Q1 2024 Ameriprise Financial Inc Earnings Call

Participants

Alicia A. Charity; SVP of IR; Ameriprise Financial, Inc.

James M. Cracchiolo; Chairman & CEO; Ameriprise Financial, Inc.

Walter S. Berman; Executive VP, CFO & Chief Risk Officer; Ameriprise Financial, Inc.

Alexander Blostein; Lead Capital Markets Analyst; Goldman Sachs Group, Inc., Research Division

Brennan Hawken; Executive Director and Equity Research Analyst of Financials; UBS Investment Bank, Research Division

Craig William Siegenthaler; MD & Head of the North American Asset Managers, Brokers & Exchanges Team; BofA Securities, Research Division

Jeffrey Paul Schmitt; Research Analyst; William Blair & Company L.L.C., Research Division

John Bakewell Barnidge; MD & Senior Research Analyst; Piper Sandler & Co., Research Division

Michael Anthony Anagnostakis; Research Analyst; Wolfe Research, LLC

Michael J. Cyprys; Executive Director and Senior Research Analyst; Morgan Stanley, Research Division

Ryan Joel Krueger; MD of Equity Research; Keefe, Bruyette, & Woods, Inc., Research Division

Suneet Laxman L. Kamath; Equity Analyst; Jefferies LLC, Research Division

Thomas George Gallagher; Senior MD; Evercore ISI Institutional Equities, Research Division

Wilma Carter Jackson Burdis; Research Analyst; Raymond James & Associates, Inc., Research Division

Presentation

Operator

Welcome to the Q1 2024 Earnings Call. My name is Briana, and I will be your operator for today's call. (Operator Instructions) As a reminder, the conference is being recorded.
I will now turn the call over to Alicia Charity. Alicia, you may begin.

Alicia A. Charity

Thank you, and good morning. Welcome to Ameriprise Financial's first 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.
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 simple list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in our first quarter 2024 earnings release, our 2023 annual report to shareholders and our 2023 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 first 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 the call today will focus on adjusted operating results.
And with that, I'll turn it over to Jim.

James M. Cracchiolo

Good morning. Yesterday, Ameriprise reported good first quarter results to start the year. We're positioned well and focused on helping our clients [submit] a complex climate, and we're also benefiting from our excellent capabilities across the business. Clearly, the operating environment remains dynamic. Equity markets have had strong year-over-year growth as the U.S. economy is proving resilient.
However, inflation remains above the Fed's target and therefore, interest rates remain high. The economic picture is not as strong in the U.K. and EMEA. Overall, many investors are holding cash on the sidelines, are in shorter-duration products, which will eventually move to other investments. This means opportunity for our business with our quality goal-based advice and [active] solutions.
With that backdrop for our first quarter adjusted operating results, total revenue increased 11% and to $4.1 billion. Earnings grew 10% to $878 million, and earnings per diluted share was up 16% to $8.39. And our return on equity ex AOCI remains outstanding at 49%. Ameriprise assets under management administration were $1.4 trillion, up 15% from a year ago, driven by client net flows and equity market appreciation.
In Wealth Management, we remain on our path to provide goal-based advice to more clients, backed by a highly satisfying and referable experience. I've had the opportunity to speak to a number of our advisors at our first quarter field conferences. They consistently shared that our client value proposition and the level of support we provide are real differentiators both in terms of driving high client satisfaction and practice growth.
Total client assets increased to $954 billion, up 19%. We saw a nice increase in transactional activity, up 17% in the quarter. Client inflows were good at $8.5 billion. While clients are still maintaining high cash holdings. Money is starting to move into other products such as structured products, brokerage and back into [wrap], including in fixed income. Wrap inflows were $6.5 billion, and the platform has grown to $522 billion, up 20%.
The bank is also an important complement. We're currently holding assets of more than $22 billion and generating very good spread revenue as we focus on deepening relationships and bringing in assets clients hold elsewhere. With $82 billion sitting in cash, we still have a significant opportunity to help clients reposition portfolios as markets settle.
Our Ameriprise advisor force is one of the largest in the industry, and we've consistently delivered some of the highest growth rates. Productivity increased nicely again up 11% to $942,000 in adjusted operating net revenue per advisor. Regarding recruiting, we added 64 experienced advisors in the quarter, and our pipeline looks good as we proceed through the year.
As a long-standing leader in advice, Ameriprise and our advisor practices are well positioned to serve the growing consumer need for advice across segments. We know that the mass affluent and affluent consumers want advice and that the opportunity continues to grow.
From a recent study, 44% of affluent investors say they need even more advice today than in the past. And there are also greater need among the majority of younger investors. More people can benefit from what we offer. And in fact, in the quarter, we were proud to earn a Hearts & Wallets 2024 Top Performer in understands me and shares my values, unbiased, puts my interest first and explains things in understandable terms.
We also invest significantly to provide our advisors a fully integrated technology suite, which has proven to simplify processes, help deliver a great client experience and drive referrals. As we shared, we're also investing in advanced analytics that can help to drive further efficiency and opportunity.
And in the quarter, we were also recognized with a Bank Insurance Securities Association Technology Innovation Award for our exclusive e-meeting capability, which greatly simplifies and enhances client meeting preparation.
Regarding financials, our margins in Wealth Management remain among the best in the business at nearly 30%. Looking ahead, our planning model positions us to sustain strong margins as clients adjust portfolios to reflect equity market and interest rate dynamics.
Regarding Retirement & Protection, we also saw a good increase in sales in the first quarter. We recently made product enhancements in both structured annuities and VUL and adjusted our wholesaling support to help more advisors deliver these solutions and increase efficiencies to the business. Variable annuity sales were up 32%, with very strong results in structured annuities, consistent with investor appetite. In the 4 years since we launched our structured annuity product, it has become our top-selling annuity and ranks among the top 10 in the industry.
In our insurance business, sales were also very good, increasing 8% with the majority of the sales in our higher-margin accumulation variable universal life products, where we added new features at the start of the year.
Overall, our Retirement & Protection business consistently delivers strong earnings and profitability. By the way, in the quarter, long-term care continued to generate positive earnings of $16 million as we benefited from higher interest rates and consistent claim levels.
We also continue to generate good earnings in Asset Management, even with flows being pressured. The team delivered strong performance for clients and focused on fully leveraging our global capabilities to drive efficiencies. Total assets under management were up 7% to $652 billion.
Regarding our investment performance, we continue to generate good short-, medium- and long-term performance across product lines. One weaker area was in fixed income to a difficult year in '22, but that's working through our medium-term numbers.
That said, we have good overall performance. In fact, the strength of our numbers was reflected in the most recent Barron's rankings of the Best Fund Families, where Columbia Threadneedle ranked in the top 10. I'll also highlight that in a recent survey of top asset management firms by [institutional investor], Columbia Threadneedle ranked 6th out of 330 asset managers for our active engagement with issuers.
Though we remain in net outflows for the quarter, in retail, we did see improvement in gross sales. In North America, equity and fixed income flows improved, and EMEA flows also improved and were in net inflows in Continental Europe, given the nice pickup in equities. In the U.K., we remain pressured.
In institutional, we ran outflows due to redemptions in lower fee mandates and impacts from previously announced portfolio manager changes as well as slower new fundings.
We have a strong offering and are telling it to better serve client demand and drive flows. This includes expanding our model delivery in the U.S., advancing our real estate capabilities as well as further strengthening our bank loan CLO business.
In Asset Management, we continue to drive synergies and efficiency gains, and you can see that in our normalized G&A expenses down 3%. In terms of overall Asset Management profitability, the North America region is performing well while EMEA faced a bit more pressure based on market conditions. Now that we're through the integration in EMEA, we're very much focused on leveraging our capabilities globally, gaining better efficiencies while reducing expenses.
For Ameriprise overall, the level of results we consistently achieve is driven by the totality of what we have here as well as our ability to invest for growth and manage expenses very well. This includes our excellent returns and earnings growth. And in terms of track records, our long-term track records are excellent. Just looking back over the last 5 years, I would highlight EPS as an example, where we have delivered 15% compounded annual growth. Our return on equity of 49% is among the highest in the industry year after year. Also very significant, we consistently deliver a differentiated level of shareholder return, returned another $650 million in capital in the quarter, and we just announced another dividend increase of 10%.
Overall, it was a great start to the year across many dimensions. What's behind our results? Our talented team. In the quarter, we received additional external recognition for who we are and how we work together. In fact, Forbes put Ameriprise on their best America large employers 2024 ranking. And Newsweek ranked us one of America's Greatest Workplaces for Women.
In closing, I would also like to highlight that in June, we will mark our 130th anniversary, which is a unique and significant milestone in any industry. Our priority has always been our clients. Also key to our longevity is our ability to innovate and evolve for the future. Ameriprise is going to continue to navigate for clients and invest in opportunities for growth, and I feel good about our ability to build on our position this year.
Now Walter will share additional detail on the quarter and some of the numbers. Walter?

Walter S. Berman

Thank you, Jim. EPS grew 16% to $8.39, with growth across all segments. The diversified nature of our business drives our consistent financial performance across market cycles and sets us apart from most in the financial services. Assets under management and administration increased 15% to $1.4 trillion, benefiting from over [$29 billion] of client flows over the past year and equity market appreciation. This has resulted in strong 11% revenue growth across our businesses.
We continue to manage expenses tightly to maintain strong margins. G&A expenses grew only 2% on a normalized basis, driven by our operational efficiency improvements. We continue to selectively invest in areas that will drive future business growth, particularly in Wealth Management. We will maintain this discipline in 2024 and plan to keep G&A expenses at 2023 levels. Our returns remain strong with a consolidated margin of 26% and a best-in-class return on equity of [50.2%] excluding unlocking.
Balance sheet fundamentals, including excess capital and liquidity, remains strong. Our diversified business model benefits from significant and stable 90% free cash flow contributions across all business segments. We returned $650 million of capital to shareholders in the quarter. And as you saw, we announced a 10% dividend increase, a continuation of our differentiated track record. In 2024, we expect to return 80% of operating earnings to shareholders.
On Slide 6, you see the strong results for Wealth Management. Client and [wrap] assets increased 19% and 20%, respectively, from strong net flows and market appreciation over the past year. Client flows in the quarter were $8.5 billion, down from quarter 1 2023, driven by higher net flows into third-party money market funds a year ago.
In the quarter, adjusted operating net revenues increased 13% to $2.6 billion from growth in client assets, increased transactional activity and a robust 30% increase in net investment income in the bank, which more than offset lower fees from off-balance sheet cash. This drove revenue per advisor to a new high of $942,000, up 11% from a year ago.
Total cash balances, including third-party money market funds and broker CDs, reached a new high this quarter at $82.4 billion as clients remain heavily concentrated in yield-oriented products.
Cash balances were fairly stable at $43.3 billion, with cash sweep down only $1 billion in the quarter, reflecting normal seasonal tax patterns. We expect clients will put money back to work in wrap and other products on our platform over time as markets and rates normalize, which creates a significant opportunity.
The financial benefit from cash at the bank remains significant and will be a sustainable source of earnings, going forward.
Adjusted operating expenses in the quarter increased 14%, with distribution expenses up 17%, reflecting business growth, including Comerica, acceleration in transactional activity, growth in experienced advisor recruiting and higher payroll taxes as the business grew.
G&A expenses increased 7% to $420 million, reflecting higher volume-related expenses and the occlusion of Comerica. We continue to invest in our growing business while maintaining expense discipline in 2024. We are targeting a G&A increase in the mid-single-digit range for the full year. This combination of revenue growth and well-managed expenses resulted in the business sustaining an operating margin of approximately [30%].
Turning to Asset Management on Slide 7. Financial results were very strong in the quarter, and we continue to manage the business well through a challenging environment for active asset managers. Total AUM increased 7% to $652 billion, primarily from higher equity market appreciation, partially offset by net outflows.
In the quarter, operating earnings increased 25% to $206 million as a result of equity market appreciation, disciplined expense management, which more than offset the cumulative impact of net outflows. And the margin was in our top end of our targeted range at [35%] in the quarter.
Adjusted operating expenses increased 2%, with general and administrative expenses flat from a year ago. On a normalized basis, general and administrative expenses was 3% lower than last year, reflecting the benefits from comprehensive expense management initiatives taken since 2023. We are looking globally, especially in EMEA, to enhance operational efficiencies and manage expenses so we are well positioned going forward.
Let's turn to Slide 8. Retirement & Protection Solutions continued to deliver good earnings and free cash flow generation, reflecting the high quality of the business that has been built over a long period of time. Pretax adjusted operating earnings in the quarter increased 3% to $199 million, reflecting the benefit from strong markets and higher interest rates, partially offset from strong sales growth, which drove up distribution expense.
Overall, Retirement & and Protection Solutions sales in the quarter, with Protection sales up 8% to $65 million, primarily in higher-margin VUL. Variable annuity sales grew 32% to $1.2 billion, with strong momentum in our structured product.
Turning to Slide 9. Ameriprise delivered excellent growth in the first quarter, which is a continuation of the long track record across market cycles and our commitment to profitable growth. Over the last 12 months, revenue grew 10%, earnings per share increased [19%] and ROE grew 240 basis points, excluding unlocking.
We had similar growth trends over the past 5 years with 7% revenue growth, [15%] EPS compounded annual growth, and ROE improved 13 percentage points. Compared to most financial services companies, this differentiated performance across multiple cycles speak to the complementary nature of our business mix as well as our focus on profitable growth.
Now let's finish with the balance sheet on Slide 10. Balance sheet fundamentals and free cash flow generation remains strong and support our ability to consistently return capital to shareholders and invest for future business growth. In the last year, we returned $2.6 billion of capital to shareholders, which included $650 million in the quarter. In addition, we announced our annual dividend increase of 10%, taking the quarterly dividend to $1.48 per share.
Merit prices consistent capital return strategy drives long-term shareholder value. Over the past 5 years, we returned $12 billion to shareholders with the repurchase of 40 million shares at an average price of $227, resulting in a net reduction in our share count of 25%.
With that, we'll take your questions.

Question and Answer Session

Operator

(Operator Instructions) Brennan Hawken from UBS is online with your first question.

Brennan Hawken

You spoke to growth in experienced advisor recruiting. So I was hoping you could maybe provide some perspective on how you view the competitive environment for FA recruiting right now. And based on that view, do you think it's a better time to pull back or lean into the market? And why is that?

James M. Cracchiolo

So as you saw in the first quarter, we attracted 65 high-quality recruits into the business. I think the recruiting is a little slower in the first quarter with the markets that ran, people were staying put a little more. I do believe that the market is very competitive. And some of the competitors are actually, I think, being a little more irrational in that regard.
So we're much more focused on quality people that really think about where they need to associate. They want to build good practices, become more productive, want the support they need to do that. And those are the type of people that we've been focused on.

Brennan Hawken

Yes. That makes sense. Okay. And then maybe for my follow-up, something a little more tactical. Cash balances have been in focus. We all know that April is a big month for taxes and sometimes has an impact on your business. So could you comment on what trends you've seen in cash balances here month to date? What the impact was that we should expect from taxes? And were those largely funded out of sweep or other cash vehicles?

Walter S. Berman

Okay. What we've seen in April is basically a small amount going out before taxes out of sweep. We have started to see some actually shifting at money market, third-party money markets, Again, I can't say it's taxes, but clearly, the patterns there, sweep is stable, and we've seen a little pattern on shifting on money market, third-party money markets.

Brennan Hawken

Got it. But overall month-to-date, stable sweep is the right way to think about it?

Walter S. Berman

Absolutely.

Operator

Your next question comes from Suneet Kamath with Jefferies.

Suneet Laxman L. Kamath

Just wanted to go back to the Wealth Management comments about the bank net investment income rising 30%. Obviously, that's not a number that we can pull out of your supplements. But just curious, where you see that going in the balance of the year and into next year in terms of growth?
I know you talked about growth this year over last year and growth next year over this year. But can you just put some broad numbers around what you're expecting? I wouldn't guess it would be 30%, but just curious, what you're seeing there?

Walter S. Berman

Won't be 30%. As I mentioned, Suneet, what you'll see is that we have each year, about $3 billion each year that will be reinvested, and you should figure that we'll pick up at -- listen, rates stay where they are, somewhere 100 to 125 basis points on that. So that will make a contribution because that will be almost 35% of our total AUM outstanding at the bank.
So it's going to -- I see it continuing. It's going to slow, obviously, as we get into the [25] and as we progress through the year, but it will be very healthy, and profitability is quite good.

Suneet Laxman L. Kamath

Got it. And then I guess on the cost savings, I mean, it seems to me like we spent more time talking about that on this call and more recent calls. And I guess what I want to get a handle on is what are you trying to -- what are you seeing on the revenue side?
It would seem to me, given your history, you tend to talk a lot about cost savings when there's revenue pressure. Obviously, we see it in Asset Management, but it sounds like there might be incremental pressure in other segments. I just want to get a sense of what are you responding to, is it more than just pressure in the Asset Management business?

James M. Cracchiolo

No, Suneet. I think when we look at the Asset Management, we do believe with what we have put together, the technology and the capabilities and the geographical type of makeup, there is an opportunity for us to further get efficiencies in the Asset Management, that's very much our focus.
In regard to the other business and across the company from a corporate perspective, we, again, feel like there's an opportunity for us to even tighten our operating model a bit more and get even a bit more efficiency based on a combination of the technology and all the capabilities that we put in place and how we're operating, including geographically.
So we're looking at that. It's not because of any external pressure per se. It's something that you know that we've done over cycles as we reengineer and continue to invest. But at the same time, we are making good new investments in AI and data and analytics and technology platforms and cybersecurity.
And so what we're trying to do is we know that we want to invest. And we know that if we can get some other efficiencies on the expense base, that's always helpful for us. And again, we can't dictate what the market conditions are, but it gives us flexibility.

Suneet Laxman L. Kamath

Got it. And then just one comment I had just on the experienced advisor recruits. I think for many quarters, you've given us the number of recruits, which is helpful. But I think there's also been a change in like the size of the practices that you've been bringing onboard. So maybe at some point, if you can give us a look at over this period of time, this is how much assets came in from those recruits, I think that would be helpful.

Walter S. Berman

Will do.

Operator

Your next question comes from Wilma Burdis with Raymond James.

Wilma Carter Jackson Burdis

Is there any pressure from clients to pass through more short-term interest rate benefits, especially as the rates could stay higher for longer?

James M. Cracchiolo

Well, as you saw, I mean, we have a lot of cash balances and a lot are invested in, whether it be money market, brokered CDs, our own certificate programs, et cetera. Even in our bank now, we have higher savings products, et cetera.
So no, because what's left in sweep is more of that transactional liquidity-type thing, just like you maintain in your bank account sort of, but in this case, were activity within the overall business that they have and maintain and that cash moves. So if everything was sitting in sweep, then the answer would probably be yes, but that's not the case.

Wilma Carter Jackson Burdis

Okay. And then can you talk a little bit about how you guys think about acquisitions in A&WM space, especially maybe for scale, a little bit -- something a little bit larger? Just kind of curious, what you're seeing there?

James M. Cracchiolo

Is that regarding asset -- [A&WM]?

Wilma Carter Jackson Burdis

Yes.

James M. Cracchiolo

Okay. Well, what we look, as we said, is we look to associate people that really feel that we can add value to their practices and what we can bring. We look at other things that may make sense for us. But again, we're not just looking to roll up firms and put it on a network. We really look for people to join us and build out under what we provide from a client experience perspective. So that's the way we go about thinking about it.

Operator

Your next question comes from Tom Gallagher with Evercore ISI.

Thomas George Gallagher

First question is, can you provide some color on what kind of margin you're getting on new flows, the $8.5 billion of net inflows overall to A&WM? When I look at -- Jim, I agree with your comment that 30% margin is certainly impressive. But just curious, as you think about organic growth, what that's going to do to margins, assuming we keep the macro constant on kind of your in-force earnings?

James M. Cracchiolo

So Tom, as you look like even in the first quarter, what we saw was a nice increase in core business activities. And what you had a little more is the -- on the cash side, that came off a little bit in the total contribution to the margin.
And so when you look at the totality of that underlying business, particularly as you -- kind of combination of business that's there, transactional wrap fee business and what -- they're sitting on the cash sidelines coming back in, which would give us higher margins, if it's not in the cash certificates, brokered, other things like that; so I would probably say there's a good opportunity there, based on people cycling back into the markets.
We saw a nice start to -- increase in fixed income, again, rather than just short-term cash. So I think there's some of that, that will occur. Part of that's from the new flow, as you said, but part of it is really from the core of what came in and what's sitting there.
And so I would probably say, in the past year or 2, a bit more of that has been in the cash side. And when that cash goes into money market or into brokerage CDs, et cetera, that doesn't give us as much margin, and that should come back in.

Thomas George Gallagher

And Jim, sorry, just a follow-up there. Would you -- so would you say -- or maybe this is for Walter, would you say the incremental margin you're getting on new flows is above or below the 30% level? If you would just isolate it that way?

James M. Cracchiolo

I didn't look at exactly how much of the new flow came and went right into the market yet. I would probably say it's relatively consistent because our advisors don't put it all to work immediately when it comes in. So I would probably look at it that way that it's probably relatively the same at this point.

Thomas George Gallagher

Got you. That's helpful. And then just one follow-up. Long-term care risk transfer, Walter, I think you mentioned last quarter that you were sort of encouraged by [bids] spread narrowing. Can you talk about where your head is at with that? Is that something you're actively pursuing? Would you have to bundle other risks to potentially transact on that?

Walter S. Berman

So Tom, as I said last quarter, we certainly looked at a manualized transaction, and we are evaluating it, we really are. We continue to do that and evaluate the trade-offs. And certainly, it's -- it moved the bar, and we're just evaluating that.

Operator

Your next question comes from Ryan Krueger with KBW.

Ryan Joel Krueger

My first question was on -- can you give us some sense of your expectations for bank, not NII, but just bank asset growth in 2024, whether it be moving more from cash sweep or growing it organically?

Walter S. Berman

Yes. So we're looking at that now. And obviously, we do have buffers in the sweep account. So it would be -- we haven't decided on the amount yet, we will just evaluate, but it will increase. It's certainly not at the levels we've increased previously. But certainly, there's potential to increase it. And then, of course, we're going to be picking up basically interest earnings on -- basically when we reposition the $3 billion each year.
So I would say that it's -- will be increasing, but -- and then also, we'll be launching other products there, too. So it's a combo, and we certainly have room to do that.

Ryan Joel Krueger

Great. And then I guess back to Tom's question, just curious, to what extent are you -- I guess, are you interested specifically in risk transfer with RiverSource? Or I guess, would you consider something that's more broad -- a more broad strategic move with RiverSource rather than isolating to a risk transfer deal?

James M. Cracchiolo

So we do evaluate different possibilities. But as I said, I think our business is performing really well. I mean even in long-term care, I mentioned about we earning $16 million. But even if you look over the last 4 quarters, we had some nice positive income, and we think that's pretty stable now. And so if an opportunity came along that made sense for us with a good strategic type of partner on a reinsurance type, we will be very open to explore that.
But on the other side, I think we have a really good hand, and it gives us a lot of free cash flow and again, the good solutions. And we have a real -- a large complement of solutions on our shelves. So it's not like we have to be the provider of -- we're not. So we pick our spots. But we feel good about it. But again, we will always look at if there's a better opportunity for us.

Operator

Your next question comes from Alex Blostein with Goldman Sachs.

Alexander Blostein

Just one for me. You guys talked about expense management. In your earlier comment, you suggested that there's a little bit maybe of a broader effort that's holding across the organization to focus on efficiencies, and it's great to see G&A being held flat versus 2023.
So -- but I guess looking beyond '24, how do you think these efficiencies [will] back G&A growth sort of like on a multiyear basis? Should we think of that being below the trend of what we see from the kind of the prior several years or sort of 2024 as a one-off benefit?

Walter S. Berman

So on the expense side, Alex, certainly, we will garner a reasonable amount in '24, but there will be carryover and certainly -- of the initiatives that we take in '24 and then, of course, the ones that will continue. So you should expect that this is part of -- we've always done reengineering, but this, I would say, has an improved trajectory, as we look at it, and the opportunities to process reengineer.

Operator

Your next question comes from Craig Siegenthaler with Bank of America.

Craig William Siegenthaler

First one is on recruiting. So I know you don't disclose this before the Q, but advisor loans grew 20% last year. And I'm wondering how you expect them to grow this year in 2024. And also, given your comments to an earlier question on recruiting, how have your transition assistance rates changed roughly over the last 3 years, just given intensifying competition on the advisor recruiting front?

Walter S. Berman

Okay. So on the advisor loans, yes, we have increased and certainly, we are competitive. So you should expect that, that would increase as we are on [transcom] proposals and as we start attracting more and more advisors. But that would stay within our limits. But you should see those loans increasing for sure, and we certainly have the cash capacity to do that.

Craig William Siegenthaler

Jim, I have a follow-up on Wealth Manager operating efficiency. So if you look at the ratio of distribution expenses relative to management fees and distribution expenses -- sorry, distribution revenues, it's sort of at payout ratio, but that ratio hit an all-time high this quarter. And at the same time, G&A growth remained elevated at 7%, which was in line with last year, but it's above your mid-single-digit target for the year.
I'm just wondering, what drove up expenses in the first quarter? And how should we think about the [forward] trajectory within the Wealth Manager segment?

Walter S. Berman

On distribution, it was payroll taxes. And of course, you have high distribution when you have part of transactional elements from that standpoint. And as far as the 7%, as we indicated, the first quarter usually does blip up, but we are staying within what we've indicated in the -- middle single digits is a growth area for us, and so we'll be investing, but that's the target range.

Operator

Your next question comes from Michael Cyprys with Morgan Stanley.

Michael J. Cyprys

I wanted to circle back to your commentary on the large amounts of customer cash on the sidelines, I think over $80 billion overall, about $39 billion or so in money fund balances and brokered CDs.
I was hoping you could speak to some of the steps that you're taking to help facilitate the movement of this cash into [wrap] accounts in terms of what can you do to make it as frictionless as possible, and what rate backdrop do we need to see for this cash to move more meaningfully into wrap accounts? And if you look out over the next couple of years, what would success be in your view in terms of capturing what portion of this cash?

James M. Cracchiolo

I mean, listen, it's hard to say because it does depend a little bit on market conditions. And when I see -- mean by market conditions, like the equity market has been up strong. But if you look at how fast it ran and then you looked at where rates dropped so quickly initially on the long end of the curve and now that is starting to come back up again, and they are up nice, again, back to a more reasonable level; I do believe that there is an opportunity as people start to think about rotating back into fixed income for the longer term.
As well as if the equity markets do pull back as they have over the last month, so to speak, and become a little more, what I would call, less reliant on just a few of the high-tech stocks, et cetera, you will see a rotation back in because of that amount, the money is abnormal to sit on the sidelines. But again, at a 5% rate in the short term, it makes sense. And it's not like our clients or our advisors are active traders back in and out of the market.
So I do believe that as they are able to read what that market is over time and they feel more that it's not like they're getting caught on the high end, that money will start to [rotate].
Now how much goes back in, it's anyone's guess, but we're no different than what you see out there across the industry today. We saw some flows. As an example, even our Asset Management on growth side start to pick up a little and same thing in fixed income, but some in equities. So I think some of that money will go back, but it was a high point as we hit last year because of the cycle.

Michael J. Cyprys

Great. And just a follow-up question. I was hoping you could maybe update us on your lending solutions, including pledged assets, lines that you have for advisors and for their clients.
Just curious, how built out this lending offering is compared to where you'd like that to be? Maybe you could speak to some of the steps and initiatives that you might be looking to take over the next year or 2 in order to drive greater uptake amongst the advisors and clients from the lending solutions.

Walter S. Berman

Looking at a bank CDs and certainly -- and we are -- we'll be looking to launching our base checking capabilities and also new mortgage capabilities, (inaudible) or something of that nature, so there's a full program that is -- the [Air Plus], as you know, we have a fairly extensive pledge and that we will certainly be looking to penetrate that more. And that is certainly totally aligned on building the relationship with our clients and deepening that relationship.

James M. Cracchiolo

We just came up with a segment of that of fixed pledge as well. And so that is also going to help grow. So yes, we're probably still underpenetrated on the pledge side of it compared to some others, that we think will be an opportunity for us.

Operator

Your next question comes from Jeff Schmitt with William Blair.

Jeffrey Paul Schmitt

So you've been signing some partnerships in the financial institution channel recently. Is there potential for that pace to pick up or maybe for you to sign larger partnerships, just given some of your competitors may be running out of capacity right now?

Walter S. Berman

Yes. We -- certainly, with Comerica, we -- that has turned out to be a very good relationship. And yes, we have a pipeline that we are certainly evaluating and we feel we do have the value proposition, not to basically satisfy the clients and really provide them with the capabilities that we provide for basically planning a number of aspects from that standpoint.

James M. Cracchiolo

And we are signing some small deals. We don't put them out there as much to publicize them, but we are bringing in some other deals, and our pipeline is good. So again, the larger ones, we wanted to really do Comerica really well, et cetera. And so we learned a lot from it and set up our capabilities. So we think there's an opportunity as well in that category.

Jeffrey Paul Schmitt

Okay. Great. And then on client cash levels, how much is sitting with Comerica right now? And I guess, do they -- so they all have to transition to Ameriprise sweep options in the second half, is that right? So some of that cash could kind of either leave or going to the market or what have you?

Walter S. Berman

This is about [$2.5 billion]. And they certainly is -- they -- as part of the program, they are transitioning and we'll see. We just don't have the full information now about what that's going to be. It's -- probably will have a better idea at the end of the second quarter.

Operator

Your next question comes from John Barnidge with Piper Sandler.

John Bakewell Barnidge

Can you maybe talk about the slowdown in institutional asset management mandate that was cited? Is the conversion rate being elongated along with few discussions? And what are you hearing as the most common pushback?

James M. Cracchiolo

Yes. I mean some of it was a bit elongated that you would expect the fundings or even the cycle. But there is a growing interest back again both in the fixed income area as well as in the equities. So we actually think that this will pick up as we go further into the year.
And the mandates that we sort of lost in the first quarter were sort of some lower fee, a pension, things like that, that they're a little lumpy in that regard. So -- but we feel that we can win some more as we go forward that the appetite is there out there in the industry, both not just in the U.S. but internationally. So we're very much focused on that.

John Bakewell Barnidge

And then my follow-up question. I think there was a bit of [severance] in the quarter. Is that expected to impact flows prospectively at all?

James M. Cracchiolo

We had some of the remnants of the changes we made that came out in the first quarter that was in the flow picture. But no, we don't expect more from that.

Operator

Your final question comes from Steven Chubak with Wolfe Research.

Michael Anthony Anagnostakis

This is Michael Anagnostakis on for Steven. I guess, just a couple here on capital. BMO largely integrated at this point. How are you thinking about prioritizing excess capital deployment? And is strategic M&A something you're looking at more closely? If so, where might you look to buy rather than build?

James M. Cracchiolo

So we actually -- we continue to buyback nicely. I mean in the first quarter, it was a little less than we normally had done, but that will pick up as we go through the year. And I think Walter had mentioned that we're targeting initially around the 80% mark. And then as we said, we just raised the dividend again that will take some more of the cash.
But we still have a healthy balance sheet. We're not out there looking to acquire per se. There's always if there's an opportunity or the market falls out or something that gives us value, we'll look at it. But we're very much focused on continuing to invest organically and really focus on getting the operating efficiencies, particularly in the Asset Management business now.
And we feel good about that, including what we do from an overall investment cycle for our technology and capabilities and products. I mean, we're working on a number of different new product areas for us in Asset Management like active ETFs, et cetera.
So we feel good. We're looking to build out a little further on our international property areas, et cetera, our CLO business. So there are things that we're investing in a bit more organically as well. But again, we don't rule out acquisitions, but we're not necessarily looking to target things at this point.

Michael Anthony Anagnostakis

Okay. Great. That's super helpful. And just on the buyback, so 80% payout is still the expectation. It sounds like you guys are more focused on the organic internal investments. But given the banks largely built out, maybe M&A is less of a focus here, and you're generating strong cash flow. Why not ramp the payout ratio back to the 90% to 100% zone that you historically ran at?

Walter S. Berman

Well, listen, we certainly have the capacity to do that, and we evaluate it on an opportunistic and -- situation as we look at it. But yes, we do have the capacity at this stage. We feel the 80% is a good return level. And there is -- there are other areas that we -- certainly, as I said, we will be growing the bank. So it would require additional.
But I would say, at this stage, we have the capability. We just feel it's opportunistic. We look at it, and then we evaluate it. And you've seen in prior times, we have gone up, but at this stage, we feel the 80% is an appropriate level.

Operator

We have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect.