Next up, I'd like to welcome the team for Ameriprise. Jim Cracchiolo, Chairman, CEO, and Walt Berman, the company's CFO. This was another solid year for Ameriprise. A number of really nice metrics. The stock has clearly done quite well. I think by our math, it's fifth or sixth consecutive year of outperformance versus XLF. You guys have now risen, I think, about 200% since you did the Columbia acquisition. I think today we'll talk a little bit about the opportunities that lie ahead and where the next 200 will come from for you guys. I'm going to jump right in. We're going to keep this as, again, as a fireside chat, and turn it over to the audience for some questions in a little bit. I'm going to jump in with the Advice & Wealth Management business.
Clearly, it remains a critical growth engine for you guys. Something I think that the investment community has underappreciated for the last couple of years, and you guys continue to sort of surprise to the upside on that business, both when it comes to revenues and the margins. Maybe we'll spend a little bit of time on that business. Talk to us, where do you see profitability going there over time? Right now you're, I think, around 15%-16% run rate year-to-date. Higher rates eventually will help, but I think there are some still interesting dynamics that could drive margins high even without higher rates. Let's start there.
Well, it is the largest part of our growth engine. It represents over 70% of the total revenue coming into Ameriprise for all the products and services that we offer. We actually think that we're positioned quite well for continued growth there for a number of reasons. Number one is we've invested, over the last number of years, $hundreds of millions to build and enhance our capabilities, our technology, our online activities. We think that for what we've invested in the platform capabilities, that will continue to help our advisors become even more productive to attract and maintain their relationships and deepen those relationships with clients.
We also think that the positioning that we have in the market really around financial advice, our Confident Retirement approach, and what we're going to be launching next year is our Confident Wealth Builder approach, which is helping people who are accumulating for retirement and then transitioning ultimately, where our Confident Retirement approach is today is well suited for what the consumer is looking for. We're positioned quite well what the consumer's needs are, and as all the research that we do, and every time we're out in the market with the value proposition that we have, our activities from prospects to client relationships are quite strong. They actually feel quite satisfied. In fact, our satisfaction today is the highest it's ever been with our clients. We have excellent retention with our clients. We're positioned really well from a market perspective.
We got rated number one as being the most customer-obsessed firm out in the marketplace from Forrester. We got ratings of being number one in trust as a full-service firm. Same thing in regard to investment experience from Forrester as being number one in the investment category. For a number of reasons, I think we're positioned quite well to continue to grow and attract more consumers into the franchise. The other thing that we're positioning to do is using our advice and wealth management value proposition around the Confident Retirement. We think we can further move upmarket. The clients we are clearly focused on today are the mass affluent, but the largest and fastest-growing part of our base is in the affluent space.
We feel that today our average client we bring in have investable assets in the mass affluent is about $400,000-$500,000 when they start relationships. We think that we can move that now to the $1 million plus. Our focus is really going to be the next step up. Our services, our value proposition, in fact, our brand attributes, and what the consumer is interested is even stronger with the affluent market, and it's quite strong with the mass affluent. Here again, if our advisors fish a bit more in that pool, they can even bring in clients that have more assets and more flows, in which case increase their productivity there. We think we're positioned well.
We have a number of things that we think have worked for us over the last number of years that we're going to really continue to hone our disciplines and our focus on.
Great. Just zoning in on that dynamic a little bit, one of the key strategy points that you've changed 2-3 years ago, maybe even longer, is the shift in the employee channel and the way you guys approach that. Where is that in the evolution from both the number of kind of high producing phase that you'd like to have in that channel and where you are in terms of the margin in that channel? Because again, the overall, I think, is still the last time we talked about it was in barely profitable. I think you moved it into profitability last year. Now it's maybe high single digits, but where could that go, and what does that mean for margins for AWM holistically?
If we just put it in context, we've actually moved from where we always sort of helped to develop advisors into the business. Our employee model was a way to bring new people in that were never in the business and help them develop books of business and become a full-fledged financial advisor over time. They would migrate to our franchisee channel and become independent. A number of years ago, we decided that there are certain people that would like to stay associated as an employee. They don't want to necessarily move to become independent. We established the employee channel. What we've done now is to really tenure people and maintain them as employees.
The biggest part of that growth comes from The people that we're recruiting in from the industry who may be wanting to leave their current firm, but still be under an employee status under our brand, our value proposition, all the tools and capabilities that we provide around the financial advice proposition. That's what we've been doing. We moved this from, as you would imagine, where it was a loss for us, a significant loss of bringing new people in and giving them all of the capabilities and helping them build books of business. You had all the expense, and then they would migrate over to become a franchisee. What we've done is move that to break even about a year or two ago. Last year, we started to really generate profitability from that, and that's on a fully loaded basis.
This year, our margins are probably in the high single digits. We are on a nice progression stage as we continue to bring in more experienced people, as they ramp up their books, as we continue to utilize the office space and the capabilities that we have, we think that we'll get into the double-digit margins that we're experiencing in the franchisee channel, which is in the high double digits, and over time, add to our total margin. Advisors we recruited in are ramping up. We continue to recruit more people in at higher productivity levels. The people who were there have matured, so I think we're on a good path to continue that progression.
Yep. Let's talk about the recruiting dynamic a little bit. A couple things that I heard from you guys over the last several quarters, and obviously you already mentioned it today, focus on higher producers, somebody who can help you break more into the affluent channel. How is the competitive dynamic, I guess, for those type of advisors different from what you're used to? I'm assuming the wirehouse is still the donors, in terms of the population pool that you're going after, and my sense is that they're also not in a rush to give up the higher producers. How do you compete in that channel?
We're actually doing very well in building the pipeline there. In fact, over the last few years, the average productivity of the recruits we're bringing in has increased by double digits. We've been attracting, in fact, some of the dimensions have been out there that we've been now attracting. On average, we look for those people in the half a million type of status we bring on average, but we've been attracting a lot more people in the $1 million category that are quite interested in the value proposition, the culture that we have, and what we do to help support their growth.
Yes, we attract them from the wirehouse, but we're also getting some people back from the independents that actually realize that we provide them some strength in the capabilities, the marketing, the compliance, et cetera, that they're looking for under a good culture. The market is very competitive for those type of producers. We feel we have a good value proposition. We're not necessarily going out to just recruit that as the primary market. We clearly, for those people who are interested in what we have to offer around our advice value proposition, we have a very good story to tell, and we are attracting good people in.
Yeah. You mentioned compliance, which has been, particularly I think this year, somewhat of a hot button for the industry, and maybe will continue to get more intense focus in the coming years. There's been obviously some regulatory changes with some of your peers. You guys so far have been able to kind of stay out of that limelight. Talk to us, I guess, a little bit about why that is, and when you think about the product that potentially could get some of the independent players in trouble, whether it's non-traded REITs or non-traded BDCs or maybe the way they sell the variable annuity product, how is that risk managed internally?
There are two components to that. We've invested heavily in our compliance capabilities over the last half a dozen years. We have sophisticated compliance in place. First starting with well-trained supervision. We have a hybrid model which we do both combination central and decentralized supervision there. We also complement that with product supervision. If we're offering complex products or non-traded REITs, we do a very comprehensive due diligence on the products we first put in the channel, and then we look at the compliance against that. Each state has their own requirements, you'd have to be up on the state level as well, and as well as the advisor book level of what they're doing with individual clients. We have tools, capabilities, modeling systems in place to help that along.
That really, I think, gives us a very good, and a practical, but a sophisticated approach to what we are offering in the marketplace. We feel very comfortable about that. Some of the products that people have offered that are under reviews, et cetera, we did not even allow in the channel, let alone the supervision around how much an advisor in their individual client book can do in a particular state. We feel very good, very comfortable about it. It's one of the strengths of the company that we have. One of the things that our advisors actually appreciate, where they don't have to worry about those things as the world stage has changed, particularly around the regulatory environment and the increased requirements and compliance that is being required out there over time.
When you're looking at pipeline of financial advisors, have you noticed that become more of a recurring theme of why somebody's looking to move? Or do you think the more centralized compliance system that is deployed internally with you guys is something that is sort of yet to come, and it could be an additional tailwind down the road for recruiting?
Well, I think there are a few things that go with this. One is, I think that it does take time where advisors, because of these things that happen, to start to really think about that and the implications of it. I think those things are still, I think, will play out. Which could be a positive for us. I also believe, however, that some of what's being recognized by clients today and by prospects for Ameriprise, which will help the advisor, is how we're positioned in the marketplace.
When you have excellent client satisfaction, when you get rated by industry sources that says you're the most customer-obsessed, you're the most trusted full-service firm, you're the firm that they would forgive the most if something happened, those credentials come from the way we've actually acted, how we behave, how we've worked on our clients over the many years. I think it's a combination of those factors that have added real value for us to recruit more people in and for the retention that we have. I think one of the reasons that we are appearing on the radar screen is for a combination of reasons, but most important is how we are so client-focused and centric.
Makes sense. I'm going to shift gears a little bit, and we'll spend a minute or two or three on the asset management business. Clearly, since you guys bought Columbia, financially, it's been a fantastic deal for you. The margins have improved. You bought it at the right time in the market. The outflows and the legacy parent connection, I think, probably were a little bit more significant of a hurdle than maybe you've anticipated. Now that we're several years into the deal, and Columbia is fully integrated with the way people think about Ameriprise and associate the business, talk to us, I guess, a little bit, the risks that are still left on the legacy parent stuff with just Columbia, and we'll touch on Threadneedle a bit later.
I would probably not position it as any potential risk per se. I would position it really as we have really crossed what we would call some of the migration change where you will lose assets from institutional and retail activities as the change settles in, and that's what we've been able to deal with over the last few years. I always use the example of Threadneedle. When we acquired Threadneedle from Zurich, they had a large and proprietary installed base. They still do because we have good, strong relationships. Our investment performance is quite strong for their clients. We've remained a very strong provider to Zurich and all of their companies for their client portfolios and their own book.
Over the years, because of that large proprietary base and how some of those books are closed and how they've diversified for future growth, we maintain the book, but we're always experiencing outflows on an ongoing basis from those books sort of peeling off. The base of assets has remained, the fee revenue has remained, the relationship is strong. It's a very good relationship for us, but every year we suffer a few billion dollars of outflows. No real erosion from the revenue base or the profit base, but because of the outflows, you got reinvested dividends, market appreciation that offsets that. That's really what we're left with our Bank of America relationships. We have very good relationships. We get good inflows in. Having said that, we have a larger installed base for some of the things, like our U.S. Trust business.
On margin, we will lose some of those assets over time, even though that base will appreciate and will generate good revenue continuing. We think that that's something we will manage well with. It will not cause us an issue over time. What we really need to do is increase the flows through our third-party channels that we've been building, the Ameriprise channel, including what we have in the institutional business, and I think that's what we've been taking hold of and focused on. I think over time, we can more than offset what will be a natural outflow from those businesses, even though the revenue streams will maintain if we have a good relationship and grow over time. I think this year, as usually, you usually get hit with some one-offs, which we did, and I think we've been able to handle those as well.
I'm looking forward to, as we move into the new year, that some of where we're putting our focus and investment and our resources and products, that will help the flow picture.
Okay. Quick follow-up, I want to spend some time, obviously, where you guys are focusing. U.S. Trust, the question that we get often from investors is really thinking about the over-allocation that U.S. Trust has had to Columbia Legacy versus where it is today. Do you still feel like it is overly represented, and that could potentially be still the source of outflows? If so, maybe talk a little bit about what the XYZ third-party mutual fund company's presence is on their platform versus what Columbia's is. Just to kind of get us some understanding around that.
Again, I can't speak for U.S. Trust, they have a diversified platform today that they've diversified over the number of years. It doesn't mean we don't have a good installed base and that we don't get a good amount of new business. We do. I think today they have a well-diversified base of who's selling in their channel and what products they need, and Columbia is one part of it, but not the total part as it used to be many years ago. I think over the years, they have diversified that. It's just more of because U.S. Trust had a proprietary business, et cetera, that was always a core part of it. I think as we go forward, I think that diversification will be consistent with what we're experienced today. I have less of a concern or issue there.
It doesn't mean that we won't be in some net outflows only because there is a larger installed base that will, over time, average out.
Right.
That's really what we're talking about. Maintaining a good relationship as one of the many channels that we're selling into, I think we're good. We're also increasing our sales activities to other private banks. We have a good capability, good knowledge, understanding of what's necessary to work with a very large private bank. Some of what we're doing is offering some of our products and capabilities now to other private banks out in the marketplace.
Let's talk about some of the new things that you guys are doing. You put a lot of weight behind certainly getting into third parties, and frankly, improving your institutional channel as well. On the institutional side, we're seeing benefits of that. I think you saw the best net inflow quarter last quarter since the deal closed. On the third-party retail, there's still some work to be done. Why is it taking longer to get into third-party retail? What are you doing to solve that?
I think it's a combination of reasons. If you look at over the last few years, there have been isolated pockets of high growth in the retail business for certain types of products and certain parts of the disciplines that are offered out there. In the past, it might have been global bonds, or it might have been in certain of the credit areas in fixed, like unconstrained bonds more recently. If you look at in the equity markets, here again, there are certain disciplines that have worked there. I would first say that we didn't have some of those particular core product that was selling in those areas where we had longer track records on them, et cetera. It's one of the areas we've invested in more recently. That was one thing.
The second thing is going through the integration of Columbia and RiverSource, it was a major change in our intermediary business, wholesaling territories, relationships. Columbia itself wasn't necessarily what I would call well-diversified in the third-party channel. They had some good product there that were very hot at the time, some Marsico products, some of their core product that they had in certain named areas, but they didn't have a broader breadth on the platforms and the capabilities. What we've had to do is really integrate that all in and invest in broadening that lineup, invest in those relationships over time. They do take longer, particularly when you don't have a wide group of product selling. Now we have many more products selling in our core equities areas that are higher alpha in some of our fixed income areas, et cetera.
We've also made a number of changes even more recently on some of the leadership that necessarily has better experience in how to penetrate these channels, and have some of those experiences, and how to grow things like how to get onto the various platforms and through the gatekeepers. I think as we go forward, we feel that we will be better versed in doing it, and we have more that we can sell. It does take time. It's not just a one-off where you show up at the door and you have a good product. A lot of people have good product
Sure
and relationships.
Sure. When we think about the strategies, and again, seems like institutional selling a little bit more, so hopefully that momentum carries forward and continues. Often enough, asset managers will have one or two or three, call it killer products
Right
that really go out there and gain a lot of market share, creates a lot of nice operating leverage within that product. Over the next two to three years, what are those products for you?
I think, first of all, there's a good embed in having killer product, right? It works in favor for a period, then when it turns cold-
It goes
it works against you. I think one of the things that I love to have as part of Columbia Threadneedle is we have 104 four and five-star funds. That we could have a lot of products in a lot of core discipline that can work for us. It just takes more time, to the point you referenced, to get that flows built in a number of different channels rather than just one killer product that everyone picks up quickly. There's a positive there. If we work hard and we maintain the disciplines we have around those core products, we can gain good flows in a number of disciplines, which I think will work over cycles. To your point, we do have some good products coming on stream as well, particularly in the solutions area.
That can garner some from greater asset flow, both from a retail and an institutional basis. A new risk parity product, as an example. It's actually just got voted out there as one of the most innovative new products in the solution space right now in asset strategy. We think that it will have some good uptake from the retail segments as advisors look to look at some of their asset allocation, and their risk as we go into the changing cycle. It also is garnering some good attention as we build our pipeline on the institutional channel as we move forward. I do believe we'll have some good products that can capture some space. We're putting a strong emphasis on income generation. We have actually an excellent credit shop at Columbia and Threadneedle.
We also have some real good disciplines around generating income in the equity type of business that we're in. We're bringing together some of those disciplines against what advisors are looking for for their clients as we move forward.
Right. Makes sense. Shifting gears a little bit to Threadneedle, another important part of the business for you guys. You've seen quite decent amount of success there in the retail channel over the course of last year, a little bit choppier more recently, but overall, it's a fairly good franchise for you out of U.K. You've seen some turnover on the PM side in one of the products. Where are you, I guess, in terms of the remaining risk within that portfolio? Again, how do you think sort of broadly around the outlook for Threadneedle for the next year?
Threadneedle, we've been able since we acquired at the beginning of 2003 or so. We've built a very large, diversified business, and we've had excellent retention of people and strong long-term performance, and we still do. We did have one of our teams that changed over as we globalized a little bit more of the business to share some of the resources and the capabilities both Columbia and Threadneedle have. What we've done is rebuilt some of that team there. We suffered a level of outflows in that transition for one of our desks, the U.S. desk there. I think that's recovering in a sense that we have a good team in place, and performance is getting back there where we want it to be. It suffered over the last few years a little bit. I think we're in good shape.
We lost a manager in our U.K. desk, but we have a very strong U.K. desk. We put our Chief Investment Officer back in there who ran that desk previously and is running it again. We haven't really suffered a major outflow there. In fact, we're garnering some good inflows. I think part of what we have at Threadneedle is very good long-term performance. We have good tenuring of our staff. We have a wide discipline in some of the managers. I think that we'll recover well. I think the only thing that has slowed Threadneedle down more recently is more the market pullback that experience. I think in the U.K. and Europe, that thing when the markets change a little bit, people pull back quickly, but they also come back quickly. I think that's what we suffered more recently in the last quarter or so.
We did have some of those outflows in the beginning, but we feel that we're both beyond that now. It's more of what the flow picture will be.
What the sales were.
In the U.K., in Europe, but I think we got good performance and good teams.
Got it. Bringing it all together for the asset management business for you guys. If I were to paraphrase, and correct me if I'm wrong, but some of the lower fee product is outflowing, not having as much of an impact on the revenue. Some of the new product, which is much more of a traditional kind of asset management product with maybe a little bit of a higher fee, is starting to pick up and you're fairly optimistic. How should we think about, I guess, the blended fee rate for the business over the next year plus, and what does that mean for the pre-tax margins for that segment?
I think when we look at fees, I think if we look isolated at retail and institutional, I think on a fee basis, we should be doing well. I think what we're looking to do over time is, listen, we have a very strong equity base. If the equity product continues to grow, it's going to be a bit higher fee and fixed. On the other side, we are looking to grow our institutional business again, which will have a little adjusted fees from what retail is, but in combination, that should give us good growth. We're seeing a good pickup in our institutional business. We've done a lot to diversify that business. We're building a whole solutions area. We are taking space more globally now in regions beyond Europe, Middle East, Asia we've invested in.
Over time, I'm hoping we will garner some good flows from that business. On an institution to institution, we think the fees will be good. On a retail to retail, we think the fees will be good. If we grow institutional a bit more in combination with retail and it averages out, we think we're in a positive. I can't speak to the fee itself, Walter, and what you're projecting more recently, but I'm not sure we're going to see a reduction per se over time.
As with the margin, as we talked about, I think as you saw, we went over 40% in the last quarter, but I think more traditionally as, again, in the current market until the flows get into more positive, 35% to 40% is the range that we see in the upper 30s. Certainly controlling expenses, we'll get the leverage out of the flows as they come in.
Yeah. Before we jump into the capital side of the story, which continues to be unique with you guys, I want to wrap up the kind of the discussion around the AWM and the asset management, really some parts of your insurance business as well. You guys touch the U.S. investor in many different ways. Whether it's the advice or the asset management product or the insurance product or annuity product, give us, I guess, an update on the state of a U.S. investor. They've enjoyed a couple of good years. Is their level of retail engagement remains quite strong into next year? I guess, do you see any risk of that being derailed?
I can't speak to markets per se, if it went into a high volatility period versus just what we experience today is maybe a bit pullback from where it ran. What I could say is, in general, I think the retail consumer is getting more engaged again. I think they're feeling much more comfortable again. I think the economic pickup that we're beginning to see, I don't think that's translated all the way down as everyone really being out there in this overly optimistic bent, which I think is good. Our clients in particular, as we look at them, they weren't necessarily trading all back into equities over the last few years. I think there is an opportunity over time for them to get even further engaged, to start to continue to deploy assets as we've been seeing.
I think they are continuing along that path. Even if there's a market pullback here, it might even be more positive for them to even get more engaged, meaning that they didn't miss some of the run-up. I do see good flows. If you look at our business, we've been adding roughly $3 billion-$4 billion in wrap flows every quarter, which is, again, people are more comfortable, they were more engaged, they're deploying more assets back from cash or just holding it. I feel pretty good about the consumer side of this right now. Again, I can't speak if we went into a major avalanche or something happened globally. In general, even if markets become a little more volatile, pull back a little, et cetera, I don't think that should stop the consumer from the trend line. Because ours aren't active traders anyway.
They deploy over time.
Okay. Makes sense. Before I turn it over to you for Q&A, just a couple of points on capital. Clearly a very differentiated part of the story for you guys. Again, I think since the Columbia deal closed, you guys repurchased something like 20%-25% of your shares. Actually, share count going down by 20%-25%, which is not something we've seen with a lot of financials of your size. You continue to return 100% of earnings, plus you have $2.5 billion of excess capital, which is 10% of your market cap. How should we think about the capital returns for you guys for the next two years?
I think, Walt can complement anything I say here. I would say we feel excellent about our capital position and the situation moving forward. We generate very good, strong cash flow based on a combination of the continued mix change in our business as well as the type of businesses we're in. We manage a good, strong capital base that gives us opportunity to deploy that capital in times that we think there are good opportunities out there. It could be further deployment if market pull back. It could be additional acquisitions that would complement those two businesses I just spoke to you about. We're quite disciplined in that. We feel strongly about continuing to grow our dividend as a part of our returning formula, and we continue to do that every year.
Buyback, we've been returning more than our earnings because we continue to free up capital. It's not as though we haven't been trying to return to the shareholder. We have been, and one of the strongest returning of any of the financial services companies. The point you reference is very important, I think, will be recognized more over time. We're one of the few financial services companies, including with amortization against acquisitions, fully loaded cost of what we have, full expenses that are in those numbers to generate a return on equity in excess of 20%. We're in 22%, and that could rise continuing based on just what we're doing.
I feel very good about the capital situation, our ability to deploy capital, and if certain deals come along that make sense for us strategically that we can generate a good return, it doesn't even have to change our profile per se in what we're returning, just we have a good, strong excess base that we can utilize for it.
The only thing I would just add to that is the fundamentals that support our excess capital and our capital position remain quite strong, both from a liquidity standpoint, asset quality to hedging and the way we approach that. The velocity of change that will come at us is certainly within the standard and managed, and that's why when we talk about the excess, it is certainly excess from that standpoint, and it's a competitive part of our value proposition.
The one thing I heard you guys say in the past, "We will continue to buy back lots of our stock because we think we're still undervalued." That's the message I heard from you for the last three years, and that still hasn't changed. How do you guys assess the valuation of the stock internally?
Well, Walter can give you more of the financial discipline of what we look at there. I would say this, we feel excellent about our ability to utilize what is our core franchises for growth. We feel not that we should be trading at a discount to segments or peers. We actually think when you put the combination together, we haven't spoken about our insurance annuity business, but it's a premium business out there compared to the industry, but we still get rated as, if anything, just whatever that core trading multiple is. To be very honest, we generate some of the highest returns there. We have some of the highest margins. We have some of the best client relationships because they're all our clients. They're not working through third-party intermediary. The business doesn't churn. We have a good risk profile.
We have great behavior with very fair benefits that we actually fully hedge or we reinsure our mortality risk. At the end of the day, when you put those three businesses together, we have the growth that you can get from the core higher cash generating businesses with low capital. Plus, we have a very good business that we built over decades that will generate good returns and a complement to that. If you look at one of the things that I think has really differentiated ourselves since we went public, let alone since the crisis, we have been able to generate a much higher growth with much lower volatility against the financial services competitors or segments individually, asset managers, broker-dealers, I&A, insurance and annuity, or even financial services in broad terms.
We think when you put those things together with the type of capital we generate, with the core profile against growth in the wealth management and the global business we have, we should be at a premium. That's why Walter and I know and feel good about our ability to think about buyback as part of the equation rather than we're just buying because the price is higher and we're making a smart move. Based on what we've been able to do over the years, we've gotten actually a quite good return on that.
Yeah. Jim said it covers it and also our ability to generate capital gives us opportunities going forward also.
Great. All right. Well, we'll have a couple of minutes, maybe a couple of questions from the group. Yep. One right there, please.
I've got three questions. The first is, what percentage of the common stock or equity of the company is owned by the executives? The second one is, I assume you have a revenue-sharing model with your franchisees. If so, is that split known, and what is it? Lastly, do you have a synchronization in the remuneration structures of your two asset management businesses? In other words, is it similar between Threadneedle and Columbia or not? Thank you.
Okay. First of all, from an executive level, a large part of our compensation is against the equity type of growth in the business. First of all, it's based on growth of earnings, it's based on growth of return on equity, and the disciplines under that, generating the net income and the revenue. A good part of our compensation is long-term, which is then based on performance grants that tie to those metrics. It's based on option value and options that were granted. Each, myself and executives, we have a good amount of equity tied up. It's a large part of what we get in our remuneration as we go forward on an annual basis, but also a long-term basis. We maintain a good level of stock ownership.
I maintain way above any requirements that I have, we have a lot of long-term value built up there. I think we feel very good and associated. In fact, some of the things we have to do over time is take it off the table a little bit only because we're so tied to it on a total basis for what we are. Our franchisees, they're not on a revenue sharing per se. What we have there is, we have certain payout rates based on product sales, commissions, fee-based business, et cetera. They're on a various level of what we would call a payout formula based on their productivity. We generate fees from that revenue, just like they do. We get a cut of those fees. We get various admin charges.
We charge them for certain fees for operating of the network and other things such as that. It's a combination of fee-based and commission-based that we generate revenue from for those advisors. They do own their equity in their practice. They do generate their own profitability from that equity, so it's a mutual sharing. Their productivity goes up, we get with that, a sharing of that increase in cut as well. If it went down, they pay for their own fixed expenses. We have a variable with that's not all our fixed costs that we have to worry about in case they don't produce, which is a positive for us and them in how we manage that activity, and we can generate good margins.
The last is, there are some differences in how we remunerate between Threadneedle and Columbia, but we're bringing that much closer today, where it's a combination with Columbia and Threadneedle on a combination of investment performance and assets and various levels that they manage. It's just some variation in the length of time on the performance. Threadneedle is a bit more around the three-year, Columbia is a bit more around the five-year in track records and performance, where there's a little more weighting of one versus the other.
Okay, great. I think we're out of time, thank you both very much. A pleasure to have you guys here again this year.
Thank you.