Ameriprise 2009 Annual Report Download - page 42

products and marketing efforts. A decline in the level of principles-based reserves for variable annuities at the end of
investment performance as compared to our competitors could 2009, and continues to discuss moving to a principles-based
cause a decline in market share and a commensurate drop in reserving system for other insurance and annuity products. The
profits as sales of other companies’ mutual funds are less requirement for principles-based variable annuity reserves, along
profitable than those from our own mutual funds. A decline in with a similar risk-based capital requirement adopted previously,
investment performance could also adversely affect the realization may result in statutory reserves and risk-based capital for variable
of benefits from investments in our strategy to expand alternative annuities being more sensitive to changes in equity prices and
distribution channels for our own products, including third-party other market factors. It is not possible at this time to estimate the
distribution of our mutual funds. potential impact on our insurance businesses of future changes in
statutory reserve and capital requirements. Further, we cannot
We face intense competition in attracting and retaining predict the effect that proposed federal legislation, such as the
key talent. option of federally chartered insurers or a mandated federal
We are dependent on our network of branded advisors for a systemic risk regulator, may have on our insurance businesses or
significant portion of the sales of our mutual funds, annuities, their competitors. Compliance with applicable laws and
face-amount certificates, banking and insurance products. In regulations is time consuming and personnel-intensive.
addition, our continued success depends to a substantial degree Moreover, the evaluation of our compliance with broker-dealer,
on our ability to attract and retain qualified personnel. The market investment advisor, insurance company and banking regulation
for financial advisors, registered representatives, management by the SEC, OTS and other regulatory organizations is an ongoing
talent, qualified legal and compliance professionals, fund feature of our business, the outcomes of which may not be
managers, and investment analysts is extremely competitive. If we foreseeable. Changes in these laws and regulations may materially
are unable to attract and retain qualified individuals or our increase our direct and indirect compliance and other expenses of
recruiting and retention costs increase significantly, our financial doing business. Our financial advisors may decide that the direct
condition and results of operations could be materially adversely cost of compliance and the indirect cost of time spent on
impacted. compliance matters outweigh the benefits of a career as a financial
advisor, which could lead to financial advisor attrition. The costs
Our businesses are heavily regulated, and changes in of the compliance requirements we face, and the constraints they
legislation or regulation may reduce our profitability, impose on our operations, could have a material adverse effect on
limit our growth, or impact our ability to pay dividends our financial condition and results of operations. In addition, we
or achieve targeted return-on-equity levels. may be required to reduce our fee levels, or restructure the fees we
We operate in highly regulated industries and are required to charge, as a result of regulatory initiatives or proceedings that are
obtain and maintain licenses for many of the businesses we either industry-wide or specifically targeted at our company.
operate in addition to being subject to regulatory oversight. Reductions or other changes in the fees that we charge for our
Securities regulators have significantly increased the level of products and services could reduce our revenues and earnings.
regulation in recent years and have several outstanding proposals Moreover, in the years ended December 31, 2009, 2008 and 2007,
for additional regulation. Market conditions and recent events we earned $1.4 billion, $1.6 billion and $1.8 billion, respectively,
could result in increases or changes in current regulations and in distribution fees. A significant portion of these revenues was
regulatory structures, including higher licensing fees and paid to us by our own RiverSource family of mutual funds in
assessments. In addition, we are subject to heightened accordance with plans and agreements of distribution adopted
requirements and associated costs and risks relating to privacy under Rule 12b-1 promulgated under the Investment Company
and the protection of customer data. These requirements, costs Act of 1940, as amended, or Rule 12b-1. We believe that these fees
and risks, as well as possible legislative or regulatory changes, may are a critical element in the distribution of our own mutual funds.
constrain our ability to market our products and services to our However, an industry-wide reduction or restructuring of
target demographic and potential customers, and could negatively Rule 12b-1 fees could have a material adverse effect on our ability
impact our profitability and make it more difficult for us to pursue to distribute our own mutual funds and the fees we receive for
our growth strategy. distributing other companies’ mutual funds, which could, in turn,
have a material adverse effect on our revenues and earnings.
Our insurance companies are subject to state regulation and must
comply with statutory reserve and capital requirements. State Consumer lending activities at our bank are subject to applicable
regulators are continually reviewing and updating these laws as well as regulation by various regulatory bodies. Changes in
requirements and other requirements relating to the business laws or regulation could affect our bank’s ability to conduct
operations of insurance companies, including their underwriting business. These changes could include but are not limited to our
and sales practices. The NAIC adopted a change to require bank’s ability to market and sell products, fee pricing or interest
ANNUAL REPORT 2009 27