Ameriprise Financial Inc (AMP) — Q2 2025 Earnings Call Transcript

Thank you, operator, and good morning. Welcome to Ameriprise Financial's Second 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 references to various non-GAAP financial measures, which we believe provide insight into the company's operations. Reconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website at www.ir.ameriprise.com. 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 and risks that could cause actual results to be materially different from forward-looking statements can be found in our second quarter 2025 earnings release, our 2024 annual report to shareholders, and our 2024 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 today's call will focus on adjusted operating results. And with that, I'll turn it over to Jim.

Good morning, everyone, and thanks for joining our call. As we shared in our release, Ameriprise had another good quarter and first half of 2025, continuing our record of generating strong results over many years in market environments. We feel very good about the strategic direction and competitive strengths of our business. And importantly, our ability to help clients achieve their long-term goals. Reflecting externally, equity markets moved around quite a bit in the quarter and investors paused, keeping more cash on the sidelines. That said, markets proved to be remarkably resilient given ongoing trade dynamics. As we saw, economic conditions were on firm footing in the first half. However, questions remain around the next steps and impact of tariffs. With that backdrop, our assets under management, administration, and advisement grew to a new high of $1.6 trillion. In terms of financials, adjusted operating results were also good. Total revenues increased 4% from asset growth and strong transactional activity. Earnings per share increased another 7%, and our return on equity remains among the industry's best at a very strong 52%. Across the business, we continue to implement a significant investment agenda. This includes investments in our leading client experience, technology, digital capabilities, advanced analytics, and AI. This is made possible by our consistent expense discipline and ongoing transformation efforts across the firm. On the wealth side, we're delivering strong value through our quality client adviser engagement centered on our goal-based advice experience. We see this reflected in the excellent client satisfaction that we consistently earn of 4.9 out of 5. We had strong client engagement, and client assets grew nicely again in the quarter to a new record of $1.1 trillion, up 11%. Total wrap assets were also up, increasing 15%. Wrap net inflows were $5.4 billion and reflected the higher market uncertainty and seasonal impact of client tax payments, and transactional activity was also good. Client total cash holdings increased in the quarter and remained very high, as we would expect based on the market situation and near-term rates, and these assets on the sidelines represent future growth opportunities. We continue to provide exceptional support and capabilities to our advisers and teams. They're staying closely connected with clients and benefiting from the investments we're making. For example, our intelligence dashboards provide in-depth analysis of key areas of advisers' practice like client contact, prospects, and acquisition. We're using automation analytics to drive efficiency, help advisers enhance personalization based on client needs, and identify opportunities for deepening engagement. In June, we made a significant addition to our wealth management capabilities with the launch of Signature Wealth, which we feel will help advisers manage client assets even more holistically and efficiently. It combines the best of our current advisory platform into a flexible unified management account and frees up capacity for our advisers to further focus on client engagement and practice growth. With the excellent platform we've built and the integrated support we provide, our advisers continue to be highly productive and engaged, and productivity grew another 11% to $1.1 million per adviser. Regarding recruiting, we continue to bring in good recruits, adding another 73 experienced advisers joining Ameriprise in the quarter, and we feel good about our pipeline as well as our differentiated adviser value proposition. These advisers appreciate our reputable brand, practice support, and financial strength and stability. We're also hearing that their clients feel overwhelmingly positive about moving to Ameriprise, which is terrific. The bank is also doing well. Total assets were up 6% and we're earning good spread. Loan growth at the bank is also good, driven by pledge. As we've shared, we're launching new products like our new CD that came out in the second quarter. In the coming months, we'll be bringing out HELOCs and checking accounts to add to our product offering. I would highlight that our wealth business consistently delivers best-in-class margin. It was 29% for the quarter. Our retirement income and protection products help serve clients' full financial picture. We're driving good sales in our targeted areas like variable universal life, variable annuities without living benefit riders, and structured annuities. We saw a nice pickup of 25% from the first quarter within our structured solutions. Advisers appreciate having these strong, consistent offerings on the platform that have been developed and seamlessly integrated with our client experience, and we're working closely to support them to engage clients to meet more of their needs. It was another strong quarter for RPS. The business consistently generates good returns for the company and strong free cash flow. The RPS business is one of the most profitable insurance businesses in the industry. Turning to asset management, we continue to deliver attractive earnings and drive operational efficiencies. Total assets under management and administration increased to $690 billion, up 2% year-over-year and 5% sequentially. Our investment performance continues to be strong across both equity and fixed income, with excellent long-term performance. More than 70% of our funds were above the median on an asset-weighted basis for the 5-year period and more than 80% over 10 years. Regarding the one year, equity performance slipped a bit; however, short-term fixed income performance is very strong at more than 80% above the median, and 99 of our funds were rated 4 or 5 stars by Morningstar. Regarding flows, we had $8.7 billion of outflows in the quarter, largely driven by higher institutional impacts. In Global Retail, gross sales increased about 10% year-over-year, but like others, we had higher underlying redemptions. April was especially tough for the industry given the markets. Looking at a flow rate in the U.S. versus active peers, we're slightly ahead in terms of equities and a bit below in fixed income, but we have narrowed the gap. In EMEA retail, higher redemptions also plagued us in the quarter, although we did see a nice pickup in U.K. multi-asset strategies. On the retail product front, we're adding to our active research-enhanced index ETF lineup in the U.S. and gaining flows. In the coming months, we will be extending this capability in EMEA with the launch of a series of active ETFs in the U.K. and Europe. In terms of the institutional business, we experienced higher redemptions that included the previously announced Lionstone outflow. As we move forward, we're adding more CLOs and earning key equity, fixed income, and hedge fund mandates across regions, as we had some good results in terms of cross-sell and deepening relationships with current clients. In Asset Management, we continue to manage expenses extremely well, driving efforts to realign resources, streamline systems, and enhance our processes in the U.S. and globally. We're significantly transforming the business while maintaining our fee rate. Asset Management margin was 39% in the quarter, at the top end of our target range, up nicely due to our expense discipline. For Ameriprise overall, our complement of businesses has enabled us to perform very well over different environments and market cycles. We continue to generate strong free cash flow and have one of the highest returns on equity at more than 50%. We're also maintaining a good balance of share buybacks and dividends, continuing to return to shareholders significantly, and we're targeting an 85% payout ratio for the balance of the year. I'd highlight that Ameriprise received some new recognition that adds to the portfolio of accolades that we've earned. We were recognized in 2025 by Kiplinger's Readers Choice Award for outstanding overall satisfaction, quality of advice, trustworthy advisers, and for being the most recommended among wealth managers. Additionally, Ameriprise was also named one of America's Most Innovative Companies in 2025 by Fortune. Looking forward, we feel very confident in our ability to continue to manage and adjust for the environment. We're staying focused on our strategic priorities and generating strong returns for the business. Now Walter will provide additional color on our financials.

Thank you, Jim. Ameriprise delivered continued solid performance with exceptional balance sheet strength in a volatile and uncertain environment. Adjusted operating EPS increased 7% to $9.11, with a strong margin of 27%. Adjusted operating net revenues increased 4% to $4.3 billion from asset growth while absorbing the market and rate impacts across our businesses. Expense discipline remains strong as a result of our ongoing firm-wide transformation initiatives. Year-to-date G&A expenses improved 3%, and we will maintain G&A expenses at this level for the remainder of the year. It was a solid quarter across our businesses, and we'll get into the details of our segment results on the upcoming slides. As we exited the quarter, our balance sheet fundamentals remain very strong, and we are well positioned to navigate potential volatility going forward. A stable 90% free cash flow generation across our segments, combined with our strong balance sheet fundamentals, enabled us to return 81% of operating earnings to shareholders in the quarter. We remain committed to returning capital to shareholders at a differentiated pace and plan to increase our payout ratio to 85% for the second half of the year. On Slide 6, you'll see that the EPS growth of 7% was impacted by the market dynamics in the quarter. Assets under management, administration, and advisement increased to a record high of $1.6 trillion, benefiting from strong wealth management client flows over the past year and equity market appreciation. We delivered strong profitability with a consolidated margin of 27% from 4% revenue growth and continued expense discipline. We continue to generate a best-in-class return on equity of 52%. On Slide 7, you see the solid metric results from wealth management, given the elevated market volatility and normal seasonal tax payment trends. Revenue per adviser grew 11% to a new high of $1.1 million. This was the result of an 11% increase in client assets to $1.1 trillion, with client net inflows of $34 billion over the past year. Wrap assets were up 15% to $615 billion, with wrap flows of $33 billion over the past year, representing a 6% annualized flow rate consistent with the prior year. Due to the volatility in the early part of the quarter and tax season in April, we saw slower flows in the second quarter following a strong first quarter. In total this year, wrap flows have been $14 billion, consistent with the prior year. Additionally, transactional activity levels remain strong. Cash sweep balances were in line with expectations at $27.4 billion compared to $28.6 billion in the prior quarter, reflecting normal seasonal tax payments. We are seeing nice momentum in our experienced adviser recruiting. Being affiliated with a firm that has an excellent reputation and strong balance sheet fundamentals is attractive to advisers, particularly in the volatility and uncertain environments we've encountered this year. Advisers find our value proposition compelling, and we are focused on making sure our transition packages are attractive to experienced advisers who share our values and commitment to the client experience. On Slide 8, you'll see strong financial results from wealth management. Adjusted operating net revenues increased 6% to $2.8 billion. Revenue growth benefited from strong cumulative wrap net inflows and market appreciation over the past year, which more than offset lower spread revenues and the impact of unfavorable markets within the quarter. Adjusted operating expenses in the quarter increased 9%, with distribution expenses up 10%, reflecting growth in adviser productivity. G&A expenses increased 6% to $435 million in the quarter, which was the result of higher growth investments and volume-related expenses due to business growth. However, for the year, we expect low to mid-single-digit growth in G&A. Pretax adjusted operating earnings were $812 million, which included the impact on wrap assets from the dip in equity markets in April. However, we saw a substantial recovery in the equity markets by the end of June, which positions us well as we enter the third quarter. In fact, advisory wrap assets on June 30 were 6% higher than the average for the second quarter. We saw a continued strong contribution from both core and cash earnings in the quarter. Our core earnings grew in the low to mid-single-digit range after absorbing the market impact in the quarter. Cash earnings saw a high single-digit decline from the impact of the Fed funds effective rate reduction since the latter part of 2024. Our strategy leveraging Ameriprise Bank has been important in minimizing the impact from Fed funds effective rate reductions on our AWM business. In fact, we continue to see a modest increase in net investment income in the bank this quarter. Margins remained best-in-class at 29%. Turning to Asset Management on Slide 9. Financial results were solid in the quarter. Operating earnings increased 2% to $222 million. This strong quarter reflected equity market appreciation and the positive impact from expense management actions, partially offset by the impact of net outflows. Total assets under management and advisement increased to $690 billion, up both year-over-year and sequentially from higher ending market levels. Revenues were $830 million with a stable fee rate of 46 basis points. Adjusted operating expenses improved 3%, and importantly, G&A expenses improved 5%. As Jim said, we are proactively driving operational transformation across our global footprint, including leveraging capabilities across Ameriprise. The benefits from these initiatives are evidenced in our G&A expense reductions. Margins reached 39% in the quarter, which is at the high end of our target range. Let's turn to Slide 10. Retirement and Protection Solutions continued to deliver strong earnings and free cash flow generation, reflecting the high quality of the business built over a long period of time. Pretax adjusted operating earnings in the quarter increased 9% to $214 million. The strong and consistent performance of the business reflects the benefits from favorable life claims, strong interest earnings, and higher equity markets. These high-quality books of business continue to generate strong free cash flow with excellent risk-adjusted returns and continue to be an important contributor to the diversified business model. Overall, Retirement and Protection Solutions sales were solid at $1.4 billion. Structured annuity sales remained strong but were down relative to a very strong level in the prior year. Turning to the balance sheet on Slide 11. Balance sheet fundamentals and free cash flow generation remains strong. We have an excellent excess capital position of $2.3 billion above regulatory requirements, and we have $2.1 billion of available liquidity. Our investment portfolio is diversified and high quality. We have diversified sources of dividends from all of 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 12, Ameriprise delivered solid results in the second quarter, which is a continuation of our long track record navigating various market environments. Over the last 12 months, revenues grew 8%, adjusted EPS increased 13%, return on equity grew 240 basis points, and we returned $3 billion of capital to shareholders. We had similar growth trends over the past 5 years, with 8% compounded annual revenue growth, 17% compounded annual EPS growth, return on equity improving 16 percentage points, and we returned over $12 billion of capital to shareholders. These trends are consistent over the long term as well. This differentiated performance across multiple cycles speaks to the complementary nature of our business mix as well as our focus on profitable growth. With that, we'll take your questions.

So Jim, it's encouraging to hear your commentary on the recruitment backlog improving. I was hoping you could speak to some of the drivers of the software flows in 2Q recognizing a lot of that related to the Liberation Day law. And are you seeing any indications of M&A reaccelerating back to that more normal mid-single-digit growth rate?

Yes. So really at the beginning part of the quarter, the combination of the tax payments, plus Liberation Day, the flows had the tax payments out, but then the flows did not bounce back because of Liberation, and people were a bit more on the sidelines. That started to recover as we got later in the quarter, but we're still seeing that pick up a little bit more as we get into July. There was also some lumpiness between the net inflow from some of the recruiting coming in versus some of the terms. I think there were some big checks that were a little irrational given the overall situation. It impacted a little lumpiness for some of the outs that we had. Overall, we feel good about the overall positioning. The core client base continues to do well, but our base doesn't react as quickly to the markets. It’s more of an average over time, and we'll see that recover.

That's great. And since you alluded, Jim, to some of the irrational behavior in this space, as I look at distribution expense within AWM that has steadily crept higher year-on-year. At the same time, one of your peers had alluded to indications that there's more rational behavior on TA, maybe less aggressive recruitment packages, at least from some of the sponsor-backed firms in particular. Just curious if that's consistent with what you're seeing in the marketplace? And how should we be thinking about the year-on-year trajectory for the AWM distribution expense line in particular?

Yes. So I think it's a combination. So let me explain the distribution, and then I'll get to the recruiting. On the distribution, when we look at the average gross production that we have at the adviser base, it's up 9%, and that's what they get compensated on. If you look at that, that's up 9% versus total revenue being up 6%, and because you’ve got the cash business, et cetera. When you look at the production, that matches, and then you had a little more increase because people moved to higher production levels, so their payout rates go up a bit, and that's the difference. Regarding the packages themselves, that only had a small incremental piece of it year-over-year. It's a little bit, but it's not to the extent of what you're looking at as the total. Most of that is production-based. And regarding the recruitment package, you're right that there are some rationally, but there's still some people irrational, particularly for certain advisers unless you have a perfect market going forward and high short-term rates, et cetera, the economics got to look a little iffy. Sometimes people will take a huge check, particularly if it's way above what the normal economics will call for.

Just a follow-up on the last question. Can you just talk a little bit more about the recruiting strategy going forward, how you're seeing the market, and how you expect to grow there?

Yes. So the pipeline looks like it has increased again nicely going through the low periods that we had. We are focused on selling our total value proposition, which is helping advisers grow their productivity. We have on average higher productivity from our core adviser base than most that just associate advisers out there and say, providing network services. We do a lot in capabilities that we provide, including new technology, AI support, et cetera, in addition to the coaching and training support we provide. We feel good about that, and we do look to attract certain types of advisers. We're not just looking to associate anyone by providing them a big check. So we do have to raise our packages a bit to be based on the competitive frame, but that's where we bring in alignment with how we can help people really grow and become more successful.

And can you talk a little bit more about what clients are thinking right now? I know you talked a little bit about annuities being popular. How are they kind of positioning themselves? And are you seeing them wanting to deploy?

Yes. Regarding the annuity business, we see a continuation of people being interested in structured annuities as well as annuities because of the overall tax environment, in addition to annuities without living benefits. Those are the only two areas that we really have in the marketplace right now. We're not playing in the fixed annuity area. I know that might have been an area. We have other people on the shelf that we sell. But in that regard, we are focused on just those two areas, and they are complementary, as people look at their retirement and long-term income that they're looking to achieve.

With top line growth slowing in wealth management, is there an opportunity to maybe get more aggressive on some of the outsourcing deals or to do larger outsourcing deals or even just get more aggressive on recruiting in general? How do you think about that?

Yes. What I would say is we are focused on the recruiting channel. As I said, we have increased the competitive packages that we put in the marketplace just because of the competitive frame. In regard to outsourcing, I'm not exactly sure what you meant. As far as the institutional business, that continues to do well, and we're continuing to focus there as well as incrementally. We are focused on also some of our centralized channel business where we could work with clients beyond the locales of our current advisers, and that activity is increasing. So those are the areas we're focused on. We have not looked at just rolling up adviser networks, et cetera, like others because we want to maintain a very strong focus on how we deliver a very good client experience, associating people who want to use the advice value proposition appropriately.

Jim, just coming back to the competitive environment in AWM, would you expect to shrink overall advisers in the next year or so? Or would you still expect to be able to grow?

Yes. I mean, even now, Tom, we are growing. I'm not saying that we have a concern there. I think what I would probably say is, listen, people will put out more to buy up what they would call people putting on the system. We look at it as a long-term approach. We have a very strong business over time. I have 10,000 advisers that I look to really help them grow and maintain their productivity strong through all market environments. We have good profitability of what we do; where the adviser does well, the firm does well, et cetera, in a balanced proposition, and we deliver very strong value. That's what we're looking for. We're not just looking to add people to show short-term top line growth and then suffer the consequences later on or have some issues with the type of people being associated. Others have different philosophies. I'm not criticizing their philosophy; I just say that that's where we are. We always stick to our knitting. In the past, we never even recruited externally. We always developed internally, and we still do that, but we now do both additionally. We'll be very competitive, but when people get a little over the top they can do that, and maybe it works for them, but we don't look at it that way.

Okay. That's helpful. And then just a follow-up on RPS. The results in the quarter looked quite strong. I guess net investment income was up a lot sequentially. Anything in particular going on there? It looks like mortality was favorable on the life insurance side. Just curious what you're seeing there. And then finally, any updates on potential risk transfer? You've had a bunch of peers doing different deals on long-term care or well-priced variable annuity deals. Any updated thoughts there?

This is Walter, Tom. As it relates to strong fundamentals, as you indicated, we did have an improvement on life claims, which certainly contributed to the increase. So we feel very good about the overall underlying profitability drivers within the business. Regarding risk transfer, again, we discussed that the business is solid. It really contributes, and we haven't seen any bid-ask change that makes sense from a shareholder standpoint.

And Tom, what I would say is you really study the industry well. This is one of the most profitable insurance businesses and protection businesses in the industry. These are excellent books. They generate great free cash flow. The returns on equity are really high, and the margin is very strong because we built good books over time. We only play in areas that we feel are appropriate for us, but we have all the other providers in the channel that have all the alternatives that clients want to use. If there's a good strategic relationship or something that makes sense, we will entertain it. But right now, I would probably say we generate very good returns that complement the business.

Two questions for you guys around the bank. It's kind of related. But one, I was hoping you guys can give us a sense of roll-on, roll-off dynamics in the bank securities portfolio right now. Walter, as I recall, you guys put this in place in sizable amounts a couple of years ago when spreads were wider. So curious as that securities portfolio rolls over the next, call it, year or two, what kind of a spread difference you're seeing and the money you're putting on versus what's coming off? And secondly, I heard you guys on the loan strategy. Obviously, that's an important part of the bank build-out going forward. What's the funding structure for that? The deposits are running relatively light on balance sheet at this point. So as you're thinking about growing the loan book, how are you planning on funding it?

Sure. On the portfolio, as we see paydowns and maturities taking place, there should be a spread increase as a result. That is certainly contributing to net interest income improvement year-over-year. We feel comfortable with that, and that was part of our strategy that we talked about executing, which we mentioned in the fourth quarter of last year. As for funding, we are launching liability products to support it, and we feel confident about our strategy to improve diversification in our liability portfolios to align with our asset strategy.

In the liability products you're launching, is that kind of high-yield savings, CDs, things like that?

Yes, from that standpoint, yes.

Jim, my question is on recruiting the wealth management business. And I know you’ve touched on this topic, but a new source reported that Ameriprise is offering up to 125% of trailing revenue for Commonwealth advisers. So I'm curious if you can comment on Ameriprise's ability to take advantage of current M&A disruption and if we could see a pickup in recruitment from this.

Yes. We don't comment on what comes out from the marketplace or what people report. What I can say is we continue to recruit broadly in the environment. We offer appropriate competitive packages. However, as I mentioned, we sell the entire value proposition for people who truly want the support, the technology, the capabilities. When advisers join us from competitors, they often rate everything they get from Ameriprise, nine times out of ten, as being better than where they came from, especially regarding technology and support. The productivity improvements for advisers we’ve brought on board have been tremendous after a few years with us, and that's what we recruit on.

Just for my follow-up, another wealth management question. Can you update us on your bank and credit union pipeline? I'm just curious if we could get some lumpy wins announcements in the second half.

Yes, the pipeline looks good. I won't comment on any particulars, but we feel good about our position in that business. We continue to build that pipeline and aim to execute and secure some deals.

My question is around asset management and flow performance. I know there were some comments about higher redemptions even while reflecting the Lionstone AUM that left. Can you maybe talk about large client breakage in the quarter distribution environment, and what your outlook is for the pipeline converting?

Yes. If you're referencing a little bit on the institutional side, the institutional business is always going to be a bit lumpy. We did experience some outflows, as we mentioned, from the Lionstone termination, some LDI, and people repositioning their portfolios, including moves closer to passive investments. However, we are getting nice underlying wins with good products in various equities and portfolios. We did receive higher redemptions in the second quarter, outpacing the wins I just mentioned. On the retail side, we have been really good on the gross sales pickup through the first quarter. However, through that April period, growth slowed down, redemptions increased. Sales have picked up again on the growth side, but the redemptions outstripped that. In terms of active space, we see overall that there is increased volatility in redemptions, but we feel good about some of our market initiatives and product launches. We are launching additional ETFs both in the U.S. and in Europe, and we're working on CLOs, even launching an interval fund, so we’re doing more product development.

And my follow-up question, with the focus on the recruitment environment and being competitive and packages that need to come over, and clearly, a focus on general and administrative expenses. Can you maybe talk about how the company weighs adding human capital versus automating and using AI? Is there an internal process to determine whether you want to add it or can be automated or using an offshore center of excellence to kind of fund that more competitive recruitment environment?

Yes. It’s a good question. What we consistently do is invest in technology, focusing on the overall experience of our advisers. We also do intelligent automation for processing and other activities. We invest in data and analytics to improve the information that we can process and how we present that information. All these investments have added to our capabilities. As we do that, we've been able to adjust some of our expense base. Some of it is offshore, and some of it is just where we then utilize that money for the investments we're making. Our investment base has been very strong. We have driven good productivity improvements. There are still good opportunities for further improvements as we help our advisers uptake more tools and capabilities and utilize some of the servicing we put in place. That’s our approach. We don't necessarily do a one-for-one trade-off, but we continue to transform the business and reinvest.

Maybe just circling back on recruiting. I was hoping you could elaborate a little bit on how you're seeing the pipeline and opportunities across the different affiliation channels where you operate in the marketplace. How do you see the mix of that business evolving? And then just related to that, on the distribution expense, circling back to Chubak's question, that expense/distribution expense ratio relative to compensable revenues has increased from the low 60s percent years ago to the high 60s, nearly 67% in the quarter, up 120 basis points or so year-on-year. What’s driving that mix over a multi-year arc, and how do you see the various contributing factors? Should we expect that to stay at this level or maybe move higher as top-line growth continues to slow?

For the recruiting side, we have a broad strategy that includes a combination of independents, wires, and regionals, both independent and employee types. We look for advisers who are aligned with our value proposition and want to grow productivity. We’re not just interested in acquiring people simply to show growth. The pipeline looks good for the third quarter, so we feel positive about that. Regarding distribution expense, some of that has risen due to the management of expenses, so SMAs and other expenses related to wrap activities have contributed to that increase. The FDIC insurance and other costs also factor into that. Walter can explain more about specific details.

It is consistent. The increase in the ratio is impacted by mark-to-market on the advisory deferred comp, hence the up and down movement. But we strive to stay within the consistency of that point. The 66% we indicated aligns with historical patterns, but it will fluctuate based on deferred comp.

I appreciate all the questions on recruiting on the call. However, thinking back to some of your comments in the past, I had always thought that most of the growth in AWM comes from existing advisers selling business to their existing clients followed by existing advisers finding new clients, and lastly, new advisers. So while I’m not expecting specific numbers, is that the right way to think about it in terms of order of magnitude regarding what drives growth? Any additional color on the mix would be helpful.

Suneet, you're 100% correct. That has not changed. The core growth of our business comes from the organic part of adding new business from our advisers, new clients, and flows from current clients. On top of that, there is always some lumpiness of recruits versus terms. What I'm saying in the second quarter, you had some undue level of volatility that affected the flow picture because the second quarter is usually weaker due to tax payments. You had that plus the weakness from the tariffs. Overall, the underlying consistent nature of growth is strong, and I believe as Walter mentioned, the first half of the year looks fine.

That makes sense. I guess I have a bigger picture question: If we think about Ameriprise over time, I think we're approaching the 20-year anniversary from the spin. Notwithstanding today's stock price, it's been an incredible success. How does the Board think about the next 5 to 10 years? Is the next layer of management identified? Are there significant strategic pivots expected, such as partnering with a larger organization or joint ventures? Just trying to assess if anything dramatically changes with this 20-year anniversary.

No, Suneet, actually, it is our 20th anniversary in September. When we came public through the financial crisis, many didn’t expect us to succeed. Since then, we have achieved the #1 best-performing financial institution out of 500 in the S&P financials. The combination of our businesses has proven to be successful, delivering higher earnings with lower volatility than each individual segment. We produce strong returns to shareholders and substantial cash flow. Our business model remains solid despite market fluctuations. The Board is confident in our position today, stronger than we've ever been, with a $50 billion market cap improving from $6 or $8 when we went public. Many larger competitors are now smaller or weaker. The Board feels good about our current standing. We're continually identifying talent and levels of management to ensure we remain successful. We’ve received recognition as one of the best-managed and most innovative companies, underscoring our overall strength and commitment to client service and satisfaction.