Ameriprise Financial's struggle to retain financial advisors could already spell big trouble for the wealth management company, spurring BofA Securities to sharply downgrade the stock on Monday.
Shares dropped 3.2% to $484.77, making the stock was one of the S&P 500's worst performers for the session. The stock has fallen 15% since hitting a 52-week closing high of $570.68 on Aug. 13, according to Dow Jones Market Data.
Other wealth management stocks were also down. Charles Schwab, LPL Financial, and Raymond James dropped 1.9%, 1.1%, and 1.2%, respectively.
Five advisory teams departed Ameriprise from May to September, including three that launched independent advisory firms using Charles Schwab as their custodian. The teams oversaw about $12.75 billion in combined client assets under Ameriprise. The largest was Rise Private Wealth Management, which oversaw $8.1 billion.
Large team departures may now be "structural" for Ameriprise, BofA Securities analysts wrote in a note. They cited "attractive economics in RIA ownership."
Ameriprise has combated advisor departures by offering retention bonuses, but this could weigh on operating margins, they said.
The analysts projected Ameriprise's organic growth at 1.6% next year, compared with 8.1% for LPL Financial and 5.3% for Raymond James. They also warned that nearly half of Ameriprise's roughly 10% long-term earnings growth will come from stock buybacks.
Artificial intelligence could be disruptive, too. Ameriprise, the analysts said, may need to raise the interest rates it pays on client cash balances as AI makes investors more aware of higher-yielding alternatives.
Consequently, the analysts lowered their rating to Underperform from Buy and cutting their price target to $445 from $570. That represents 11% downside from the stock's closing price of $500.80 on Friday.
Of the 12 analysts polled by FactSet, five have the equivalent of Buy ratings and six have Hold ratings. They have an average target price of $556.10.
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