Right off the bat, Ameriprise Financial (NYSE:AMP), the asset management company spun off from American Express (NYSE:AXP) last fall, is an enticing proposition. With a single investment, you get to combine the healthy returns of the asset management business with the potency of a unique spinoff situation. Theoretically, this combination alone should be enough to trounce the market averages, but of course, as diligent Fools, we need to take a closer look anyway.
Last Wednesday, Ameriprise creamed analyst expectations by growing net income 39% over the previous year. The improvement was bolstered primarily by an increase in cash sales and, more importantly for investors, moderate growth in the number of affluent clients. As anyone who is familiar with the company's television campaign can plainly see, Ameriprise has its sights set on attracting the "mass affluent market" -- which is management-speak for rich baby boomers.
With respect to this objective, CEO James Cracchiolo seems to be delivering the goods, as average assets per client grew to $91,600, compared to $83,000 a year ago. But that should come as no surprise after you consider the company's strategic focus on financial planning and retirement needs. In fact, over a tenth of all certified financial planners in the U.S. work under the Ameriprise umbrella. This is notable because clients who are either under a financial plan or have assets tied up in a 401(k) have a tendency to stick with an investment firm for a meaningful period of time.
The obvious question now is whether Ameriprise can continue to leverage its network, further tap into its target demographic, and build its brand in order to fuel future growth. Despite Ameriprise's branding efforts, more established asset "collectors" like Merrill Lynch (NYSE:MER), Morgan Stanley (NYSE:MS), and Wachovia (NYSE:WB) still have greater prestige associated with their firms. But, as mentioned earlier, I believe that the economics of the asset management business, and specifically the advisory side, are so attractive that investors would do well to get involved at a reasonable price.
The battle for "baby-boomer asset share" is certainly a highly competitive one, but there's enough room for multiple players to succeed. Sometimes, achieving superior investment results is as easy as being in the right special situation (like a spinoff), in the right industry (like asset management), at the right time (like pre-boomer retirement). Of course, after a greater than 40% run-up in Ameriprise shares since it went public, one would have to think hard about whether the company is also selling at the right price. OK, so maybe investing isn't that effortless after all.
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Fool contributor Brian Pacampara has no stake in any of the companies mentioned. The Fool's disclosure policy pulls no surprises.
