Bank of America downgrades Ameriprise, questioning whether retention bonuses keep big teams

Bank of America analysts downgraded Ameriprise Financial on Oct. 19, and the report behind the call says the firm is now paying bonuses and waiving fees to keep advisors, RIABiz reports. Ameriprise shares closed at $480.41, down $20.39, or 4.07%, from $500.80.

RIABiz describes the note as citing the 'attractive' economics of RIA ownership as a 'structural' disadvantage for Ameriprise, one that 'can't be easily remedied.' The analysts also say the bonuses weigh on near-term margins and doubt they will stop the firm's biggest teams from breaking away. A retention bonus pays once; an ownership stake in an RIA is an asset the advisor holds and can eventually sell.

RIABiz reports the firm, with about $1.5 trillion in assets under management and advisement, lost its fourth billion-dollar team to Schwab this year. Four such departures equal a fraction of a percent of that book.

RIABiz raises a second cost: paying advisors to stay could set expectations of what it calls 'free money' among people who want the freedom and equity of an RIA.

RIABiz reported on Oct. 14 that a $3 billion-asset Truist team moved to Captrust, citing employee equity. Captrust says just over 68% of its more than 2,000 employees hold a stake.

When Citywire first reported the retention bonuses on Sept. 24, Ameriprise shares fell $17.64, or 3.51%, to $485.15 in about 20 minutes around 1 p.m. ET, RIABiz notes. The Oct. 19 close was $480.41, down 4.07%, still above a 52-week low of $422.37 and below a 52-week high of $572.