Ameriprise 2007 Annual Report Download - page 38

Advice & Wealth Management
Our Advice & Wealth Management segment provides financial
planning and advice, as well as full service brokerage and banking
services, primarily to retail clients, through our financial advisors. Our
affiliated advisors utilize a diversified selection of both proprietary and
non-proprietary products to help clients meet their financial needs.
The following table presents the results of operations of our Advice &
Wealth Management segment for the years ended December 31, 2007
and 2006:
Years Ended December 31,
2007 2006 Change
(in millions, except percentages)
Revenues
Management and
financial advice fees $1,350 $1,080 $270 25%
Distribution fees 2,218 2,034 184 9
Net investment income 405 405 — —
Other revenues 76 62 14 23
Total revenues 4,049 3,581 468 13
Banking and deposit
interest expense 236 246 (10) (4)
Total net revenues 3,813 3,335 478 14
Expenses
Distribution expenses 2,349 2,068 281 14
General and
administrative expense 1,179 1,071 108 10
Total expenses 3,528 3,139 389 12
Pretax income $ 285 $ 196 $ 89 45
Our Advice & Wealth Management segment reported pretax income
of $285 million in 2007, up from $196 million in 2006.
Net revenues
Net revenues were $3.8 billion, an increase of $478 million, or 14%.
Management and financial advice fees increased $270 million, or 25%,
in 2007 as compared to 2006. The increase was led by net increases in
wrap account assets of 23% from December 31, 2006 to
December 31, 2007 and an increase in planning fees due to acceler-
ated financial plan delivery standards. The growth in distribution fees
of $184 million, or 9% from 2006, reflected an increase in cash sales
and market appreciation. Net investment income was flat compared to
2006 as an increase attributable to a full year of activity from
Ameriprise Bank was offset by lower average account balances in
certificate products and the impact of hedges for stock market certifi-
cates. Banking and deposit interest expense decreased $10 million as
decreases in certificate sales and balances and the impact of options
hedging the stock market certificates were offset in part by an increase
related to a full year of activity of Ameriprise Bank and higher rates of
interest paid on certificates.
Expenses
Total expenses increased $389 million, or 12%. The increase in
distribution expenses reflects higher commissions paid driven by
increased sales volumes and higher assets under management.
General and administrative expense increased due to higher staffing
and vendor costs related to a full year of activity of Ameriprise Bank
and increases in professional, consulting and technology fees,
partially offset by a decline in legal and regulatory costs.
Asset Management
Our Asset Management segment provides investment advice and
investment products to retail and institutional clients.
The following table presents the results of operations of our Asset
Management segment for the years ended December 31, 2007 and
2006:
Years Ended December 31,
2007 2006 Change
(in millions, except percentages)
Revenues
Management and
financial advice fees $1,362 $1,221 $141 12%
Distribution fees 322 336 (14) (4)
Net investment income 48 63 (15) (24)
Other revenues 50 157 (107) (68)
Total revenues 1,782 1,777 5 —
Banking and deposit
interest expense 20 26 (6) (23)
Total net revenues 1,762 1,751 11 1
Expenses
Distribution expenses 464 415 49 12
Amortization of deferred
acquisition costs 33 52 (19) (37)
General and
administrative expense 958 1,031 (73) (7)
Total expenses 1,455 1,498 (43) (3)
Pretax income $ 307 $ 253 $ 54 21
Our Asset Management segment pretax income was $307 million in
2007, up $54 million, or 21%, from $253 million in 2006.
Net revenues
Net revenues increased $11 million, or 1%, in 2007 compared to
2006. Management and financial advice fees increased $141 million, or
12%, driven by market appreciation and positive flows in retail funds,
the impact of market appreciation on Threadneedle assets, as well as an
increase in Threadneedle hedge fund performance fees. Management
and financial advice fees in 2006 included $27 million related to
revenues from our defined contribution recordkeeping business that we
sold in the second quarter of 2006. The expenses from the sale of our
defined contribution recordkeeping business are primarily reflected in
general and administrative expense in 2006. Distribution fees decreased
slightly due to the continued trend of client movement into wrap
accounts which have lower up-front fees. Net investment income
declined due to a decrease in interest income and a decline in the value
of seed money investments. Other revenues declined due to a decrease
in revenue related to certain consolidated limited partnerships and a
decrease of $41 million for proceeds received from the sale of our
defined contribution recordkeeping business in 2006.
Expenses
Total expenses decreased $43 million, or 3%. The increase in distri-
bution expenses reflects higher distribution fees and marketing
support costs driven by higher assets under management in River-
Source Funds. The decline in the amortization of DAC was driven by
decreased B share sales resulting in fewer deferred commissions to be
amortized. General and administrative expense, which primarily
36 Ameriprise Financial 2007 Annual Report