Ameriprise Financial is looking to take advantage of other firms’ problems. The sleeping giant in the financial planning world (it has about 10,000 advisers) is looking to expand in that bread and butter business and asset management, Newswires’ Jessica Papini reported earlier today. It’s a great time for one of the healthier financial services companies to do something like that. We’ve already seen Citigroup, desperate for capital, sell of a big stake in its Smith Barney business to Morgan Stanley. Merrill Lynch got thrown into the arms of Bank of America.
While we shouldn’t expect to see Ameriprise pull off deals of that size, there will be some smart and tempting targets for them. Last year, Ameriprise bought H&R Block Financial Advisers, which added almost 1,000 financial planners to its ranks. And it bought J.W. Seligman for about $440 million to add $13 billion in assets under management.
Slowly, we might see Ameriprise look a lot like the Merrill, Morgan Stanley, Smith Barney and Painewebber’s of yester-year (for that matter, toss in E.F. Hutton, Shearson and Prudential): firms with strong retail brokerage businesses and asset management intended to support them.
Back in those days, the brokerage business was more about commissions and pushing products to generate commission. The brokerage firms ran into trouble because there were incentives to push their own mutual funds and other products versus those of other fund managers, thus putting the firms’ interests ahead of the interests of their clients.
But today, as more and more financial advisers move into wealth management and do fee-based work, that incentive to push interal fund products is less. And you end up with two fee-based businesses that don’t carry the same risks in a down market as the commission business did and does.