the platform, recognizing it’s early days here. What’s been the pace of adoption in terms of the attachment rate. And just trying to gauge how we should think about the incremental fee opportunity as adoption steadily builds across the platform.

Jim Cracchiolo: Yes. So we initially launched this in the second half of last year. And with its rollout and then getting advisers initially, so it’s starting to really take an uphold across the advisers. As you know, any new platform, people take a little time. The people who actually activated like it and moving more assets in, as Walter said, a lot of the money going in includes new money. So they like it as far as then — now having said that, money is coming from other of the various platforms. But because of how they need to adjust their portfolios and move them in and other things that takes a bit more time. We’re also adding more capabilities to it, like we just added some of our SMAs, et cetera. So I think we’re — what my team says is that for previous wrap launches, this is one of the quickest and it’s really progressing nicely against what they had expected. And so I think as we get further along, we’ll probably give you some more information on it.

Operator: Your next question comes from the line of Tom Gallagher of Evercore ISI.

Thomas Gallagher: First question is really just on the competition and how you’re approaching it. And so if there are irrational deals being offered in the market and you’re holding the line not capitulating on some of the more aggressive packages. I guess my question is, what’s the scale of this activity? Is it limited enough, or you’re not that worried, or is there a risk here that this starts to really become bigger and it could meaningfully impact the size of your adviser base? Like how broad is this right now? And is it still limited enough that you think you could still achieve your objectives? Or is it something you’re going to have to react to more forcefully at some point?

Jim Cracchiolo: No, this is — let me give you an example. You could have an RIA where a team thinks that, that is something that they are ready or want to move to for a certain reason or based on what they’re giving them as the financial incentive, et cetera. So you got those types of things that happen. We got a large adviser force, right? So you’re going to have a few of those things, and they always impact when they occur. Then you have a little bit where some of the competitors, they are offering big checks and they promise what they have. And I’ll give you an example, and advisers sometimes have a hard time. When we bring in advisers from these platforms, and I won’t mention names, but they look at what they get here, the technology, the capability and all that compared to what they have.

And they’re like, it’s night and day. And so what people sell as a story and then give a big check sounds wonderful, but that’s what will occur. What we do is when that’s happening, we’ll talk to our advisers, we’ll explain, we’ll try what the reality is. And most of them say, “Hey, no, that’s not.” But remember, people dabble big checks in front of people, and they sometimes jump, sometimes they listen, but it isn’t large. And in fact, our net recruiting was what we lost last year was still very positive. So — but this is going to happen because that’s what’s happened in the industry. When I was in the industry many years ago at the wirehouses, it happened because people got overly aggressive. There are some people that always started it with the idea.

The Street always looked that was favorable and then it blew up on them. But it was after the fact. And so people think that’s the best way to look at those people growing top line. Whether they pay back in a number of years or not, I don’t know. But right now, you’re giving all the credit because of cash earnings. But at the same time, you’re worried about cash going away. So it’s interesting, but that’s what’s happening. So when you jack up PEs based on it, people think it’s a free good, right? And that’s what’s happening in our environment in the market today. Everything is a free good.

Walter Berman: So — and if you correlate it as we said, listen, looking at client — looking at the growth we had in client assets, certainly, it’s very strong and based on the elements of organic growth. The other elements when you start evaluating, gee, you’re looking at your growth coming from net new assets. And when you look at the differential on payback that you almost have to be twice as much to even get marginally close to what you’re doing. That’s what I’m saying. So the impact factor has to be consideration to the size of what we have and the growth and profitability of that and how we manage that in the organic side of it.

Jim Cracchiolo: And you would look, the turnover in the industry, when someone leaves for a big check, they most likely leave again. If they leave in because they want to go to a place that has a better environment, culture support, et cetera, that they can relate to or their clients can, they usually stay. So there is — now you won’t see that initially, right, because of everybody transitioning, but that’s the reality.

Thomas Gallagher: That’s helpful perspective, Jim. And so is the level setting of this, if I ex out the Comerica attrition in the quarter, are we talking about the advisers that left outside of that in the quarter? Is that under 100. Just can you dimension that…

Jim Cracchiolo: No, there wasn’t a lot of advisers. What I’m saying is there are some adviser practices, again, that left. And with that, you get a couple of billion dollars of flows, just like when we brought people in, in the fourth quarter, you get a couple of billion the other way. So what I’m driving at, it wasn’t necessarily that there was a large movement of advisers and that’s why Walter said it’s lumpy. And — but listen, what you should be looking at is, and you can compare it is when we had growth of our total asset base and our total revenue base, and that translated to very strong bottom line consistent with that, that’s what I would pay for if I’m investing in a company. If I got a lot of top line growth, but I’m not translating that after all the expenses, after amortization, after expenses for financing, all those things, then that’s a different question, and I wouldn’t invest like I wouldn’t buy that company.

Thomas Gallagher: Got you. And then just for my quick follow-up here. How should I compare the HBAN deal with a normal, I’ll say, 10 to 20-person adviser practice that you would hire and the type of package you give them? Is it comparable? I assume with more scale, you can offer better terms to HBAN. But how would you compare like the IRR to that deal versus a normal smaller deal?

Walter Berman: It’s a 10-year deal, a growing deal with basically a strong adviser base. So it’s — and the paybacks for this are certainly we feel are within our ranges and makes sense for both of us. So you have to look at this is really a big transaction that will stay with us, will grow with us and has the stability of it. So you can’t really look at a one-off. This is certainly — IRRs are very good and certainly appropriate, but it’s the stability of it and the growth potential of it.

Operator: Your next question comes from the line of Kenneth Lee of RBC Capital.

Kenneth Lee: Just one follow-up on the Huntington deal. Just for completeness, fair to say that the $28 billion in AUM is going to materialize in either client inflows or wrap inflows after the fourth quarter just throughout the next couple of quarters there.

Walter Berman: No, it will occur…

Jim Cracchiolo: Sorry, go ahead.

Walter Berman: We’re targeting that most of that will occur in the fourth quarter.

Jim Cracchiolo: Yes.

Kenneth Lee: Okay. Great. And then one follow-up, if I may, just in terms of the G&A expense and recognizing the back office optimizations still ongoing within Asset Management. Any updated outlook around overall G&A expenses there?

Walter Berman: On G&A, you’re talking for the company?

Jim Cracchiolo: No, Asset Management.

Walter Berman: Yes, Asset Management. Asset Management certainly should track in being in the range of neutral or a small negative. We really — we still are getting the momentum. As I mentioned, we have the back office coming through. So that’s in that range.

Operator: Your next question comes from the line of Alex Blostein of Goldman Sachs.

Unknown Analyst: This is Anthony on for Alex. Maybe just a follow-up to the recruiting discussion. I guess what channels are you seeing the most aggressive recruiting packages. And I appreciate you guys holding the line there. But at what point would you maybe need to revise your payout packages if the industry continues to trend in that direction?

Walter Berman: Well, actually, I think you’re seeing it in both the W-2 and in the franchise where they have gotten — both of them have gotten extremely aggressive on our fronts and commitment levels. So it’s across the board. And again, this makes sense on looking at payback, looking at really the risk return of it and you gauge it because we rely on organic, and then we certainly have to make sense to really give the payback looking at all factors, not just trying to get volume.

Unknown Analyst: Got you. That’s helpful. And maybe just for my follow-up, the certificate balances kind of continues to trend downward. So how are you thinking about the trajectory of balances from here?

Walter Berman: That’s strictly a spread, play, really as it relates to it. And so I think we’re going to see it candidly probably stabilize and stay in this range or increase a little go up. Again, but it’s strictly spread depending on where rates are going from that standpoint.

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

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