Welcome. My name is Suneet Kamath. I'm the U.S. life insurance analyst at UBS. Today, I have the pleasure of introducing our first company presentation. That's Ameriprise Financial. Joining me on the stage is Chairman and CEO, Jim Cracchiolo, Chief Financial Officer, Walter Berman. We also have Alicia Charity from Investor Relations in the audience. The format of this session is going to be a bit of a fireside chat. I think Jim's going to kick off with some intro comments, and then we'll go into Q&A. Just by way of background, Ameriprise remains one of our top picks in the space. The stock's had a very good run over the past couple of years. Of late, it's been underperforming, in part due to market volatility and some regulatory issues that I think we'll talk about.
We would argue, as we have in published research, that this has created a very attractive long-term investment opportunity. We previously discussed this using a sort of unique framework, which for us is a 15 by 15 by 2019. What that basically means is, by 2019, we expect the company will generate around $15 of EPS power, perhaps greater than that. At the same time, by 2019, we would expect their business mix to justify a valuation multiple also close to 15. $15 of EPS power against a 15 multiple will get you a stock price of around $225, and the stock's, I think, $110 right now. Pretty significant upside. That's kind of the case that we've been making. I'm going to turn things over to Jim and get his intro comments, and then we'll move to Q&A.
Thank you, Suneet. Good morning, everyone. I appreciate you taking the time this morning to hear a bit more about Ameriprise. What I'd like to do is just give you a quick overview, tell you who we are, where we've come from, where we think we can continue to go, and then open it up to questions and discussion with Suneet. Let me see if I can get this working. Ameriprise today is a diversified financial services company. We're headquartered in Minneapolis, Minnesota, but we're a nationwide firm in our wealth management activities in the U.S. We're one of the largest there. We also have a good makeup of insurance and protection, along with our wealth management products that we serve the retail consumer. We're also a global asset manager. Between the Columbia Threadneedle, we just globalized the business.
We do operate around the world today, we'll talk more about that. One of the cores of Ameriprise is how we're focused really on the client as the center of what we do and who we are. We have a very long reputation working with our clients. The firm itself is over 120 years old. It was an independent company. It was the IDS company at one point, taken over by American Express for two decades. We spun off from American Express 10 years ago. This will be our tenth-year anniversary. From that, we've had an excellent run since we became a public company. We're the sixth largest spinoff in U.S. history, I think if you look at over the last 10 years, we've outperformed most of the financial services companies. We didn't need bailouts. We didn't need helping hands. We actually did a number of acquisitions.
We came out of the crisis stronger than we went in. Today we're well-positioned, and we have some large market opportunities that I'll discuss about the wealth management and the asset management area. I think you also find that we have a good diversified business model that gives us multiple revenue streams, lowers our volatility, and in many cases, helps us generate good, strong, free cash flow that we return to shareholders, and we have, and we'll continue to look to do so. When you think about the makeup of our business, we really look that we're looking to advise, manage, and invest for income for our clients over the long term. Whether they're retail clients or institutional clients, the makeup of the firm really starts with two of our front ends.
Our advice and wealth management is the way we go to market in the U.S. through our financial advisors. We have an advisor force of over 9,700 advisors. They are financial planners. They have strong, deep relationships, good productivity. We're the leader in financial planning in the United States. With that, they generate very long-term, deep relationships with their clients that we have multiple products and multiple accounts. With that, we offer in some of our protection programs, our annuities, asset management products, as well as well-diversified products coming from all the other providers in the industry. We have our asset management business. Our asset management business today does operate globally. We have Columbia in the United States, and we'll talk about the size and scope of that. We have Threadneedle here, and we've been expanding to the Middle East and Asia and across Europe.
With that, we have been able to generate a very good, strong return, and then we have an excellent balance sheet. The diversification of the business gives us some unique benefits. Number 1, we have deep long-term client relationships, so the multiple product scheme gives us very good long-term retention and depth of relationship. We have valuable expertise that we share across the franchise. Our experts in asset management manage the assets for us from the balance sheet perspective, helped us navigate the financial crisis well. Our annuity and protection products help us in that sense, have a depth of protection and guaranteed income for our clients. The expertise there helps us when we think about how do we generate income long term for our retail and wealth management clients.
When we think about the wealth management product, it gives our ability to the asset manager, as an example, to understand better the depth of relationship and how they actually apply their skills in such a large network to gain good share. Those things give us strong asset persistency and retention and multiple revenue streams. That, over time, has led to lower volatility with leading returns. Let's look a little about our history here. If you look at assets under management and administration Since 2009, we've grown by 12%, a compound annual growth, net revenue 9%, and our operating earnings per diluted share up 22%.
When you think about that, compared to the industry segments that we get compared to, whether they be asset managers, insurance and annuity peers, or wealth managers, you can see that we've generated higher EPS growth with lower pre-tax earnings volatility. That's a combination of the makeup of the business and the success that we've had in growing the business. As you look at the mix over time, as we've invested and used our capital appropriately and tried to really energize coming out of American Express, the growth of our wealth management business and our asset management business, you can see that the pre-tax mix of the business has changed dramatically. Now the majority comes from our advice in wealth management and asset management, representing 66% of our total earnings. That has given us the ability to free up a good amount of capital.
We have a good generation of cash flow, and gives us the ability to return to shareholders. Now, as we look at a starting off point, I'm more excited than ever. We have a lot of market volatility occurring. We have a lot of movement and transition of baby boomers to retirement in the U.S. and new people coming up, Generation X and Generation Y, transitioning to retirement. That wealth generation is tremendous. With that, they need someone to serve them, and they need someone to put that all together to help them generate what they used to get in a pension check as an income check for their future. Ameriprise today is a leader in doing that.
We can see that growth in investable assets in the U.S., as an example, for our wealth management business, continues to grow tremendously, and you can see the wave of baby boomers moving to retirement. In fact, the first baby boomers started in 2011. We're roughly at 2015. It's going to peak into 2023. That's trillions of dollars in transition. How are we situated to go capture a share of that? First, we're a leader in financial planning in the United States. We have the most Certified Financial Planners. That's the way we do business. We have one of the strongest advice models in the business. We're nationally recognized and trusted brand. We're rated number one in trust of all full-service brands out in the marketplace through the financial crisis and thereafter.
We were rated number one in forgiveness, meaning that if we ever made a mistake, our clients would forgive us based on how we handled ourselves. We're a top five branded financial advisor force . Against the big wirehouses, the Merrill Lynches, the Morgan Stanleys, we're number five. We manage $453 billion of our clients' money, $182 billion of that are in asset management wrap-type accounts, where we earn a fee for managing the assets. We're also a top player in the retirement income space. We're rated number one in plan quality of what we provide to a client that satisfies the needs for a Confident Retirement. Most of all that business is done through our own client relationships.
We have better returns, we have better behavior, and we understand that the necessary appropriate benefits, and we can manage them well and hedge them well for the future. How do we continue to move the business forward as we have over the last few years? We've gained tremendous growth in our Advice & Wealth Management business, compound annual double-digit growth and profitability. We are now continuing to recruit inexperienced advisors from the industry, whether from wirehouses or independents. We've established a very strong value proposition. We're considered a bit more of what used to be out there in the street, more of a family culture type business. It's the center and core of who we are and what we do and not part of a very large investment bank. We ourselves are an independent company, very much focused on this business as our core business.
We have very good, strong advisor retention. That advisor retention has led to good advisor productivity growth. With that, we've invested $ hundreds of millions in compliance and new technology capabilities in marketing, in digital. We're rated one of the best firms for social media, one of the best online investment brands, even though we're a full-service company, one of the best technology platforms, number 2 across the industry. We also are reaffirming our approach in reaching the market and particularly in moving upmarket with our Confident Retirement approach. More people are looking for those types of services as they continue to think about their future. How does their pension, how does their 401(k), how does Social Security, how does their own investments work together to generate income for the future? How do they satisfy individually their life goals on the way?
Children's education to buying a second home, to their retirement, at what point to a change of career. We can continue to move further upmarket. We really at the heart of who we serve is the mass affluent, $100-$1 million. Most of the new clients we're bringing in are roughly around the half a million mark. If we just move that up a bit more to the half a million to $1 million, $1 million above, we can serve them as easily as well with even a greater level of productivity, and they actually will take more of the services. When we use our approach on the million-dollar-plus client that we're bringing in today, their satisfaction with our Confident Retirement approach is over 97%.
Their propensity to refer us to a friend, a family member, a colleague, is one of the highest in the industry in the mid-90s. Let's look at the asset management opportunity. Here again, we have a growing global marketplace. You wouldn't believe it today with all the volatility and what's happening and depreciation of some of the assets. At the end of the day, this marketplace will continue to grow. It has grown tremendously and will continue to grow, and we just need a small share of it. We just need a small share of it. With that in mind, how are we situated, Columbia Threadneedle Investments? We have a very strong presence in the U.S., in the U.K., and Europe, and we're expanding across Asia. We manage over $ half a trillion of assets through our retail and institutional businesses.
In the U.S., we're a very large play in the mutual fund business, the number 13 in long-term mutual fund sales. We're number 4 in the retail rankings in the U.K. under the Threadneedle brand. We have a tremendous lineup of very high-performing funds, over 125 four and five-star rated Morningstar funds, both here in the U.K. as well as in the United States. Just recently, we introduced the global brand under Columbia Threadneedle. We used to operate a bit more distinctly, Threadneedle Investments here, and Columbia Management in the United States. Now we're globalizing that business and really starting to leverage the resources between the two entities. That situates us quite well for further growth and opportunity. What are we doing to take advantage of that and start to really move this more into an inflow situation over time?
We've been investing in building out our distribution capabilities. We've been expanding geographically, we've been expanding in our institutional space, we've been adding depth of talent in our retail, and building out in some local markets. We continue to do that with also launching more product and service appropriately, whether they be investments in global solutions or even in, we call alternative solutions and risk parity type activities, alternatives, et cetera, that will complement our activity. With that, we have been gaining traction in institutional. Institutional are in now good inflows through third party. We still have some outflows from ex-parent activities that are low fee, low margin, but we've been gaining traction in institutional business. We've been winning mandates both here, the United States, global and sovereign wealth funds in Asia and across Europe.
We've also been expanding our U.S. reach and distribution as well, and turning around the way we go to market there. We've hired new leadership, we brought in new marketing capabilities there, and product solution sets. We think over time, we'll be able to gain even more traction as this market becomes a bit more volatile and it moves away back to some way balance between what has been going on with passives versus active again. With that in mind, I think we have the pieces in place that we'll continue to invest in so that we can gain share, but we have a good foundation from which to build on. Has very good profitability, very good margins in the business. Let's look at what we've been able to do from an overall shareholder return for you as an investor.
Our operating return on equity moved from 10.7% to, as of annual basis as of June, 23.5%. You'll find that this is one of the highest returning businesses in the United States in financial services. With that, you have a very strong capital return to shareholders, and we're returning more than 100% of our earnings every year through dividends and buybacks. We have a very strong balance sheet. With the size of our total capital base, we have over $2.5 billion of excess capital that we can utilize for whether returning to shareholders, additional acquisitions, or reinvestment in the business, and we do that. We start with reinvestment, we then look to buyback, and we constantly look in the marketplace for incremental or complementary acquisitions in the wealth management or the asset management space.
We do feel we have the opportunity, continue even in volatile times like that, to even increase our ability to buy back if there's no opportunities for acquisitions that we see. I do believe you are at a point of, again, after our 10-year history of proving that we can both establish ourselves strongly, grow strongly through a financial calamity, come out strong, do three acquisitions during that timeframe, integrate them well, and generate good return for shareholders. We feel, again, with the depreciation that has occurred in the stock, we are a value stock again. If you compare our wealth management business, it gets top performing marks, and the PEs out there for some of the wealth managers are a bit higher than what they've given us attribution for.
Our insurance and annuities are all to our clients, very good risk profile, very good return on capital. Again, I think it should be trading at a premium when you look at just that pure segment, even though that should be part of a larger integrated company. Our asset manager generates excellent margins with good diversity, with good client performance that we can expand upon. You put that together as a complement, and I actually believe it should be at a premium to the complement of the segments rather than a discount. That's for you to determine. For me, we have a good diversified model, very client-centric. We're in a good position to capture more opportunities. We're investing to do that. I have an excellent leadership and talent base, very good, strong engagement.
If you look at that as part of company, we're one of the highest engaging workforces in anywhere in financial services in the U.S. With that, we compare ourselves to the best Fortune 50 companies on a global basis, and we rank up there with best in class. That, in combination with our balance sheet, our excess capital, our risk management capabilities, the diversified of the business, client-centric model, I think you have an opportunity through this market cycle for us to get greater returns for the future. Thank you, and I'll take any questions.
Great. Thank you. We'll take questions as they come up. I'm going to start with one, Jim, on your comment that you're a value stock again. Given the weakness in the shares, how should we think about your willingness to step up the share repurchase program given your excess capital position?
We've been purchasing a good amount of shares, as I showed you on the chart, in excess to our earnings when we combine that with dividends. Over the last two quarters, we have actually stepped up. In the second quarter, as an example, we stepped up our buyback activity to What was it, Walter?
425.
$425 million just for the quarter without dividends.
Obviously, I think the average price that you bought back in 2Q is maybe $125, something like that?
123.
Yeah, $123. Given where the stock is today, is it reasonable to think that we could see another step up as we move through the next couple of quarters?
I'll leave that to my CFO, but I would say.
Two quarters.
Two quarters. Okay. I'll just keep looking at the audience if there's questions. Okay, why don't we start here?
Department of Labor.
Yeah.
Changes there, could potential changes.
Sure. Well, many of you, maybe not so, are familiar that the Department of Labor is trying to come out with new regulations on how to deal with the qualified assets of the individual consumer, 401(k), IRA, et cetera. It's actually been one of the best-performing areas in the market in helping consumers save for retirement, but many, many providers. The Department of Labor is coming out to say, "We think everyone should be treated under a best interest standard." With that, there are certain product or services or the way various broker-dealers do business through commissions that may not be as good for them as some alternatives. The nature of it is that at the end of the day, the market is served very well. It's a very efficient market. We today at Ameriprise actually fully operate under the best interest standard.
Having said that, when you're selling some individual products in small accounts, it's actually more efficient to sell them through a commission-based model rather than an ongoing advice fee model that is actually more expensive for some of the clients with lower assets. We in the industry are compelled to actually ask what the real benefit is that the Department of Labor is looking to achieve versus the actual true cost that that would drive, meaning, many other providers would start serving the lower client in assets. They will start to try to put the product in through a fee-based relationship that might be more expensive for them. It may actually do more harm than good.
I think there's been major feedback across all parts of the industry, financial services, whether they be investment banking, banks, retail providers, insurance companies, annuity providers, mutual fund companies, retail distributors such as ourselves to say, this actually will do more harm than good. If anything, this should be left to the SEC to manage, because if you want a best interest standard, people already operate under the SEC standard that's well managed and well-regulated. If it's under more of an industry security standard, it's under the FINRA relationship of how that's managed. At the end of the day, there's a lot of feedback that went on. The department will come out and see whether they'll make adjustments to the rule or not.
In the end, I think we've been impacted like many in the industry is because we're a large provider that serves the qualified market, but we also serve the wealth management market in addition to that. There's always a feeling that the distributor will be somewhat impacted. I would say everyone will be impacted if this regulation goes in as such. I do believe that if it does, and I think there has to be a number of adjustments, I think it's recognized for a number of adjustments. I actually feel that Ameriprise will not be harmed more than anyone else. In fact, we may have an opportunity to come out in a way that we can reconfigure our business to even operate very strongly because I have a compliance structure already in that operates under the best interest standard.
I am already moving my advisors very much across all of what they do as a value-added relationship through advice. Number 3, the technology and the capabilities for independent providers. Some of these firms that may be large but independent, operate off of thin margins. Their compliance costs are going to go way up in addition to what their cost structure is today. That's going to squeeze them even more. I've been attracting good advisors in coming from wirehouses and independents for that simple reason today, because I'm willing and I'm able to work with clients that have a reasonable amount of money, but at the same time, I have a very cost-effective operating method that we can service them well. We can make the changes. The issue is we don't think all the changes are appropriate, we're pushing back with the industry.
If they come about and they're in anywhere reasonable fashion, we think we'll be able to handle them as good, if not better than most in the industry.
Just want to follow up. Would it be reasonable if it will be against you, mate, that maybe the market is worrying about the productivity hit that might occur for a while? Can you give us a sense, the extent to which you've had to deal with this stuff before, what sort of delta productivity over what sort of time period might be a reasonable best guess?
Right. I'll give an example. As an example, and again, this is how Ameriprise does business, you just get a flavor. A year ago, they came out with some new regulations on how to sell non-traded REITs. Moving from sort of the idea that today a non-traded REIT, you pay a big front load and the whole bit, and over time you have the income over a longer period of time. They came out with new way of disclosing that, they wanted all those fees disclosed in a certain way in a very visible, it would impact the NAV. It was never that way before. It would impact the NAV immediately.
We, different than the industry, went out a year in advance, Go to our advisors, tell them to take a step back to understand what those issues, what the implications, how we're going to treat that, how we're going to inform the client, et cetera. We had an adjustment in then the use of the REIT in that regard until we can get the compliance and get them formalized and they can understand it and deal with their client. As an example, REIT sales in the U.S. have slowed generally just because of the market. In addition to that, we took a step forward in it ahead of any one of our competitors to go out there to orchestrate that. Might have had a little more impact to us from a REIT sales, it's all within our numbers today.
People are saying, "Well, if REITs fall off on the Department of Labor, how is it going to impact your business?" I really don't have that impact anymore. At the end of the day, our REIT sales will be, over time, coming back because it's going to be on an average load rather than an upfront load. It will get to revenue over time on an annual basis rather than all up front. At the end of the day, what I'm saying is we can make those adjustments. We know how to do them. We have a compliance structure and a strong leadership structure in place with good product management to go do that. The question is, what is it that we're changing to? That's what we need to know from the Department of Labor.
Hopefully, what they come out with will be more sensible than it is today.
Can you maybe just talk us through, for your main divisions, how you should think about change in Fed interest rate policy and any changes in the steepness of the yield curve?
The impact will be to us with the change in the interest rate policy?
Yes.
Well, the biggest impact was, we have about $22 billion in brokerage cash, which immediately, if again, going up on the short end, that would have an impact for every 100 basis points will, following prior patterns, keep around 80%-85% of that. As it goes increments above that, the percentage drops lower, but it's still 70%, 60% ranges. It'll have a very beneficial impact immediately. On the longer end, we're well-positioned right now because we are defensively positioned with our fixed annuities and other products, but we have duration of around four years, it will work through.
The only time you have, which I don't anticipate this will happen, a precipitous increase in the interest rates, I'm talking about 200, 300 basis points in a year, would obviously put pressure on surrender and other factors of that nature, which again, we're positioned. It would take short-term, immediate benefit, quite large in the Advice & Wealth Management certificates. On the longer end going up, it would be a slower improvement on fixed annuities, depending on, again, it could go slower improvement on fixed annuities and then on our insurance activity.
Got it.
I'm just hoping they actually start.
There's a question over there.
Jim, you talked about your confidence in turning around the flows in asset management through new products, new distribution. Can you give us a timescale on that? I mean, we've sort of been expecting flows to turn for a few years now.
I can't sit here and predict an actual timeframe because there's a number of industry factors occurring as well as us individually. What we're seeing is this, we'll still always have a level right now. Let me put it this, we maintain three large relationships. Okay? One is Ameriprise itself, and that has moved from where we were in some outflows ourselves as we re-jiggled, re-changed the wholesaling and the product mix and other things, to now moving that back to more of a stable to possibly a good growth over time. The second one is our relationship with Bank of America and U.S. Trust. When we did the acquisition of Columbia merged it with RiverSource, of course, a part of that business was in the U.S. Trust channel. It was the proprietary provider for the private bank.
There, as we went through that change, you're always going to have some bit of runoff because where they used to sell the majority of their product being in-house, they had to diversify themselves, and therefore, even though we have a very good, stable, long-term relationship, in fact, the initial arrangement with them was over in May. It was a five-year arrangement when we did the deal. We have re-upped that arrangement, but we're never going to garner the overall new percentage of sales that they once had, and you have a base that equalizes. Some of the runoff in those flows are in what we would call lower margin, separate type accounts, fixed income portfolios, et cetera. Some of the things that they're starting to do a little more in-house that makes some sense for them and it's not a big margin erosion for us.
We're going to still see some of those outflows occurring. That's still, we generate a good return on it. It's a good margin. Just from a flow picture, it's going to look like, oh, you're in outflows. The third relationship we have is with Zurich. It was part of, we bought Threadneedle from Zurich, and we have maintained that relationship very strongly across all the disciplines. That relationship was renewed again three times. First contract was a seven-year, then moved to 10, and then now out. We have a good relationship. We give them good service. We have excellent performance. There again, as they close down certain books, as they sell off certain annuities, as they move some of their owned assets. Average get a few billion GBP a year of natural outflows from that.
The business base itself regenerates, the fee basis is there, et cetera. The flow picture looks negative. What are we doing to offset that and grow? We've been growing our third-party institutional business. As we reestablished and confirmed the consultant ratings and we've settled down the integration, we're now starting to get very good third-party mandates, both in the core developed markets we were in, but also, as I said, Middle East and Asia, et cetera. That's starting to build, and we've been building out our institutional resources. We've opened rep offices across Asia, in the Middle East, and we're starting to expand there slowly and surely. We're adding solutions business. We hired a number of senior leaders. One of them you might be familiar with, Jeff Knight, who has a good reputation in building a solutions risk parity business.
That's what he's been developing for us. We also are expanding our retail distribution. Threadneedle has excellent retail distribution. It goes through, and you understand a little more being here in the U.K. and Europe, there's some changes based on market environment. When the market improves and stabilizes, we get into good inflows. When people pull back, as it had earlier this year or beginning end of last year, it slowed off again. That's back to now having some good inflows again. I think over time, that will continue. We got good product and good performance, particularly as people have gone back into European and U.K. equities, et cetera. We're building out our fixed income activities here more on a global basis. We're trying to come up with more global bond solutions. We have a strong U.S. franchise, we have a U.K. franchise.
We want to make that into more of a global franchise. The biggest one for us is the U.S. retail. There we've changed over the last two years, leadership. We've changed the way we go to market, changed how our wholesalers are being paid, and what they're focused on, their training. We brought in new marketing teams. We're changing how we go to market there, and brought in better product people. We sort of assumed some of the people and the resources we got from Columbia, which were more used to dealing as part of an internal channel within the Bank of America. We really need to change that out and get more of what we would call stronger third-party talent, that we've just brought in over the last two years that are starting to hit their mark.
Again, I can't predict when that will lead to inflows because as you know, when the markets were all going up, it was easier for people to move a bit more of their money to passive. When it was more of fixed income, I think now that we're getting volatility, I think the retail investor and the advisor is starting to see the volatility, and ETFs aren't necessarily just doing what they thought they may do, or that they're just moving completely with the market rather than being better than the market. I think there may be more opportunity for us. We're putting our emphasis on higher alpha type product on the equity side, more concentrated portfolios on the risk side.
We really are doubling down on our credit expertise, is very strong, our tax-exempt expertise, and the solution sets that we're coming out with, like risk parity product, I think will be helpful.
How much of that is sort of resolving the distribution versus you having to build a track record in the product?
Some of it is definitely, I would say, distribution as we build out our institutional. It's going well, but we're building it out and globalizing it. Then the U.S. retail, I think we're already hitting good cylinders in the U.K. here and in Europe. It's getting the U.S. turned around, and I think we're probably in the fourth inning of it. I think there's a good upside there. I would say in the product side, it's that we have good, excellent core product in equities, let's say, right? In the disciplines of equity. Where we're weaker in is having a bit more on the global product that we're putting together now and on some of the additional type of solutions. We actually have many solutions we provide to our clients, Ameriprise, U.S. Trust, Zurich, and managed assets.
We're trying to bring those into what we would call commercialized products to sell through multiple parties. That's what we're putting the expertise against to bring that to life.
It's interesting the way you talk about capital.
Sorry, there was one there, we'll come back to you.
Could you please talk a bit more about your ambitions in Asia, the expansion there, how you proceed. Is there need to go for M&A, or you go ahead, like you do it in the U.S., U.K., and Europe, just adding advisors, product people, marketing, extend the channel. How does that go?
Let me start with where we are today. We've actually been building out organically today, okay? We set up our regional activities out of Singapore. We have offices in Hong Kong. We opened in Seoul. We're in Malaysia. We're in Taiwan. We're building out with first institutional, and we have institutional sales groups and business, and we've actually set up some manufacturing already out of Singapore for fixed income and equity. We're complementing that with intermediary and wholesale activities in places like Hong Kong, Taiwan, Singapore, et cetera. We're building that out organically. What will happen is if there are some inorganic opportunities that would fit in or make sense for us, we will look at them. We have looked at one or two in the past. The things that were available weren't of exciting nature to us versus the organic build.
If something came along that would be complementary, we have the capability of adding that on.
Maybe I think we just have a little bit of time, but just if we focus on AWM, that business has been a source of positive margin surprise for a while now. Can you give us a sense of how that business is performing, given market environment is a lot more volatile than we've seen in some time?
Yeah, good question. I think the market environment has been a lot more volatile. I think what I can say so far is we still see our business operating very effectively with our clients. We've engaged them, as we've done in any of these situations, to really focus on what their goals, what their long-term nature is. We do a lot of contact with our clients and engagement to walk them through and give them an understanding. We've actually advised them there would be some levels of pullbacks and greater volatility as we went through the year. With that in mind, what we're seeing in actual behavior is we see a little more cash position building because people aren't putting as much in new to work until things settle.
We're seeing a little in where they've held back a little more on the equity side right now because of it. We're not seeing people pull money out or go to the things. That's the way our advisor works with the clients. It's just more of how much do they engage. Our cash positions have gone up a bit during the quarter, but again, that can go back to work pretty quickly. Overall, we still see good new inflows. We see good client acquisition still occurring, which is very good. We see our advisors very much focused on doing business.
I think one of the positive surprises in 2Q is your recruiting was much stronger than we've seen. Has that kind of continued?
Yes.
Is there anything specific or different that's driving that?
I think there's a greater recognition, and the type of recruits we're bringing in are actually of much higher productivity now than a year or two ago. I think our name's out there now. I think what we have established, how we think about the business, the culture we have, is starting to percolate a bit more as we get the word out. We're seeing very good recruits, and the pipeline's very good.
Got it. Then maybe one last one just on the JHS advisors. I think that's more of a 3-Q event in terms of your discussions with them. Any sense in terms of how that retention is going on the advisor side?
Yeah. I don't know if you want to.
Yeah. I think it hit our target on the employee side, and certainly, it was an experiment for us to see as we went in, and we certainly were comfortable with the employee side. On the franchise side, we attracted a level, a little less than we wanted. Again, the deal was an asset deal, and it worked out very well for us. Actually, I think it will be a third quarter event is right. You'll see it come through. Performance-wise, IRR-wise, everything is really hit on every aspect of it.
What are your targets for mix of employee versus franchisee?
The mix is fine.
Just in terms of 100 new
It was about, I would say the numbers were about two-thirds were employee and one-third, which really, that was exactly where we came in.
Got it. Okay.
Again, we didn't want all of it.
Right.
That's why we went the asset approach.
Rob?
Given the discount that you believe in the value of the current system today, and the fact of some confusion about which sector you guys should be covered by and all that good stuff, if you put those two together and think about the structure of the business, could you talk to what extent you might actively consider changing the structure? How big would the discount have to be? For how long? Just to get a sense of how open or not you are to.
Yeah. See, I think it's an excellent question, and one that Walter and I, and we always discuss business strategic financial. I think one of the things I would just say is this as a starting point or a base case is we have transitioned the business tremendously, where it was two-thirds insurance and protection versus now two-thirds advice, wealth management, asset management versus insurance protection. The insurance and protection, sometimes people don't necessarily fully capture that it's really an in-house business to us. It has a very good return. It has very stable premiums. It has good additional diversification from spread. Those things are actually a beneficial and complementary. They don't detract. There's no capital overhang.
In fact, we have a very strong capital excess base, and if you took that out, there's only one probably business that drags that down and one that Suneet has mentioned that we think will get improved over the next year or two. Our long-term care business, which is a closed block. That's all we do is we continue to raise and request premium, but we haven't sold in 15 years. If long-term interest rates went back, it'll be a way for us to release that. The other one is our property casualty business that we've always generated in the past a very good return. It is an affinity-based business. It's a direct model. It's a high-demand model. We've hit a number of what I would call developments over the last few years as the marketplace has changed.
We're putting in changes necessary to bring that margins and profitability back, and that will give us opportunity in the future if we wanted to sell or continue to invest in a direct way. If you look at that as a total, I would just say, so if we continue down this path and we get to 70%, 75%, whatever, is this really a way that you would discount this whole diversified firm that you can generate very good diversified revenue, good returns, very high return? Our return on equity compared to either independent asset managers is very good. Look at asset managers fully loaded with their acquisition, amortization cost, et cetera, the compensation. Our return is very good, right?
At the end of the day, I would say, look at Ameriprise as a diversified, integrated business with a strong capital return and ability to penetrate and operate in the retail market. When you do that, I got to say, I think it should be thought of very differently than the idea of we're three little segments and each one performing a certain way. Look at the totality of it and what we've been able to leverage from it.
Great. I think we're going to have to end it there. Please join me in thanking Jim and Walter and Ameriprise.