Ameriprise Financial Inc (AMP) — Q3 2024 Earnings Call Transcript

Thank you and good morning. Welcome to Ameriprise Financial’s third 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 reference to various non-GAAP financial measures, which we believe provide insight into the company operations. Reconciliation of non-GAAP numbers to their respective GAAP members can be found in today’s materials and on our website. 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 risks that could cause actual results to be materially different from forward-looking statements can be found in our third quarter 2024 earnings release, our 2023 annual report to shareholders, and our 2023 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 second 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.

Good morning everyone. As you saw, we had another very good quarter building on another strong year. The business is performing quite well. In terms of the external environment, as we know, the Fed lowered interest rates for the first time since 2020 as inflation moderated. Equity markets appreciated even with short-lived spikes of volatility that occurred in the quarter and investors continue to manage uncertainty related to the U.S. election and heightened geopolitical risk. While the environment is fluid, Ameriprise is extremely well-positioned and we're helping our clients navigate what's ahead. For the quarter, assets under management and administration increased to $1.5 trillion, up 22%. And in terms of our financials adjusted for unlocking, total adjusted operating net revenue increased 11% to $4.4 billion. Earnings were up 11%, with earnings per share up 17%, excluding the severance expense and we again generated an excellent return on equity. It was 50.7% for the quarter compared to 49.6% a year ago. The power of Ameriprise comes from our client relationships and the consistent success of our complementary businesses that continue to deliver strong results. In Wealth Management, our goal-based advice value proposition is helping to drive excellent client satisfaction and practice growth. Total client assets had a new record passing the $1 trillion mark, up 26% from strong flows and markets. In fact, we had $46 billion of client net inflows over the past year including $8.6 billion in the quarter. With guidance from our advisers, clients are putting money back to work. Flows into fee-based investment advisory wrap flows were up significantly, nearly 50% to $8 billion for the quarter. This marks our highest level in more than two years. Total wrap assets reached $569 billion in the quarter, up 28% and transactional activity increased significantly, up 19% year-over-year. While cash balances overall are still elevated, we've seen some shift from term products to money market funds and there's additional opportunity for clients to redeploy their money into wrap and other solutions over time. At the bank, assets grew nicely, up 7% year-over-year to more than $23 billion. There are further opportunities to expand the bank and we're coming out with new savings and lending products next year. In addition, with supporting advisers to take advantage of our powerful CRM client meeting preparation capabilities and data-driven insights from advanced analytics and AI. As advisers uptake these capabilities even more, it should provide further growth opportunities. And Ameriprise adviser productivity growth remains among the best in the industry and increased another 11% and to a new high of $997,000 per adviser. Regarding recruiting, we had a good quarter with 71 experienced productive advisers joining the firm and we feel good about our pipeline. I'm pleased to see Ameriprise and our advisers stand out in the industry for excellent client service, leading growth, and overall quality of their practices. In fact, we had a record 21 Ameriprise advisers ranked in the Barron's Top 100 Independent Financial Advisor list that recently came out. And Ameriprise has consistently scored very well in terms of overall trust for many years. Last month, I spent time with our top advisers at the Chairman's Advisory Council Conference. They appreciate the environment we created and how it helps enable both clients and advisers alike to achieve their personal goals. They're proud to be part of Ameriprise and energized about our direction and the opportunities in front of us. In Retirement & Protection Solutions, we again drove good sales and consistent earnings. In variable annuities, our structured annuities and variable annuities without living benefits continue to attract strong interest with combined sales up 13% for the quarter. And in our Life business, we focused on variable universal life and disability products that are appropriate for this environment. Life and health sales were up 25% with the majority of sales in accumulation-focused VUL products. We've also continued to see positive results from our automated accelerated underwriting that's driving nice efficiencies and we've been named one of the most profitable insurers in past rankings. These high-quality books of business consistently generate strong free cash flow and return on capital with a differentiated risk profile. Moving to Asset Management, we're generating strong financial results as we continue to adjust the business. Assets under management increased 14% to $672 billion in the quarter. We have excellent performance across equities, fixed income and multi-asset strategies across three, five and 10-year periods, and we've seen a nice pickup in fixed income in both taxable and tax exempt. And this level of performance is reflected in the 118 4 or 5 Morningstar funds we offer globally. With regard to flows in the quarter, net outflows improved 40% year-over-year to $2.4 billion, which included about $900 million of outflows from legacy insurance partners. Retail and model delivery net outflows were better at $1.5 billion due to improved gross sales in both North America and EMEA as well as net inflows into ETFs and model delivery. We continue to evolve how we deliver our investment capabilities and over the last few years, we have successfully built out our SMA businesses with both traditional and tax-efficient strategies and we are a top 10 player in model delivery. We've also been building out our ETF business just added four active ETFs to leverage our investment strength in equity income and credit. We're beginning to gain a good level of flows in these areas, and we'll look to further expand our product line over time. And in institutional, excluding legacy insurance partners flows flat in the quarter. As we discussed, the team is very focused on positioning the business for future growth. We're driving operational improvements and making necessary adjustments that include streamlining the organization, in particular in the EMEA region. In addition, we're improving and better leveraging our processes and technology systems globally. We're redeploying these savings to invest in the areas that will drive profitable growth. Ultimately, we're focused on better positioning asset management to adapt to changing market dynamics. You can see some of the benefits in our results for the quarter that we will build upon next year. Bringing things back to the firm level, Ameriprise continues to consistently generate strong results. Our long-term record is excellent. As an example, just looking back over the last five years, we've delivered 16% compound annual growth in EPS and a return on equity consistently among the highest in the industry, and our balance sheet remains a clear and important differentiator. We're proud of the level and consistency of our results that reflect the unique combination of capabilities that we have across Ameriprise. And the operating leverage and benefits that result from our teams working together firm-wide are key to delivering our excellent client value proposition. We are one firm using the strength and activities of the business working together, and that's reflected in the consistency of the results we've delivered. Before I close, you've asked about long-term care and whether there's an opportunity to do a risk transfer at this time based on market changes. We thoroughly reviewed our options and believe that keeping the book at this time is in the best interest of shareholders. Walter will discuss in more detail. In closing, last quarter, we shared that Ameriprise recognized 130 years in business, how we manage the firm is key to our longevity and legacy. Ameriprise regularly earns awards in the marketplace for our culture and how we operate, including being recognized among the best managed companies on the Wall Street Journal Management Top 250 list. Forbes Magazine named us as one of America's Best Large Employers, and Ameriprise has also been ranked as one of America's Greatest Workplaces for Women by Newsweek. We also earn excellent recognition with our people internally year-after-year and our annual engagement scores that we received in the quarter continue to exceed external benchmarks across industries. Across Ameriprise, we're focused on serving clients well as we continue to build, invest in, and take the business forward. I'll now ask Walter to provide his perspective in more detail on the quarter and then we'll take your questions.

Thank you, Jim. The diversified nature of our business and unique leverage points between them drives our strong, consistent, profitable growth and ability to navigate stress events. Adjusted operating EPS increased 17% to $9.02 excluding unlocking, and severance expense associated with the company's initiatives to enhance operating efficiencies and effectiveness to further strengthen the client experience and future shareholder value. In addition to the severance costs, we recognized additional expense of $0.32 per share related to severance program expenses and acceleration of the firm's transition to cloud-based technology platforms. Higher compensation accruals relating to strong performance and mark-to-market impacts on share-based compensation. This further demonstrates the strong underlying growth achieved in the quarter. Assets under management and administration increased 22% to $1.5 trillion, benefiting from strong client flows over the past year and equity market appreciation. This has resulted in strong 11% revenue growth across our businesses. G&A expenses continue to be well-managed and demonstrate our focus on operational efficiency and effectiveness. We continue to invest in areas that will drive future business growth, particularly in Wealth Management, while maintaining expense discipline to achieve shareholder objectives. Our returns remained strong with a consolidated margin of 27%, excluding unlocking severance expenses and a best-in-class return on equity of 51%. Balance sheet fundamentals, including excess capital and liquidity are very strong. Our diversified business model benefits from significant and stable 90% free cash flow contributions across all business segments. We returned $713 million of capital to shareholders in the quarter. In 2024, we continue to expect to return 80% of operating earnings to shareholders. On Slide 6, you will see our integrated model leverages key business linkages to drive strong and consistent operating performance. Our business model is a key driver of profitable growth for our shareholders across market cycles. Ameriprise is one company with three business segments from which we gain leverage for the whole. For example, within our open network and Wealth Management, Columbia Threadneedle and RiverSource provide important solutions to AWM clients. These relationships result in high levels of adviser and client satisfaction and retention. Another example is where we are able to leverage our asset management expertise at Columbia Threadneedle to manage the general and separate account assets for RiverSource, the bank, and certificate company, and they have delivered high-quality returns with strong credit performance. These segments benefit from the leverage of our corporate functions and capabilities, which include technology, Ameriprise India, and staff group. These capabilities enhance our ability to meet client needs in an efficient manner, while driving growth and consistency across market cycles. On Slide 7, you see the strong results from Wealth Management. Total client assets grew 26% to an all-time high of $1 trillion with wrap assets up 28% to $569 billion from strong net flows and market appreciation over the past year. Wrap flows were strong in the quarter at $8 billion or 6% on an annualized flow rate. Pre-tax adjusted operating earnings increased 13% to $826 million, driven by quite strong year-over-year core wealth management earnings growth, offset by lower cash sweep earnings and margin remained strong at 30%. Adjusted operating net revenues increased 14% to $2.7 billion from growth in client assets, increased transactional activity, and a 6% increase in net investment income in the bank. This drove revenue per adviser to a new high of $997,000, up 11% from a year ago. Total cash balances, including third-party money market funds and broker CDs was $83 billion, which was over 8% of the clients' assets. Clients remain heavily concentrated in yield-oriented products with highly liquid products like money market funds being more in favor than term products like certificates and brokered CDs. We are beginning to see clients put more money back to work in wrap and other products on our platform and we expect this to continue over time as markets and rates normalize, which creates a significant opportunity. Client cash sweep balances were stable at approximately $28 billion. Bank assets grew to $23.2 billion, providing sustainable net investment income in this forecasted lower rate environment. These trends continued in October. Adjusted operating expenses in the quarter increased 14%, with distribution expenses up 19%, reflecting business growth and increased transactional activity. G&A expenses were flat at $419 million, with higher volume-related expenses in the current quarter and a regulatory accrual in the prior year quarter. Excluding the regulatory accrual in the year ago period, G&A expenses were up 5% in the quarter, consistent with expectations. Turning to Asset Management on Slide 8. Financial results were very strong in the quarter. The AUM increased 14% to $672 billion, primarily from higher equity market depreciation. In the quarter, operating earnings were quite strong and increased 23% to $245 million and our margin reached 41%. Adjusted operating expenses increased 2%. With G&A expenses improving 2% from a year ago, reflecting initial benefits from the company's initiatives to enhance operational effectiveness and efficiency to further enhance our ability to meet clients' needs. Let's turn to Slide 9. Retirement & Protection Solutions continued to deliver good earnings and free cash flow generation, reflecting the high quality of the business that has been built over a long period of time. Pre-tax adjusted operating earnings, excluding unlocking in the quarter increased 2% to $208 million, reflecting the benefit from strong markets and higher interest rates, partially offset by higher distribution expenses associated with strong sales levels. Year-to-date, pre-tax adjusted operating earnings, excluding unlocking, were $603 million, which is on pace with our expected level of approximately $800 million on an annual pre-tax basis. We completed our annual actuary assumption update in the quarter, resulting in an unfavorable pre-tax impact of $90 million, primarily related to updates to persistency assumptions for variable annuities. Our lapse assumptions are now aligned with recent experience and we are very comfortable with this level. Overall, Retirement & Protective Solutions sales improved in the quarter, with protection sales up 25% to $99 million, primarily in higher-margin VUL products. Variable annuity sales grew 13% to $1.2 billion with strong momentum in our structured product. Turning to the balance sheet on Slide 10. Balance sheet fundamentals and free cash flow generation remained strong with $2 billion of excess capital. We have diversified sources of dividends from all our businesses, enabled by strong underlying fundamentals. This supports our ability to consistently return capital to shareholders and invest for future business growth. Ameriprise's consistent capital return strategy drives long-term shareholder value. In summary, on Slide 11, Ameriprise delivered excellent growth in the third quarter, which is a continuation of our long track record to outperform our stated financial targets. Over the last 12 months, revenues grew 10%, earnings per share increased 14%, return on equity grew 110 basis points, excluding unlocking, and we returned $2.6 billion of capital to shareholders. We had similar growth trends over the past five years with 7% of revenue growth, 16% EPS compounded annual growth, return on equity improved nearly 13 percentage points, and we returned $11.9 billion of capital to shareholders. These trends are consistent over the longer term as well. Compared to most financial services companies, this differentiated performance across multiple cycles speaks to the complementary nature of our business mix as well as our focus on profitable growth. Before we move to Q&A, let me provide some additional insight into our decision to retain long-term care on Slide 12. As you are aware, we have been in the process of assessing potential risk transfer opportunities related to long-term care. In the quarter, we completed this analysis and have concluded that retaining the business is in the best interest of our shareholders. Our analysis found that there is a substantial difference in value between retaining the block and reinsuring the block. Our assessment concluded that the market for stand-alone long-term care risk transfer deals has not matured and that high-quality blocks like ours are not receiving an appropriate level of differentiation by counterparties. Our transaction will require us to include other books of business that would transfer tremendous value to a counterparty to offset unwarranted discounts applied to long-term care. Let me be clear, we feel very good about the quality of our long-term care business and it has performed better than our expectations over the past several years, which we expect to continue going forward. As you have seen, the business has generated $215 million of statutory earnings over the past five years and that trend should continue. We have already seen the size of the book declined by 70% with over 75% terminating without a claim. This business will continue to run off with over two-thirds of the remaining book expected to run off over the next 10 years. This extensive experience has supported our reserve process and that process has proven very accurate. We will also be able to capture additional upside from future enhancements related to investment portfolio repositioning, premium rate increases, and other program actions to improve performance. We will maintain a strong and differentiated capital position, and we do not need to supplement our capital position with a reinsurance transaction. In summary, given the high quality of our block with $300 million of capital as well as our credible experience and confidence in our reserves, we do not believe there is a plausible scenario that could justify executing a risk transfer deal at these levels and taking on additional counterparty exposure. In closing. We had an excellent quarter and feel good about how we are positioned going forward.

Thanks. Good morning. I wanted to start with the retail flows in Asset Management. It was interesting to see the slide discussing synergies across businesses. My question is whether you are implementing any strategic or structural changes within Asset Management and Advice Wealth Management to leverage the presence of these two businesses for improving the flow outlook. If you could provide some examples, that would be helpful.

Yes, Suneet, this is Jim. So, as you saw and Walter presented in the slide, the AWM business is a large distribution partner for Columbia. They've established that over many years, even in our open architecture, and they are a valued partner. And in that regard, as we focus more on growing our third-party distribution globally and as well as institutional we haven't put as much focus as we used to on the AWM business. And I think there is an opportunity that Ted and team are working on now to bring more product in to gear some of that product, especially for the type of solutions that we need. And we actually think that there is a great opportunity for him to increase his activity within the channel again. And so he's working on a combination of current solutions that he has as well as bringing other solutions to bear that we think can go on flows within the channel.

Got it. Okay. And then just on the comment that you made about client cash moving into money market funds as opposed to the term products, what is your read in terms of what's going on there? Is it that the advisers are sort of positioning for a rotation into these other longer-duration sort of wealth wrap products? Or what do you think is going on? Thanks.

We observed a 50% increase in wrap flows within diversified portfolios, which includes fixed income. This indicates a positive rebalancing and an increase in flows. More generally, we noticed a shift away from brokered CDs and certificates; although overall cash levels remained stable, there was a transition towards money markets. This suggests that people are less inclined to lock their funds into purely interest-earning assets and are moving towards options that allow for potential reallocation into wrap or other fixed income products with longer durations.

Hey everybody. Good morning. Thank you for the question. I was hoping you guys could talk about your outlook for cash revenues within AWM in totality. So, I know in the past, you kind of referred to bank more on a stand-alone basis and Jim, you made some comments earlier this morning regarding kind of ways you could still aim to kind of keep NII stable to growing within the bank. But maybe just expand that a little bit and we think about the certs business, the bank, the broker-dealer or the third party like kind of putting it together given the forward curve trajectory and current cash balances, what are your thoughts for the revenue trends there for 2025?

Well, as I indicated, it's Walter. For the bank, on the revenue trends and net interest income, we do see that it will be stable or actually increase, and we feel very good about that positioning. We see, as Jim mentioned, that we hope money will stop moving from third-party money market accounts and CDs. We might see some continued softening in CDs depending on how drastic the rate is. Overall, I think the majority of our earnings will come from the bank, and certainly sweeps will be affected as rates come down, but hopefully we will see a rotation out of the money market and third-party CDs back into products.

And Alex, from the bank perspective, we will be launching bank CDs that would be another cash alternative where clients are holding cash out in the banks, we'll be offering a fixed loan pledge this quarter. We'll also be launching HELOCs at the beginning of next year and putting in checking accounts later in the year. So, again, that could bring more cash activities from current bank accounts that our clients are holding to having more cash here as well that they can utilize or save. So, those things, again, will be gradual builds, but I think they'll be nice and complementary. And we think we can garner both savings as well as lending activities from our clients because we know they have a lot out there, and they have a lot of lending and loan books that we can take in.

I got you. That makes sense. Thanks guys for that. For my follow-up, I wanted to spend a minute on the Asset Management business margins and the G&A expense trajectory there. So, you guys are on track, I think, for a second year in a row of declining expenses in that business. Speaking to the efficiencies, obviously, that you talked about, despite record market and your record AUM levels pushing margins, I think, to 40% plus now. How sustainable do you think this level of profitability is in this segment? Maybe give us a sense of how you think the additional efficiencies you still expect in that business to impact the G&A dollars in that segment over the next, call it, several quarters to a year?

Sure. Again, it's Walter. So, looking at the actions we take on transformation, and the impact it's had in 2024. We certainly see that will continue in 2025. And again, I can't predict where the markets will be, but based on our controllables that we've taken action on and improve the and at the same time, include our client servicing with. That I think you could see margins certainly stay with good market staying at the 8% levels, probably be in the 35 to 39 range for sure.

Hey, good morning. I guess you guys are on track for kind of 80% capital return this year. Can you walk us through how you think about that level for 2025 and beyond? Thanks.

Well, right now, we're talking for 2024 that we'll be at 80%, and we believe based on certainly, as we project the market that probably is a good number that you should use for next year.

Yes. Capital position, the excess has built up again. And so we have flexibility as we go into 2025, depending on market circumstances and other opportunities.

Hi, good morning, Jim and Walter. I wanted to start off with a question on the expense outlook. Just imagine you're already thinking through the budgeting process for next year. I was hoping you could offer a bit of a sneak-peek just on how we see to be thinking about the G&A growth outlook as well as both at the AWM on an enterprise level. And just given some signs that flows are inflecting in AWM, are you looking to ramp up investment versus that current baseline?

Well, on the flows list, I think we're following what the industry are. The good news is on the wrap as Jim has indicated. So but on the expense is probably a good gauge. Again, like I mentioned, the severance and the investment we're making in the cloud, it probably in that flattish range and probably again, with the growth investment in AWM, probably in the 4% to 5% range is a good thinking.

Thanks. Good morning everyone. So, my first question is on the recruiting front. So, the adviser count declined in the quarter, but given that retention levels look pretty strong and you felt good with the 71 adviser additions, can you talk about what drove the sequential decline? And if you expect adviser growth to reaccelerate in 4Q?

Yes, we think that the adviser growth will get back to track. We had some additional and as we continue to work through productivity, some lower some on the teams and some turnover in the AFA things as advisers start to adjust their practices a bit more. But there's nothing major or abnormal there that we see.

Got it. And then I want to come back to the long-term care book commentary and how your view of value differs in the private markets. So, I'm curious, like what type of entities are or would bid for reinsuring or acquiring the long-term care block? And how robust is the market for long-term care today? I can't see many public insurers bidding for that? And does that market include alternative asset manager models, private insurers and public life insurers?

I can only speak to what we've encountered. As mentioned, we engaged in discussions with well-known reinsurers and evaluated both the long-term care aspect and the overall situation. I can say that this isn't a mature market, and from what we've seen, the outcomes suggest it's not advantageous. Therefore, I won't elaborate on the market's depth. The reinsurers we work with are reputable in the industry, but we do not perceive any potential for value creation.

Yes, there are some firms that act like private equity partners, but they collaborate with reinsurers. The reinsurance market for this type of business is relatively small, and they are applying a significant gross discount because it is still developing and not their primary focus. They prefer to pair it with high-quality other portfolios, which may require sacrificing some earnings. When everything is combined, it appears more favorable, but the reality is reflected in the proceeds rather than the underlying assets. Nevertheless, there is an opportunity for those who need capital or are willing to make trade-offs. From my viewpoint, our value is evident. They even acknowledged that pursuing this may not be suitable for us at this time due to market conditions. I feel confident in maintaining our position based on our performance and track record.

Good morning. Hey, just first a follow-up on long-term care. I hear what you're saying on the bid/ask, particularly given that it's profitable for you. But just out of curiosity, there was a precedent transaction, Manulife did a deal that was according to them a negative 8% fee. So, they had to pay money to get rid of it. Is that sort of a line in the sand that you wouldn't be willing to go for? Like absorbing a loss or a stand-alone LTC far worse than that? I just want to get a sense for your perception of what price was too high for you? Because I do think from a management distraction standpoint, if it was a modest loss, that might still be a reasonable trade-off.

Tom, let me address it this way. When we've analyzed our book, we're not discussing a loss. We're looking at all factors, which contribute positively, and we feel very confident about that. Clearly, reinsurers have different objectives that work for them but not for us. The key point is that the value of our book is not a distraction; it actually enhances our shareholder value at this stage, and we are confident in our ability to manage it, having done so for years. As we've discussed over the years and as the results show, we believe it’s a positive for us, whereas the reinsurance approach created a negative for them. That's our current positioning.

Tom, you’ve raised a good question. From our viewpoint, we not only found it to be incorrect, but we also evaluated whether there was an opportunity to pursue this, understanding it’s a common inquiry from you and others. To be candid, after contemplating the possibility, the difference in value was simply too significant. The book is quite mature and doesn’t require extensive management to yield results; we have sufficient resources for managing the rest of the life company. We’ve successfully managed to secure good rates and are modifying our claims handling for greater efficiency moving forward. The book is running down and is very mature. Despite concerns others expressed about different books years ago, our book has demonstrated improvement. We have even created discretionary reserves that we haven’t utilized, providing us with flexibility. Essentially, what you would need to sacrifice in terms of earnings from the Life business as compensation would detract from future earnings, especially considering the likelihood of more gross discounts due to limited market involvement, which would be offered as accommodations against other books. This approach simply doesn’t align with our interests. It may work for others based on their needs or perspectives. However, if I had any concerns about the contents of that book or any potential repercussions, I would address them. Even minor issues, if they existed, would be negligible over time in comparison to our operations and current holdings. Therefore, I genuinely believe this is not a concern for our shareholders.

The only thing I would add is that we have been taking on counterparty exposure, which is not even included in the formula. All things considered, as Jim said, this makes sense and provides a high confidence basis for retention.

Hi, good morning. Thanks for taking the question. Just coming back to the $2 billion excess capital position, available for deployment. I imagine that continues to build if the expectation is that you'll pay out 80% of earnings. So, maybe you could speak to some of the priorities for how you're thinking about potentially deploying that excess over what period of time? What's the sort of appetite to sit that excess capital position for how long? And maybe you could comment on some of the strategic type of M&A conversations you're having and where M&A could be most additive to the business today?

Have a lot of parts to that question. So, what we have done really is we were going through this market cycle, not knowing the environment. We feel like actually, we're one of the highest returns out there compared to anybody today and 80% is a substantial amount. What we've just done is looked at the environment. We replenished some of the excess capital at a level. We have the alternative as we move into 2025 of whether we if the market environment is good, whether we take up that buyback a bit more, whether we look at some opportunities depending on what happens in the market and values for inorganic or we will further look at how we adjust the business and redeploy in other ways. So, it gives us a good level of flexibility, but we're not at a low level of return. And so let's look at it as an opportunity and then we can decide how we utilize it based on a combination of factors, including the environment.

Yes. So, the only thing I would add is, obviously, to the previous quarter we'll increase the bank, which obviously will require capital. We're certainly investing as we've incurred $73 million of severance and also probably $25 million, $30 million of additional expense to drive that. So, that's investments, which we'll get paid back for from that standpoint. And we are also investing in seed. As Jim has mentioned, the Asset Management is certainly launching multiple products and so there's investments being made even though we're growing the excess, and we'll just keep on evaluating that as we deploy.

Sneaking in under the wire. Thanks for taking my question this morning. So, a couple of questions thinking about the bank. So, when I think about ways to protect spread regardless of rate environment, I often think of lending, and we've seen other wealth management firms note a pickup and particularly the pledge loan product with rates coming down. We know that you've seen some decent growth in pledge loans since they bottomed in mid-2023, but have you seen an acceleration in engagement in that product since the Fed cut rates recently? And should we also continue to expect the strong resi mortgage growth that you've been seeing in recent quarters to continue?

Yes. So, we do see a nice pickup in pledge. We are launching even a fixed pledge product in complement to what we had, which we also know was our advisers were asking for, and that's out in the marketplace and a good portion of what's done in the business. We know that this was a new business for us, and we're underpenetrated compared to others that have those products and solutions. And so we think that, that can continue to further expand. We will be launching HELOCs next year, and we think there's a good opportunity years ago when we had the bank, we launched HELOCs. We built a nice portfolio in that so we think we can continue to do that. We're actually working with another provider of mortgages that we're transferring that we think, again, that could further expand. So there are a number of things that we feel good about to grow the lending part of the book.

Thanks. Good morning. I just wanted to ask about your recent growth in high net worth adviser numbers and how you're envisioning the strategic developments in growing that segment over the next few quarters?

Yes, we're very pleased with the growth in high net worth advisers. As mentioned earlier, we've had 71 experienced productive advisers join us, and we're actively recruiting more. Our initiatives are focused on enhancing value for our advisers, allowing them to better serve high net worth clients. We envision providing additional tools, support, and resources to strengthen this segment further as we understand the unique needs of high net worth individuals. We will continue pushing forward with our recruiting strategy to expand this area.

We've also been enhancing our training programs specifically designed for high net worth advising, ensuring advisers are well-equipped to cater to this valuable clientele. Our aim is to create a more supportive environment that leads to improved adviser retention and satisfaction in this crucial market segment.