Few investors today have dealt with a prolonged period of rising interest rates. Meanwhile, the strategies that worked the last time—in the 1970s—probably aren’t going to work as well today, suggests Jim Pearce, editor of Personal Finance.
And this turmoil will be happening as baby boomers matriculate into full retirement, which magnifies the need for clarity in making portfolio decisions.
So demand for trusted financial advice will increase and independent providers such as Ameriprise Financial (AMP) stand to cash in.
Ameriprise was built on the need for retirement advice. It may be the closest thing to a pure play on the baby boomer generation.
We boomers began turning 65 in 2011 and the youngest of our generation will hit that age in 2029. The peak years are still to come, with an estimated 4.2 million boomers projected to retire in 2021.
In financial terms, this equates to over $40 trillion in investable assets this year and 50% more than that when the peak is reached.
Ameriprise has captured less than 2% of those investable assets, with $444 billion in client accounts at the end of 2014, an 81% increase since the stock market bottomed out in 2009.
At the heart of its business is fee-based financial planning, performed by its nearly 10,000 advisers around the world.
Demand for fee-based financial planning has grown sharply since 2009, as investors find it to be more objective and less biased than using brokers working on commission.
The fee-based model is paying off. Operating net revenue per adviser has grown at a compound annual growth rate of 13% over the past five years.
Ameriprise offers the security of a Fortune 500 company with a strong balance sheet and an army of certified planners, backed by a legion of accountants, lawyers, and other specialists.
Ameriprise has ascended to a perfect score of 10—based on our proprietary IDEAL ranking system—based on its solid dividend yield (2.5%) and strong growth in net operating cash flow.
What does surprise me is its relatively modest valuation of only 10 times next year’s estimated earnings.
We believe Ameriprise represents one of the best ways to participate in the growth of the baby boomer retiree market as they struggle to develop a successful investment portfolio in the face of rising interest rates and increasing stock market volatility.
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