Walter Berman: Yes. So obviously, we’ve been very proactive in managing the controllable aspect of that on the expenses, not just in AWM, even in AM, but across the board. So yes. Obviously, it will be dependent on several factors as it relates to markets or other things as it relates to margin. But with — right, I’m not going to forecast exactly where it goes, but I think we feel comfortable that we have put in place our control of G&A at Asset Management and that we have the capability with the right set of conditions sets going on with markets. And certainly, if we as we get — make progress on our flows, that is — certainly can increase. But right now, we’re comfortable with the current levels that we have, but we have the potential.
Operator: Your next question comes from the line of Steven Chubak from Wolfe Research.
Steven Chubak: So wanted to start off with just a question on the AWM margin. Just given some of your larger wirehouse peers have guided to lower wealth margins for the next few quarters, given the absence of NII tailwinds, incremental investments to sustain organic growth. You noted, Walter, that your spread revenues will be more resilient in ’24. But do you believe you can sustain that north of 30% pretax margin in AWM even in the face of rate cuts in line with the forward curve?
Walter Berman: Yes. So I think that we have reasonable confidence that we will be able to sustain. But obviously, there are variables that go into that. But as I indicated, our net interest income was — 2024, will certainly be higher than ’23. So yes, I think we have a reasonable level of confidence in that.
Steven Chubak: That’s great. And just for my follow-up on capital return, the payout came in below the 80% target. Apologies if I missed this. But just wanted to get a sense as to how we should be thinking about the payout trajectory over the next few quarters, especially in light of the robust excess capital generation that we’ve been seeing.
Walter Berman: So yes, we came in at 79%, I would agree with you, for the year. And right now, we — our capacity and capability certainly remains very strong, as you can see from the elements and certainly generation. So I would think that a continuation of that strategy is probably a reasonable expectation.
Operator: Your next question comes from the line of Suneet Kamath from Jefferies.
Suneet Kamath: Just wanted to start with the Asset Management business and the expense reductions that you’re doing there. Clearly, you’re trying to defend your margin, which I understand. But it feels like we’re starting to see potentially some commercial impacts there. I think you alluded to some outflows related to head count reduction. So I guess my question is, how are you thinking about sort of trying to balance that, right, where you’re cutting expenses but at the same time potentially seeing some negative commercial impacts?
Walter Berman: Well, from what you saw from basically the breakage that we took, it wasn’t — basically a proactive evaluation of the payback that we were getting. So that was a conscious decision on our part. Our expense plan has been basically evaluated on the basis of , but looking at process and how we can improve efficiency. So we feel very good about. There is some basically spillover effects as you get to managing that ultimate return, and some we will get breakage. We believe the breakage, certainly, we saw what we saw this year, there will be some but manageable — taking place in 2024, but manageable. But again, it’s a conscious decision on our part, and we feel we give them opportunities to certainly redeploy the money in other products that we have. So it’s — again, it’s we are controlling what we can and we — which is on the G&A expense, and it’s through a conscious review of expense management.
Suneet Kamath: Okay. Got it. And then just a level set on that $82 billion cash number that you talked about. I mean, if I think about that relative to total client assets, it seems like it’s upwards around 8%, 9%, which is almost 2x, I think what you guys normally would expect. Is that the right way to think about it? And then over time, as rates kind of normalize that kind of 8% to 9% cash balance would probably trickle back down to somewhere in that 4% to 5% range and that’s really the opportunity set that’s in front of you in that business?
James Cracchiolo: Yes, Suneet. So it is sort of like double the amount that clients are holding usually compared to where they used to be. And again, advisers look at it with their clients and they’re getting a 5-plus yield on it, just to sit tight, with unclear about the market moves, et cetera. So I do believe that over time, that money will be redeployed, but holding at higher rates right now, it’s not an uncomfortable thing for clients that are advised us to keep extra cash there.
Suneet Kamath: And is there any reason why that money wouldn’t come to Ameriprise? I mean it sounds like it’s in products outside of your firm, but obviously, your advisers do holistic financial planning. So is there any reason why, either from a diversification perspective or anything, why that money might want to stay outside of Ameriprise?
James Cracchiolo: In fact, the money is at Ameriprise. The advisers have just put it into whether money market or brokered CDs, where there was a bigger lineup of brokered CDs before we had our bank and CDs that we’ll be launching. So I think it’s a — vary. But they — just as they did that, they put it into our own certificate program as well, and that grew nicely. It’s up to $13 billion in total. So I think it was just the outlets for where to talk the cash. I think as we put more bank products in, as we develop the bank, some of that will go into our bank products. We think also there’s an opportunity for us to capture more cash from our clients holding it at their banking institutions. But the money that’s currently that $81 billion is at Ameriprise. And as that rolls over or opportunity the advisers to rebalance accounts, they’ll put that money to work.
Operator: Your next question comes from the line of Tom Gallagher from Evercore ISI.
Thomas Gallagher: First question, just on the layoffs in Asset Management, I think it was 12 PMs. Can you comment on the size of the AUM that they were managing, and what exactly happened there? Did you merge or close any funds? Did you replace them? Just a little more color there.
Walter Berman: Well, with the breakage, it was basically on that one we closed upon. And obviously, we’ve looked for alternatives and was institutional. And then the other funds, we feel there are opportunities where we can basically merge them into other products that we have and to get the efficiencies and effect on that. So it’s — it was a capital review of it, and we just felt, based on payback, it would make sense to do that.
Thomas Gallagher: And Walter, the total AUM related to the layoffs, are you able to provide that?
Walter Berman: Right now, the — of the $2 billion was basically the — that was the amount in that fund pretty much.
Thomas Gallagher: Right. But of the — I think it was 12 PMs that were let go, are you able to size that in the entirety?
