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Stock Strategist

Ameriprise Widens Its Moat

Its growing prominence in wealth management is responsible for the rating increase.

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We've upgraded our economic moat rating for  Ameriprise Financial (AMP) to narrow from none. With roots in insurance, Ameriprise has transformed into a wealth management firm that targets the mass affluent and affluent households, and a moat now surrounds its asset management and wealth management businesses.

In general, insurers do not benefit from favorable competitive positions. They are in the business of selling commodified insurance products to consumers who attribute very little value to brand. Industry competition is fierce, and there is a high degree of cost uncertainty. Because of the long duration attached to many of the products they sell, insurers do not necessarily know their cost of goods sold for a number of years, allowing them to underprice policies without knowing it. Firms have a large incentive to chase growth without regard for profitability, a cycle that repeats itself as competitors are forced to match artificially low prices or risk losing business.

Vincent Lui does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.