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Ameriprise Takes Your Money But Doesn’t Give You Your Financial Plan
By JLP | October 17, 2007
I have never been a big fan of Ameriprise, which used to be part of American Express until it was spun off a few years ago. I always thought that Ameriprise’s financial plans were used as a way to sell clients Ameriprise’s own products. It’s a huge conflict of interest.
This article ($) in today’s WSJ claims that several states are investigating Ameriprise. Apparantly some Ameriprise advisors collected plan fees ($300 per plan) from clients but then never delivered the plan!
What kind of plan can a person expect for $300?
As bad as it sounds, it’s probably a good thing for these clients that they didn’t get their plan, which most assuredly would have placed them in high commissioned products. So, it could have been a blessing in disguise. Still, you hate to be out $300.
This isn’t the only time Ameriprise has been in trouble. The article also mentions that in 2005 Ameriprise agreed to pay $7.4 million to settle “allegations from New Hampshire that it steered clients into the company’s own lackluster mutual funds instead of better-performing products from others.” Ah, now we know why the plan was so “cheap.”
Of course, not all planners at Ameriprise are bad. However, I sure as heck would think twice before I used this company.
Topics: Business News |
October 17th, 2007 at 1:23 pm
A couple years ago I dropped my business card in one of those restaurant bowls, and in turn got a free lunch there plus a lovely chat with an Ameriprise “financial planner” about my finances. I had followed the industry for a long time and was not fond of it. I asked him point blank “Do you believe there’s a conflict of interest when you’re paid for an unbiased financial plan but your primary compensation is totally dependent on what you recommend?”
His answer was “No, because that’s why I’m certified.” Not reassuring. The reality is, there’s no good answer to that question, because there’s nothing right about that approach to financial planning.
October 17th, 2007 at 2:09 pm
Ah, yes, Ameriprise. I used to have various IRAs held with them until the 529 plans came about. I asked my advisor whether she thought these were good to use and did they (American Express at the time) offer them. She insisted these were not useful and that she could offer me something better culled from their slate of product offerings. Then, a few months later, American Express became a broker for a 529 plan and (cue the fanfare) the 529 was one of the most remarkable products to be developed in a long time. I fired her and moved all the accounts to Vanguard. I did get a Christmas card last year, though.
October 17th, 2007 at 3:19 pm
I actually started my personal finance journey with Ameriprise. I too had one of those free lunches that turned into regular investments into a Roth IRA — with AMP’s RiverSource funds, of course.
After learning more about index funds, Vanguard, and feeling secure in making my own investment decisions, I transferred my money to Vanguard.
Now I’m involved in the class-action suit against them.
October 17th, 2007 at 3:29 pm
Ameriprise (formerly American Express) reps are notorious for hammer closing (and closing and closing) new prospects into buying a financial plan. Many people will write a check at the first meeting and feeling buyers remorse the next day, NEVER talk to the rep again. Of course failure to deliver the plan means a refund for the customer, and a direct charge against the advisers commission, hence the forged delivery forms.
Clients can get a refund without ever talking to the rep by completing a request form like the one below:
http://www.amexsux.com/pdfs/Refund.pdf
With the WSJ article creating negative exposure I would bet customers could expect that refund check to come quickly.
October 17th, 2007 at 4:50 pm
so sad people would actually think it’s a good idea to see a full commissioned salesperson for financial advice.
October 17th, 2007 at 5:04 pm
I actually interviewed for a job with Ameriprise to be an “Investment Advisor” (I was forced into it; long story), and I was apalled and stunned by the company and its sales/hiring techniques.
First of all every person I interacted with reeked of the sterotypical used-car salesman. Seriously, it was insane.
Secondly, I had to take this long computer questionnaire right before the interview–and every single question was measuring your aptitude, personality for, and experience in sales. Not a SINGLE question was financial in nature or about your aptitude for customer service or anything else. All the questions were like “rate your comfort level with a 100% commission based job” and such.
Third, when I talked to the interviewer he said it looked like I didn’t have a hardcore sales personality (I swear he might have used the word “hardcore”). I agreed. He was all “you don’t have any sales experience at all?” I was still in college (where they had recruited me at a career fair) and I said no, but I had a finance degree and was studying to take the CFP. He said that didn’t matter; they take applicants from any major. Plus he said I’d be a better candidate for the job if I’d demonstrated sales ability, even if it was from selling shoes at the mall!
October 17th, 2007 at 5:08 pm
[...] [Update, 10/17: Ameriprise is under investigation by “several states” for misleading practices. See other comments here]. [...]
October 17th, 2007 at 5:19 pm
Funny, I was just thinking about Ameriprise. Ireceived a letter in the mail from them. If I agree to a financial consultation. I would get 3,000 sky miles from Delta.
Sounded like a Timeshare sell. LOL
I had to pass. When companies start to sucker you for skymiles there are desperate.
October 17th, 2007 at 8:42 pm
Like others here, I have not heard good things about Ameriprise. Thanks for the additional warning. As you say, these people may be better-off.
October 17th, 2007 at 9:00 pm
It still amazes me that anyone would want to go a place like Ameriprise to get financial advice when there are so many other options out there.
October 17th, 2007 at 9:09 pm
I cannot believe what so many people are saying about Ameriprise. Some of them think that they are better at Vanguard??? Well, obviously they have not read the article that was published in Forbes September 3rd, title “Disinherited by Vanguard.” Talking about propietary funds and products…every company outthere does the same thing. They try to sell their own product, when was the last time that you heard or saw Pepsi sodas machines selling coke…or verizon wirelles selling At&T services? Come on people we live in a capitalistic and monopolistic society and every company out there is trying to gain market share from their competitors. Now that does not mean that to do that they have to be unethical and unprofessional. I am not in any way justifying the actions of those that committed forgery or misrepresented their services and themselves. You know what, I am sure they got what they deserve. But because you find a bad and unthecial doctor you do not stop going to the doctor, right? It is the same thing with financial advisors every where in any company, there are those that take what they do very seriously and are truly advisors to their clients, and those that dont.
I think the article and some of the comments are too general and do not reflect the reality of Ameriprise Financial Advisors. Again, when you have an organization with more than 10k advisors, there are going to be some bad apples.
October 17th, 2007 at 10:05 pm
I have to agree with Jessica. I’ve been with Ameriprise for 7 years, with the same adviser, and have been very happy.
October 17th, 2007 at 10:11 pm
My general rule of thumb with financial advisors is to avoid brokers like the plague. Any financial advisor with whom I deal is fee-based, either fee only if its for a one-off deal, or a small percentage fee based on performance.
We have several Vanguard funds, and not one was sold to me by a Vanguard financial advisor. My choice of Vanguard funds rests in my assessment of their ability to meet my needs and their low fees. Very low fees. A simple comparison shows that the RiverSource S&P 500 Index Fund class E share has a front end load, as well as an expense ratio of .59% for the class E shares. The Vanguard S&P 500 Index fund has no load, and an expense ratio of .18%.
It doesn’t take a genius to figure out where you are going to get better value in your index fund.
October 19th, 2007 at 8:59 am
Financial planners are like every other service professional you might hire. Go with someone you know and trust, or at least someone recommended by someone you know and trust. My financial planner is with Ameriprise, and he is fantastic. He has never pushed Ameriprise products on me (although he will include them when pricing the options), and is anything but a “hammer closer.”
Could I do my investing myself? Sure, but I am not particularly interested, and Dave, my advisor, keeps a closer eye on my financial future than I would.
October 19th, 2007 at 4:02 pm
As an Ameriprise Advisor I Feel I do an outstanding job of keeping my advice and reccomendations in the Clients best interest. I see my job purely based on educating my clients on options they have available to them that will help them attain there goals. I use low cost index mutual funds, etf’s, and vangaurd etc all the time. All of my clients pick what they feel most comfortable with based on there goals and objectives only after expenses and fees have been discussed. We can also work on a fee only basis through planning, % of assets, or just a flat fee arrangement. We are also not compensated any more or any less depending on whether we use our own products or anyone elses. Do not pass judgements on everyone because of a few bad apples and I am sure they were dealt with accordingly.
October 20th, 2007 at 8:22 am
Do they “attain there goals”, Derick?
October 20th, 2007 at 3:14 pm
[...] AllFinancialMatters: Ameriprise Takes Your Money But Doesn’t Give You Your Financial Plan [...]
October 21st, 2007 at 12:18 am
Where “independent” financial advisers are concerned, it is always a perception what or who you perceive to be independent.
In my opinion, no one financial adviser is completely independent. At the end of the day, it all boils down to how much commission they can earn by referring the products and companies they are representing.
October 21st, 2007 at 3:32 pm
A few years out of college, I actually worked for Ameriprise back in the days when it was known as IDS (Investors Diversified Services). At the time I started, they were commission only, but were making a pretty good attempt at “needs based selling”.
The whole financial planning approach was used as a means of selling product. But, they did have a pretty good suite of products, so they weren’t stuck with sellign only mutual funds, or annuities, or life insurance. I’d say that they weren’t as good as “real financial planners, but in the market that was their sweet spot (the low-to-middle class), they were better than whatever else whas available. In most cases, it was a matter of a front-load mutual fund or no-load fixed annuity vs. money in savings and whole life insurance.
Then (about 1985 or so), they started charging for a mostly boilerplate financial plan (a couple hundred dollars). The IDS reps (At this time, they’d just been bought out by Amex) still mostly made their compensation by selling product.
All in all, I’d say that they weren’t the best option available for sophisticated investors, those who were willing to do their own homework, or those with the resources to work with a true fee-only planner. But to be fair, that’s not the market most of their reps were getting the bulk of their business from. In that market, they weren’t the best of all options, but they were better than the options many of their clientele were currently taking advantage of.
But you’re right - they were very sales oriented. I was a pretty good teacher, but not a good closer. And if you wanted to survive in that business, selling was a necessity. There were many ethical reps in the company, but even they were pretty good closers. If they weren’t they didn’t survive. The reality was that most financial planning services at the time were sold rather than bought. My guess is that it’s similar today for most of the middle/lower end of the market (and a good part of the upper end, too).
My sense is that many (maybe most) of the “fee only” advisors came up through the ranks and put their time in selling product. Then, after they’d migrated to a more affluent market, they switched over to a mixed compensation scheme, and eventually to a fee only basis. Once they’d been in the field long enough, their business and reputation became such that a lot of their new business came from referrals. But at the beginning, if they couldn’t sell, they didn’t survive.
October 21st, 2007 at 9:45 pm
“…or a small percentage fee based on performance…”
Really? Because this is a big time no-no in the business, unless you fit into a very narrowly defined category of ‘accredited investor’.
October 21st, 2007 at 11:11 pm
Ameriprise has such a bad name in the industry is probably why advisors are forging documents. People pay their money then do research and say screw it. Advisor has to deliver a plan to get paid so since the client has bailed the advisor has nothing left to do but forge the plan acceptance form. The advisor figures the client won’t try to get their money back so they figure no one will ever find out.
Ameriprise Sucks
October 22nd, 2007 at 9:26 am
I have worked for Ameriprise since 1999 and sure, there are some bad advisors that are out there and I worked for one of them. When I chose to change advisors, I promised myself that if he was the same way, I would change companies. He is honest and out for the clients best interests. He tracks their goals and yes, people actually reach them! I know it’s a novel concept, but it happens!
In addition, a small percentage fee based on performance is actually a good thing! Advisors choose funds, etf’s, stocks etc. on performance and risk according to the client. If you lose money, he gets less money. It is a better incentive for advisors to stay on the ball rather than just putting the clients in funds that may or may not suit them years later, just to keep getting the trails.
They do not work for free, do you? They should be compensated for their time and knowledge. A lot of people can say they will do it themselves and do better. But the question is, how will your investments do in a bear market? Are you taking too much risk for potential gain? Do you research the fund in depth to find out if there have been fund manager changes etc? You probably do not. But we do. That’s what we are paid to do.
Obviously I am biased, I am a paraplanner who has to keep up with all the new compliance regulations that are set up to protect the client. And believe me, there are tons.
Every time a mutual fund A share sale is made, we have a worksheet to fill out. If an advisor recommends the sale of an A, B or C share, you have to enter the information into a program which will tell you which will be cheaper for the client over time. Every time a financial plan is sold, we only have 90 days to deliver it. That is sometimes very difficult to do, when you go so much in depth in the plan. The plans are a bit “cookie cutter” too, if you want to say that they all come from the same program. There are only so many ways that a program can say 2 minus 2 equals nothing…
We also have compliance officers who check our plans and each plan has to have a certain amount of recommendations etc that cover certain subjects to make sure that all areas of financial planning are covered according to what the client wishes.
There are checks and balances put into place. One thing the WSJ article does not cover is how many Ameriprise advisors are out there? How many plans are sold and delivered each year? I wish I had the answer, but I can say that the number is well over 200!!!
October 23rd, 2007 at 2:52 pm
Most “financial advisors” are product salespeople, trained especially to make it sound like they are something more then they really are. There is an undeniable conflict of interest to providing real, objective advice to one party and at the same time being paid to sell products by another party.
Even if an advisor sells non-proprietary products, they are still selling THEIR products because THEIR firm has selling agreements to rep those products. So, just because you don’t the firm’s name on something doesn’t mean your advisor is being objective. Sometimes the other products pay the firm (and the advisor) more than the name brand stuff. Despite a broker’s best effort to portray otherwise, their firm does not offer a broad universe of products. They sell only products that are willing to contractually share their revenue with the brokerage firm.
It is to be expected that advisors, however they are paid, believe they are doing the best thing for the client, but most lack the frame of reference to really qualify that belief. It should also be expected that they have strong loyalty to their employer. I’ve also heard a number of advisors claim something like, “I chose to work for this company because I truly believe they have the best selection of products.” But the truth of the matter is that most brokers have not scrutinized all of their competitors’ products. Most likely, the broker knew very little about their firm’s products at the time they were hired and had to go through the firm’s product training. Also, most “advisors” don’t receive any training about how to give objective advice. Most of their training is sales and product training, “how to sell our products.” Rather than being taught to understand the long-term effect fees have on an investment, they are taught how to justify the fee and overcome objections. Most sales people that call themselves “financial advisors” cannot even perform basic time value of money calculations with a financial calculator.
Also, look at how brokerage advisors measure themselves and each other also. Most look at how big of a “producer” they are. How good of an “advisor” someone may be is measured by their level of production, or in other words, fees generated. When they teach you to be a “better advisor” they teach you to use more of the higher paying products like annuities, VUL, and those new alternative investments that “no savvy investor should be without for at least a portion of their portfolio.”
While primarily salespeople use the title, not all, “financial advisors,” sell product. There are advisors that advise on a fee-for-advice basis ONLY. They don’t sell anything and their compensation is not effected in least based on what they recommend or what a client does. Professional advice is available from truly independent advisers for a flat fee or an hourly rate without any outside monetary influence or incentives from a third party. You still have to determine if the advisor is knowledgeable and trustworthy, but this eliminates one major obstacle to sound advice.
If you really want to know if your advisor has your best interest in mind, write on a piece of paper, “Dear (fill in your name): I will always act in your best interest.” Now ask your advisor and his/her manager to sign it. If they try give you some kind of liability or regulatory excuse , its really because they cannot comply with the terms of that statement.
October 23rd, 2007 at 9:44 pm
“Professional advice is available from truly independent advisers for a flat fee or an hourly rate without any outside monetary influence or incentives from a third party.”
…and this eliminates all of the conflicts of interest???
October 24th, 2007 at 7:48 am
TJ,
Anytime the interests of two or more parties are not 100% aligned (this includes just about every business interaction), there is a potential for conflict of interest. People should always be on the lookout for conflicts of interest and how they may influence any relationship.
The advice model described eliminates one very large and significant conflict created by advising people to buy products that the advisor sells. This particular conflict simply cannot be over come in some instances due to the nature of the advisors business model (sales agreements, limited regulatory authority, etc.).
January 8th, 2008 at 10:27 pm
I am currently a customer of Ameriprise in King of Prussia, PA. After reading the articles on the internet about this company, I think it is time to get out. I have been a customer for about 3 years and paying $800/year, all I get from them is a statement every quarter and meet with my advisor face-to-face or on the phone once a year. He also sold me and my wife Variable Univeral Life which I think now is a waste of money. I think I can get a better service else where. Can anyone tell me how if possible I can get out of this mess? Please send me an email to eaglerock198@verizon.net.
Thanks.
February 2nd, 2008 at 7:13 am
You can get out of that account by signing papers. If you have an IRA you have to sign papers that will roll it over to another IRA.
Seek an independent financial advisor or independent life insurance agent to find out how your variable life compares with other policies
February 9th, 2008 at 4:58 pm
My daughter got involved with Ameriprise about 8 years ago and he sold her universal life which after all this time is worth less than she put into it. Also sold her a bunch of River Source funds (ALL aMERIPRISE) as well as a 403-B annuties plan that she can’t transfer because the IRS has new regulations regarding these. She has lost a ton of money in these plans. He also sold her a 529college savings plan for the state of Alabama, one of the worst plans in the nation even though South Carolina, her state, had a plan and offered a tax savings for their plan. He put little in Roth IRA’s but mostly insurance and 402-B’s. He charged her commissions and $750.00 a year to maintain the accounts. I have tried to get her to seek legal counsel but she is uncertain how to handle all of this. She has been giving him $800.00 a month for 7 years.
February 10th, 2008 at 9:58 pm
Mike, you can get out of the IRA but if you get out of the VUL you’ll pay a surrender charge. This is why the put you in the VUL. If you hold onto the VUL, they’ll make their money by charging you high fees and if you get out they’ll make their money on the surrender charge. Either way you go they’ll win and you’ll lose.
Sara, this company could careless that a South Carolina 529 plan made more sense for your daughter. Their concern is to make maximum dollar and they did this by putting your daughter in the Alabama plan. I recommend you point your daughter to a site like ameriprisesuck.com in the hopes she’ll see the light and move her money out of Ameriprise. If she doesn’t, she won’t be able to send her kids to a good college and when she goes to retire she won’t have much money left as a result of the high fees. Ameriprise is a rotten company with rotten products and they don’t care.
March 24th, 2008 at 6:53 pm
I have worked with my Ameriprise advisor for 3 years now and he has done some amazing things in my situation. Just one example is my wife and I were referred to an estate attorney upon the discovery that we should consider a disclaimer trust by our advisor. That alone is worth it, looking at the estate taxes my family will be able to save. He did not receive compensation for that, but made my family’s situation better.
As in any service industry, it is important to work with someone you trust. My advisor is a CFP with 5 years of experience and has been a true blessing to our situation.
My wife and I work long hours and it is nice to know we have someone we can trust in charge of our investment accounts. We just don’t have time for it. I would never work with someone I was not referred to or knew personally, and I thank my sister all the time for this introduction.
You should look at the individual and not the company. Look around your own office. There are good and bad employees there.
May 12th, 2008 at 7:22 pm
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