By David Wignall

Sometimes exceeding analyst estimates isn't enough for Wall Street. Case in point: Analysts at William Blair downgraded Ameriprise Financial stock Friday, citing slowing earnings momentum. The downgrade comes after the financial services firm announced its second-quarter earnings on Thursday, which beat Wall Street expectations yet sent the stock trading sharply lower.

The analysts, Jeff Schmitt and Tyler Mulier, downgraded Ameriprise to Market Perform from Outperform. The stock, which fell 3.7% to $517.10 on Thursday, was about 1% higher intraday Friday.

"The company is a high-quality franchise with a strong track record of success," Schmitt and Mulier wrote in a research note. "However, declining interest rates are putting pressure on the core wealth management business."

Ameriprise's wealth management unit -- which represents 65% of the company's revenue -- makes much of its money from net interest income, also known as spread. The firm takes cash left in brokerage accounts and lends it out at high rates, while paying much lower rates back to depositors. As rates rise, that spread -- the difference between what Ameriprise earns from investing client cash and what it pays back to clients -- widens, boosting profits. This industry practice has led to complaints from investors across the industry, including lawsuits.

In 2021, Ameriprise earned $305 million in spread income. By 2023, earnings from that source had risen to $1.7 billion -- more than half of the wealth management unit's total revenue. Analysts don't believe that growth will continue. "Wealth management segment earnings growth is decelerating due to pressure on spread income following the Fed rate cuts last year," the analysts wrote. "We expect this pressure to continue."

While the analysts are less bullish on Ameriprise stock than before, they note that the company has performed well and is "appropriately valued." They add, "While the company has a solid future, we believe the stock will likely be more of a market performer in the near term."

More risks. Cathy Siefert, vice president at CFRA Research, says the business remains strong, but notes that the company's prospects for organic growth have weakened. Ameriprise's client inflows slowed this quarter, partly due to market turmoil and tax season, as clients withdrew funds to cover tax bills.

The wealth management business faces some headwinds. Competition for advisors has grown heated in recent years, as companies offer lucrative compensation packages to secure top talent. On Thursday's earnings call, CEO Jim Cracchiolo said some Ameriprise advisors had left after being given "big checks" that were "a little irrational."

Cracchiolo noted that his firm would have to raise its offers "a bit" to remain competitive -- a prospect which could weigh on the company's wealth management earnings further.

On Friday, a New Jersey-based team of advisors with $2.3 billion of client assets announced that they were leaving Ameriprise to start their own registered independent advisor. The breakaway team, who are calling themselves Laurel Oak Wealth Management, are backed by Tru Independence.

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July 25, 2025 13:49 ET (17:49 GMT)

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