Ameriprise Free Financial Consultation Experience
So off I go to the Ameriprise financial consultation, armed with my knowledge from their website and many interesting comments from readers. I tell myself not to be a jerk, and to listen to what the guy has to say with an open mind. Their office is a vanilla office building, and I get guided into a small conference room with a dry-erase board and meet my advisor. Let’s call him Rick. Rick seems like a nice guy, wearing a suit and a big smile.
We sit, and he asks about what I am looking for from financial planning. I tell him honestly that I am handling all my finances myself right now, and am considering professional help if I believe it to be worth it. He tells me that’s what he hears all the time, and would like to talk with me about my finances and my goals. He’s sad to hear that my wife could not join us. (I didn’t want her to come, and she had zero interest anyways.)
I tell him a mostly-truthful picture. I actually tell him my picture from 6 months ago, when I was a working professional and so was my wife. I tell him our salaries, our savings, that we rent, and other details about our lives. 2 paid-for cars. Life and disability insurance only from our employers. We don’t have kids yet but plan to.
He then goes into a brief presentation using the dry-erase chalkboard about investing. He talks about taxes, about how that is a big drag on returns and how we really want to avoid them. He talks about accumulating money as we work, and then the need to spend it all without losing it. He talks about different asset classes, stocks and bonds. He actually goes on to make a pretty good explanation of the importance of asset allocation and the efficient frontier. So far, I’m actually impressed.
He then talks more specifically about helping us choose the proper mutual funds to optimize our portfolio. He says he has thousands of funds to choose from, and he can pick them or I can help pick them. I slip slightly and ask him if that includes Vanguard funds. He says yes. He then asks me if I’m still interested (I say yes) and gives me a thick packet for me to take home and fill out. He outlines that the cost is something like $700 for the initial plan setup, and that since I’m a Costco member I get a discount. So far, no mention of front-loaded funds or commissions.
He then asks if I have any questions. I ask him, “Are you done with your presentation?” He says Yes.
This is where he loses me. (Sorry for the long transcript, it’s easier for me to remember it this way)
Me: “So, you make money by me paying these fees every year?”
Rick: “Yes”
Me: “Would you pick no-load funds or front-loaded funds for my portfolio?”
Rick: “It depends on the situation.”
Me: “But I hear front-loaded funds charge you something like 5% of your investment before you even start.”
Rick: “Well, that may be true, but in fact, no-load funds have higher expense ratios that loaded-funds, so in the long run you’ll be paying more for the no-load fund.” (I do recall this being true on average.)
Me: “But what about no-load index funds? Like from Fidelity or Vanguard? Those are both no-load and they have very low expense ratios.”
Rick: “Yes, that is true.”
Me: “So what is your opinion of actively-managed funds versus passively-managed funds like index funds?”
Rick: “Well, I think that you should pay a professional to handle your money. Just like you want a professional to fix your car. You should have a professional manage your mutual fund, as they watch the markets all the time and have access to information we don’t.”
(I wanted to talk about Random Walk Down Wall Street material like how actively managed funds on average trail passively managed funds, and how you can’t pick the good actively managed funds ahead time, but I didn’t.)
Me: “So would you pick your in-house funds for my portfolio?”
Rick: “Well, yes, if it fits your situation.”
Me: “Do you make a bigger commission off of selling your in-house funds versus other funds, like a Vanguard index fund?”
Rick: “Well… I guess you could put it that way. I do earn commissions off certain products.”
Me: “So you make money both from commissions from selling mutual funds or front-end load products, in addition to my annual fees”
Rick: “Yes.”
Me: “Why didn’t you tell me this earlier?”
Rick: “That kind of information is included in the packet I gave you. I also have a fiduciary responsibility to you as my client, so I wouldn’t recommend it to you if I didn’t think it would be in your best interest.”
Me: “Oh, in one of these disclosures in this thick packet?”
Rick: “Yes.”
[small talk]
Me: “Ok, thanks. When will I get my $25 Costco Gift Card?”
Rick: “Are you still interested in pursuing a relationship with us?”
Me: “I’ll think about it. When do I get the card?”
Rick: “I’ll fill it out when we meet again next, and I’ll mail it in. It should take 6-8 weeks. When is a good time for you to come back with the completed packet?”
Me: “I’ll have to ask my wife, I’ll get back to you.”
I should have said “Just gimme the freakin’ gift card”, but I wanted to avoid any more tension so I’ll have to call him this week and tell him I’m not interested in a plan after reviewing the materials I got. Hopefully I still get that 25 bucks.
In the end, the presentation left a bad taste in my mouth. The conflict of interest here is just too great to expect a completely impartial advice. Here is a good SmartMoney article titled “So Much for Conflict Resolution” about these poorly performing in-house funds that were renamed from Amex Funds to seem like a third-party fund, and the conflict of interest that they create. On a positive note, although he did mention the need for adequate term/whole life insurance, the words “variable universal life insurance” and “variable annuity” were not uttered.
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December 19th, 2005 at 12:59 am
I assume about what you expected even before you went.
December 19th, 2005 at 5:19 am
Good post Jon… I considered getting a consultation for the $25 but this is WAY too much hassle.
December 19th, 2005 at 6:01 am
The interesting thing about all this is that most of the people I know that would do this are folks that are living paycheck to paycheck and have no cash reserves for emergency purposes. I would be curious to know if Rick would tell you, “well before you start givinh me your money, you proabably want to put away 4-6months worth of salary and expesnes away for an emergency.”
December 19th, 2005 at 10:45 am
Rick is not going to tell them to save 4 to 6 months worth of living expense. He would tell them to start saving for retirement and start putting part of their money into a mutual fund. He’d probably want them to do an automatic monthly investments in the funds deducted from one of their checking or savings account.
December 19th, 2005 at 12:42 pm
December 19th, 2005 at 12:53 pm
I have a friend that is a planner for Ameriprise. He doesn’t use the RiverSource funds because they stink, but he does sell some annuities and illiquid REIT products that make him a ton of commissions. Don’t ever buy those!!
Right now, all you really need to do is own Vanguard Total Stock Market Index and Vanguard Total International Stock Market for your investment portfolio. For insurance, just stick with term products from a high quality company. That’s by far the cheapest way to go.
December 19th, 2005 at 1:05 pm
Full disclosure - I am an investment consultant with a competing firm. First observation, the suffocating compliance environment we are currently in has been caused by this kind of b.s. Most legitimate firms would not allow commissions to be charged in a fee based account - the basic understanding is you have exchanged one form of compensation for another, not piled it on top of. Second, in my recollection, most legitimate firms did away with a commission differential on in-house products 10+ years ago. Third, I highly doubt you’ve escaped the annuity/vul pitch entirely. Dollars to donuts says that the tax efficiency/avoiding losses conversation was a lead in to this ’solution’ at your next meeting. Fourth, giving away free Costco cards to get you in the door may just tell you all you need to know about the quality of advice you’ll be getting…
December 19th, 2005 at 7:22 pm
I will be surprised to see them send the costco card. Same thing happen to me and they never sent it in since I never signed on with them. They were quite rude when I declined (this is the biggest mistake of your life, you’re a fool not to join in etc)
Out of curiosity, did you ever get Rick’s background and the amount of client he has and how much time he would spend throughout the year on you?
December 20th, 2005 at 4:02 am
Wayne’s comment reminds me of our recent encounter, too. We asked him what the median income of his clients were. He said $250,000! We then asked about the distribution, which he didn’t know offhand. We then told him we were probably located at the end of the tail on the left side of the distribution (this was for our free fish bowl lunch). If the median income of his clients really is $250,000, then I can kind of understand why they would recommend annuities and REITs. However, I think Strom’s comment at the end pretty much sums it up.
December 20th, 2005 at 9:44 am
Michael, it is highly unlikely that any advisor with a book of clients in which half (unless you meant average instead of median) earn more than $250k wouldn’t have his assistant qualify you before agreeing to meet with you. It simply wouldn’t be worth his time to meet with someone who is more interested in a fricking gift card than actual investment advice. No offense meant to anyone here, but my guess is that a random sampling of the phone book would be more likely to yield qualified prospective clients than would a gift card offer to a discount retailer.
On another topic, outside of some esoteric estate planning strategies, variable annuities make no sense regardless of income. There are far more efficient ways of deferring taxes in a growth portfolio (etf’s, tax loss harvesting, etc.). Variable annuities are primarily sold because the advisor either doesn’t understand them or because the massive commission overwhelms his sense of fiduciary responsibility - actually, they both kind of go hand-in-hand.
December 22nd, 2005 at 7:45 pm
Strom, I can’t say I completely agree with your implicit argument that the combo of gift cards and COSTCO is going to draw in low net worth individuals. From everything I have read one of the defining characteristics of people with a million dollars or more in assets is cheapness.
I do agree, however, that the $250K people probably have better things to do with their time. If they work 50 weeks a year, 60 hour weeks, then their time is worth about $80 an hour to them. It’s going to be hard to convince them to spend an hour for a $25 gift card.
March 5th, 2006 at 6:01 pm
I joined with amexp funds 4 years ago. I did not pay much attention until recently. I had 2 meeting with the advisor to discuss if I can buy any low cost index funds. Each time, I was steered to somthing more expensive funds. I am tired of this and decide to cash out my money and move to vanguard instead. I may have to pay lots of money to do that (amexp put all my investment in the B share), but in the long run, it is worthy of the effort. Are I right?
I also have $70,000 in the VUL fund. You sounds like that you are not fond of it. What should I do with it?
Thanks!
Tang
March 21st, 2006 at 11:23 pm
You guys are brutal! I’m a client. I believe its always about the relationship between you and your advisor(regardless of the advice you are getting).
Fact - There is no commission difference to the advisor for selling “house” funds. So that point is moot.
I understand the desire to focus on expenses. It makes sense, but frankly it is only one part of the selection process. I would gladly pay 5% on the front end and .25% ongoing for a fund that outperforms. Infact I have. I own Riversource (RVS)Diversified Equity Income, RVS Mid Cap Value, RVS Parnters International Select Value, and RVS Discovery Fund. If you care, look up how these funds have done for me over the last 3 years. I really don’t care about the fee’s What matters most is the fact that I have 60% more money in my account now than I did when I started.
By-the-way, the first words out of his mouth (after some small talk) were how he gets pain. He clearly explained a fee for planning and commissions on products. I pay for the service I recieve and I’m very happy. Maybe some of you just didnt get good people. When a company has something like 10,000 advisors, there are bound to be some duds.
Last point (I promise) - There were some negative comments about the advisor and company using the $25 gift cards to make contact with people. I think those who went to the meeting just to get the gift card should be ashamed of themselves. Bad karma. You waste your own time and the advisors. For what? $25? Brutal!
March 30th, 2006 at 9:11 am
I went through the process of meeting up with an Ameriprise financial advisor. I almost signed the dotted line. On a whim, I did some research on Ameriprise and found Amexsux.com. From the articles, I realized that Ameriprise has a history of poor performing mutual funds and everything they offer has a conflict of interest attached with it. I soon realized that you’re better off looking for an advisor who doesn’t have conflicts of interest. I’d highly recommend staying away from Ameriprise.
May 5th, 2006 at 9:14 am
I have been a client for 3 years now, my funds have performed very well, just recently I started to get into stocks, I wish I had time to do the research myself, but I don’t, so yes I pay them to do it and am proud to say that since october I am up 18%, after fees. Not too bad seeing the market on average goes up 12% in a full year. As far as bad press, you can find it anywhere on anything, someone could give away $100 dollars to people walking by on the street, and you could probably find a website bashing it. I actually also used to work for American Express Property an Casualty, it was a great place to work. I left there for more money, but if you look at their stock price since spin off, and their financial ratings, they must be doing something right, the stock has gone from 35 to 48, in it’s first year, analyst are not to down on ameriprise, anyway, good luck where ever you decide to go with your money, i am happy where mine is
December 8th, 2006 at 5:51 pm
I just finished all the meetings with ameriprise after paying $600 for “financial advise”. The advisor guy sounded really caring and persuaded me to write a check for $600. He collected data about income, expense, rent, 401 etc. On the next meeting he sold me ameriprise disability insurance and term insurance. I signed up for that. It did not occur to me to check if the IDS was also owned by ameriprise. After coming home I realized that was the case. I said may be the investment portfolio hold sthe key advise - so I waited for him to finish explaining everything. He wanted me to open an ameriprise account to being secure retirement planning. I declined. I consulted more people. Read on the internet and finally decided to request my money back. I am happy to say that I received my refund check!!
Oh .. they gave me a blue folder full of ameriprise “personal plan” - I am carefully shredding it. It is worth nothing. Has nonsensical information.
Bottom line - make sure you have a term life insurance with a reputable company (minim coverage should be 10 time your annual income for at least 20 years or the age of 60). If employed, enroll for after-tax disability insurace. If self-employed, buy disability coverage from a reputed company.
Fidelity freedom funds are quite good for retirement investing. They start to invest aggressively at first and then become conservative as the retirement year draws nearer. Janus has good funds too. So does Vanguard.
Key to making wealth is - don’t spend too much money on things you don’t need. Some places you can easily conserve is - Starbucks/Other Gourmet Coffee, Lunch, Dining out, Designer clothes, Keeping up with fashion. It makes a big difference!
Set aside some money to be transferred directly to your savings. Put aside always as a matter of discipline.
And yes - be generous! We live in the richest country on earth!
December 18th, 2006 at 3:22 pm
I have been a client for 2 years. The funds are up by 16% after fees and commissions. It is not as bad as you think. But I only turned over about 50% of my assets - just in case it doesn’t work out.
January 25th, 2007 at 5:01 pm
If you are the type of person who would take a minimum of 2 hours out of your day including travel and meeting time for a 25 dollar gift card and then spend even more time taking out your frustrations on a message board trying to bash a company that has helped millions of people achieve their financial dreams, then you are absolutely pathetic. I am a financial advisor at Ameriprise and have dozens of letters of appreciation from satisfied clients. Some of these people have been with me 5 years. I think that if you go into a “PMM” meeting with your cleets on like many of you did, then you will not get anything out of it. You all went in there with no interest in financial advise and a closed mind. The only motive was a gift card. I can honestly say that few of my clients came from incentives or free gift promotions. They are all referrals and people I have met at different functions.
January 25th, 2007 at 5:04 pm
By the way, you ever checked how the Ameriprise stock has performed since last year? I guess you guys are the minority of people who do not see value in this company.
January 25th, 2007 at 5:23 pm
So Ameriprise’s high amount of profit from their clients is supposed to make me feel better? Sorry, that’s doesn’t make any sense to me.
Final thoughts:
Ameriprise may include many great advisors. I don’t doubt it. The main point is that they have a built-in conflict of interest, much like many other brokers. That is, they get paid commissions based on what you buy. You may still get sound advice, but it is less likely. Ameriprise (formerly American Express financial advisors) has already been fined and reprimanded by the SEC for such actions, so it’s really hard to argue otherwise.
To avoid this conflict, my suggestion is to find a good fee-ONLY (not fee-based) financial planner who is not based on commission. For some references, see NAPFA.org.
I am not a crusader against Ameriprise, these are simply my opinions from my own experiences. To continue this argument, please use the many other message boards out there. Thank you.