In a bid to expand its reach into community banks across America, Ameriprise Financial Inc. said Monday that it has agreed to purchase a Texas company that manages on-site investment programs for more than 140 banks and other financial institutions in 29 states.
Minneapolis-based Ameriprise also reported strong first-quarter earnings thanks to continued growth in its Advise and Wealth Management business. The company reported net income of $403 million, up 11 percent from last year, with net revenue of $2.9 billion for the quarter.
The acquisition of Investment Professionals Inc. (IPI), which is expected to close in the third quarter, will not greatly expand the size of Ameriprise's network, which already includes nearly 10,000 financial advisers at Ameriprise offices around the country.
San Antonio-based IPI, by comparison, has about 200 financial advisers and manages about $8.2 billion in assets, according to Ameriprise. But the deal will open up an important new avenue for growth, according to an Ameriprise news release.
"Coupling the resources and product line of Ameriprise with IPI's community bank culture will open the door to extensive opportunities in the financial institution investment business," said IPI Chairman Scott Barnes, who founded the company in 1992.
Risky products
IPI has faced recent regulatory scrutiny. Last month it agreed to pay a $100,000 fine and hire an outside consultant to make recommendations on how to address problems in the way it markets its investments. It also must offer restitution to victims.
IPI routinely used illegal sales contests to help drive sales of risky investment products that were inappropriate for its elderly customers, according to securities regulators with the Massachusetts Secretary of State. Massachusetts officials blamed the problems on "lax supervision" from the company's headquarters in Texas, as well as the use of "aggressive sales contests" that were promoted at the highest levels of the company.
Ameriprise responded to questions about the matter with a written statement: "As with any acquisition, we take compliance very seriously and will supplement their systems with our strong compliance infrastructure going forward."
Among the documents cited by Massachusetts investigators was a November 2015 e-mail from IPI President and CEO Jay McAnelly, who urged the company's regional directors to use the offer of a free ski trip to Colorado as a way "to motivate sales," IPI acknowledged in the consent order.
"This is the last week of the contest … use it to drive results … and let's get some chatter … Top two will go skiing … don't miss out of the opportunity to motivate someone," said McAnelly's e-mail.
The company also rewarded high-performing salespeople with all-expense-paid trips to the Caribbean and other perks, including free tickets to a Red Sox game and up to $300 in spending money.
Regulators said the contests violated rules against promotions aimed at increasing the sales of a particular financial product. While IPI could treat a sales person to an "occasional meal" or baseball game, such gifts could not be "preconditioned on the achievement of a sales target," according to the complaint.
One of the financial advisers cited in the complaint reached his sales quotas — and qualified for free trips — in part by steering elderly bank customers into high-risk investments they didn't fully understand, according to the department. One of those victims was a 65-year-old woman who was dying of cancer and was pushed into purchasing a long-term annuity even though she told the adviser she was afraid she would be dead by the time the investment matured, records show.
IPI officials did not dispute the facts in the consent order, but they also did not admit to any violations.
In the news release announcing the acquisition, Ameriprise noted that McAnelly will be joining Ameriprise and "providing continued leadership and a smooth transition."
In its earnings announcement for the first quarter, Ameriprise said assets under management had increased 6 percent to $818 billion. The company said it bought back $357 million in stock and paid $121 million in quarterly dividends.
The company said its board had authorized an additional $2.5 billion in share repurchases through June 2019. It increased its quarterly dividend 11 percent to 83 cents a share.
The company said its fee-based businesses are growing and generating cash it can use to invest in the business and return to shareholders. "Client activity was strong, and assets increased across the firm," the company said. "Net inflows from fee-based investment advisory accounts more than doubled from last year."
Jeffrey Meitrodt • 612-673-4132
