Ameriprise, the financial planning firm that will soon be severed from its parent, American Express Co., will look to establish a highly visible brand name and emphasize its service model as it keeps vying for share in the growing mass-affluent market, says chairman and CEO James Cracchiolo.
The company expects to spend $300 million in the next two to three years on a marketing campaign that will begin Tuesday and encompass print, television, online, radio, and outdoor media, he said. It will be the largest such campaign in the company's history.
"We'll be focused on the mass-affluent client and talk about how we can address that client's personal financial needs and goals," Mr. Cracchiolo said. "It's a comprehensive, 360-degree campaign."
Mass-affluent clients are typically defined as those with $100,000 to $1 million of investable assets, and serving them profitably has been a challenge because the cost of providing personal service is so large. Ameriprise's network of 12,000 advisers allows it to give customized advice with greater cost efficiency than competitors, Mr. Cracchiolo said.
Creating brand awareness will be crucial for Ameriprise as it tries to compete on its own in the saturated mass-affluent market, analysts said. Community banks and small-town-oriented brokerage firms like Edward Jones Investments and A.G. Edwards & Sons, some of which have unveiled extensive ad campaigns of their own in recent years, are among Ameriprise's competitors.
"One disadvantage of no longer being under the American Express umbrella is that it's now paramount for Ameriprise to develop brand recognition on its own," said Laura Kaster, an analyst at Sandler O'Neill & Partners in New York. But Ameriprise may benefit from independence in that it will have direct access to the markets and no longer have to compete with other American Express units for capital, she said.
The demand among mass-affluent investors for personalized financial service is expected to grow significantly as the baby boomer generation approaches retirement, Mr. Cracchiolo said, and this positions financial planning companies like Ameriprise to capture retiree assets.
The threat of changes in Social Security and the shift among private companies from defined benefit pension plans for their employees to defined contribution plans have also created demand for personalized financial advice, he added.
The mass-affluent market is underserved in terms of personalized financial planning because the limited fee revenue it can produce has dissuaded most larger banks and investment management companies from catering to that segment, Mr. Cracchiolo said.
Providing individualized, face-to-face financial advice is crucial to cornering the low-margin, mass-affluent market, particularly as the baby boomer generation approaches retirement, he said.
"There are very few companies that can provide personalized financial services and advice economically," he added. "They are limited by the size of their adviser networks. We have more certified financial planners than anyone in the country."
To compete with Ameriprise's 12,000 advisers, Edward Jones says it can muster nearly 9,000 and A.G. Edwards, close to 7,000.
"We treat the mass affluent similarly to the very wealthy customer at a large wire house," Mr. Cracchiolo said. "We sit down with them and identify all their financial goals and needs, whether it's liquidity or tax-related concerns."
Developing a superior service model is essential to attracting mass-affluent customers, said Rus Prince, the president of Prince & Associates, a Shelton, Conn., investment consulting firm. Mass-affluent clients typically require only basic investment services, but they also desire face-to-face contact with their advisers, he said.
"Ameriprise needs to be much more responsive as a service model than its competitors," he said. "You need to have advisers who are living in the same community as their clients and going to the Rotary Club and the PTA meetings."
Mr. Cracchiolo emphasized Ameriprise's proprietary investment management capabilities, which he said give it an edge over competitors, though the company also offers more than 2,000 nonproprietary mutual funds. Its rebranded asset management arm, which will be called RiverSource, offers mutual funds, annuities, separately managed accounts, and money market accounts, among other products.
"We've been building out product lines to handle all aspects of the client's portfolio," he said. "We have products that can handle all the income levels the client needs to maintain throughout retirement."
Proprietary investment performance will be an important factor in setting Ameriprise apart from its competitors, Ms. Kaster said. But Amex funds' performance has lagged in recent years, according to data from Morningstar Inc.
The fund tracking company said weighted returns on assets for the American Express family of mutual funds trailed those of comparable funds in both 2003 and 2004. The average total return for American Express funds was 8.2% in 2004, compared with 9.4% for comparable fund families, and the previous year was 20.2%, compared with 22.5%.
However, Ameriprise points to its AXP Diversified Equity Income Fund, which got a 2005 Lipper award as the top-performing portfolio in Lipper's equity income category for the three years through Dec. 31, 2004.
American Express Financial Advisors, which is to become Ameriprise this month, generated $7 billion of revenues and $700 million of net income last year. "We will go out as a Fortune 300 company," Mr. Cracchiolo said.
