Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-10-2014, 03:16 PM   #61
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by samclem View Post
Your Ameriprise rep would prefer to keep you in her high-fee funds AND also collect her advisory fee. If you've wised up to that, she'll help you go to Vanguard funds and skip the high fund fees, but she'll still get her "cut" from the advisory fees (and maybe even charge you a brokerage fee to move the money). Do you really want to pay her over 1% every year for that? You've got $200K with them, that amounts to over $2000 per year.
High-cost managed funds do >not< outperform low cost funds. On average, they underperform them for three reasons:
- Fees charged to you to pay for their managers
- Added taxes you'll pay due to their trading (in a non-401K/non-IRA account)
- Added trading/transaction costs for the stocks they sell inside the funds.

Every year a share of managed funds do outperform their index. It's usually a small share, sometimes it is many. But nobody knows which funds these will be. Ameriprise doesn't know, and neither does your FA. If they did know, if they could invest and earn even slightly better than market returns on a consistent basis, they could become fabulously wealthy by trading options, they would not need to pester people like you and I so they can skim off a small commission. They don't know which funds will outperform, and if they tell you otherwise then they are simply lying.

If you tell your FA which Vanguard funds you plan to invest in, you can bet her "research" will turn up several funds with better performance- - -in the past. Maybe with much higher risk. Just like I can tell you with 100% certainty who will win the 2014 Super Bowl.

Keep reading the books on low-cost investing ("Bogle on Mutual Funds", etc). Your FA is only looking out for her commissions. Don't back down, escape and be ruthless about it.
Not defending Amerprise at all, but what she told is true, however, there are usually TWO ways to hold them...........

1) You can buy them in a brokerage account for a flat fee, like $40. Most big companies like Ameriprise can do this.

2)She can put them in your fee-based Ameriprise account, and you will pay the wrap fee amount on that account.
__________________

__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-10-2014, 05:06 PM   #62
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
easysurfer's Avatar
 
Join Date: Jun 2008
Posts: 7,886
Quote:
Originally Posted by Animorph View Post
Don't fall for it. Kind of late to be offering that now.

Call Vanguard and get them to do the transfer. They should be able to assist you and do most of the work.
+1.
__________________

__________________
Have you ever seen a headstone with these words
"If only I had spent more time at work" ... from "Busy Man" sung by Billy Ray Cyrus
easysurfer is online now   Reply With Quote
Old 02-10-2014, 05:26 PM   #63
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,262
Quote:
Originally Posted by Ready View Post
Well, I suppose I do like to analyze things!

Looking at the Vanguard Target Date fund for people who are in retirement (VTENX), I see an AA of 39.66% equities. If I move to a 2015 fund (VTXVX), it increases to 53%.

Based on my retirement date of last year, I would be in VTENX at 39.66%. If I were 65, I might be comfortable with that. But retiring mid 40's, that just doesn't feel right to me. And even 53% feels too low for my time horizon, even though that fund is for people who don't even plan to retire for two more years.

There is nothing wrong with these funds, but I would just recommend that an investor decide what AA they are comfortable with first, and then pick the fund that gets them there, rather than simply picking a fund based on their retirement date.

But if you look at the survivability of both of these ratios, they are pretty darn close....

I agree with you that an investor should decide on an asset allocation.... but if they have not done that, then a target date fund will do it for them... they can adjust later if they wish or if they get more invested...
__________________
Texas Proud is offline   Reply With Quote
Old 02-10-2014, 06:05 PM   #64
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 1,823
I remember going through a similar process as Cucumber when I was getting out of actively managed funds at Fidelity and looking to replace them with index funds. My Fidelity rep suggested I could buy the Vanguard funds through Fidelity. However, when I asked about fees, it became clear that it made no sense to do so. I seem to remember there was a fee of either $35.00 or $75.00 per transaction each time I bought a Vanguard fund. So if I wanted to dollar cost average into the fund once a month, I would have to pay this fee each month when I made a purchase. Whereas Vanguard was no charge to purchase their own mutual funds. So it was a pretty easy decision for me to move to Vanguard. Come to think of it, they could have suggested the Vanguard ETF equivalent, but my rep wasn't very savvy I guess.

I can't see any logic in your Ameriprise rep validating your idea to go with a very low cost index fund from Vanguard, but still paying her 1% to hold the money at Ameriprise. It just seems completely ridiculous, and if she suggests you do so, then you pretty much know who you are dealing with.

Feel free to humor her and let her give you some suggestions. It will be very enlightening to folks like me who have never used a company like Ameriprise and have only heard things about them on forums like this one and Bogleheads.
__________________
Ready is online now   Reply With Quote
Old 02-11-2014, 01:00 PM   #65
Dryer sheet aficionado
 
Join Date: Jan 2014
Posts: 31
I obviously have a lot to learn because I looked at the prospectuses of my funds and it clearly said there were loads but my FA is telling me differently. So now we are planning on meeting with her to discuss all the fees on our account. Here was her response. I am thoroughly confused and will obviously need more time to study investments. 😥 Thanks to everyone for your support and guidance!! I truly appreciate it.

"There are no 5% load fees on the investments that we made. Here are how your 2 accounts are set up:

1. Active Portfolios: This is a wrap account that is being actively managed via Home Office/Wilshire investments- who manage institutional dollars. They buy and sell on your behalf and don't charge any transaction fees to do so. It does have a management fee of 1%. All your dollars were invested when we first opened the account and no initial fee was charged.

2. Your brokerage account is invested in "C" shares which has a 1% backend fee if we sell them prior to 1 year. Thereafter we can make changes at any time and there is cost to do so."
__________________
cucumber is offline   Reply With Quote
Old 02-11-2014, 01:19 PM   #66
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,878
Quote:
Originally Posted by cucumber View Post
....... Here are how your 2 accounts are set up:

1. Active Portfolios: This is a wrap account that is being actively managed via Home Office/Wilshire investments- who manage institutional dollars. They buy and sell on your behalf and don't charge any transaction fees to do so. It does have a management fee of 1%. All your dollars were invested when we first opened the account and no initial fee was charged.

2. Your brokerage account is invested in "C" shares which has a 1% backend fee if we sell them prior to 1 year. Thereafter we can make changes at any time and there is cost to do so."
I'd head for Vanguard based on #1 and #2. This is of no advantage to you.
__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Old 02-11-2014, 01:39 PM   #67
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2013
Posts: 5,570
Quote:
Originally Posted by cucumber View Post
I obviously have a lot to learn because I looked at the prospectuses of my funds and it clearly said there were loads but my FA is telling me differently. So now we are planning on meeting with her to discuss all the fees on our account. Here was her response. I am thoroughly confused and will obviously need more time to study investments. 😥 Thanks to everyone for your support and guidance!! I truly appreciate it.

"There are no 5% load fees on the investments that we made. Here are how your 2 accounts are set up:

1. Active Portfolios: This is a wrap account that is being actively managed via Home Office/Wilshire investments- who manage institutional dollars. They buy and sell on your behalf and don't charge any transaction fees to do so. It does have a management fee of 1%. All your dollars were invested when we first opened the account and no initial fee was charged.

2. Your brokerage account is invested in "C" shares which has a 1% backend fee if we sell them prior to 1 year. Thereafter we can make changes at any time and there is cost to do so."
Normally c class shares carry a 12b1 fee (max 1%.), in your case their only charging a 1% deffered sales charge. Many times c class shares also carry a higher ER than their equivalents.
MRG
__________________
MRG is offline   Reply With Quote
Old 02-11-2014, 04:39 PM   #68
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,528
Quote:
Originally Posted by travelover View Post
I'd head for Vanguard based on #1 and #2. This is of no advantage to you.
+1

Fees matter. A lot. Compounded over years/decades the differences are surprisingly huge.
__________________
I heard the call to do nothing. So I answered it.
Walt34 is offline   Reply With Quote
Old 02-11-2014, 05:00 PM   #69
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
easysurfer's Avatar
 
Join Date: Jun 2008
Posts: 7,886
Cucumber,

It's important to ask yourself do you want to be an active investor or passive investor.

I think that many (myself included) start out as active looking for the right method, but decide to go the passive route.

Here's a link with an interesting football analogy:

What Is The Difference Between Active and Passive Investing?

Quote:
Active investing is like betting on who will win the Super Bowl, while passive investing would be like owning the entire NFL, and thus collecting profits on gross ticket and merchandise sales, regardless of which team wins each year.
__________________
Have you ever seen a headstone with these words
"If only I had spent more time at work" ... from "Busy Man" sung by Billy Ray Cyrus
easysurfer is online now   Reply With Quote
Old 02-11-2014, 05:09 PM   #70
Thinks s/he gets paid by the post
Lisa99's Avatar
 
Join Date: Aug 2010
Location: The Villages
Posts: 1,327
From a former Ameriprise customer, don't let her confuse you with industry speak.

Bottom line, with the money you have invested at Ameriprise you could have a completely self-invested portfolio that would cost you a fraction of what you're paying now. On just a $100,000 portfolio, would you rather pay $1,000/year in mutual fund fees (minimum) + $750/year for the privilege of talking to your FA advisor a couple times a year or would you rather pay $180/year in total for all fees? $1750 or $180... was an easy decision for us ($180 is based on paying 0.18% on our Vanguard portfolio which is even higher than some here pay at Vanguard).

And here is another way to think about it which I don't think I've seen yet in this thread yet (sorry if I missed it).

When you retire, you'll be able to safely withdraw 4% of your portfolio per year to live on (there are differing views on the safe withdrawal rate but I'm keeping the math simple).

Ameriprise charges 1% of your portfolio/year MINIMUM which leaves you only 3% that is yours to spend. Is your FA REALLY worth 25% of your annual retirement withdrawal?

So when you get in the million dollar range, if you're with Vanguard (or Fidelity or any other very low cost investment company) you get to withdraw and spend $40,000 (minus about $720 in fees) per year. If you're still with Ameriprise when you retire, they'll charge you $10,000 and you get to only spend $30,000.

See now why your FA is fighting tooth and nail to keep you?
__________________
Lisa99 is offline   Reply With Quote
Old 02-11-2014, 07:13 PM   #71
Full time employment: Posting here.
gcgang's Avatar
 
Join Date: Sep 2012
Posts: 924
Quote:
Originally Posted by cucumber View Post
I obviously have a lot to learn because I looked at the prospectuses of my funds and it clearly said there were loads but my FA is telling me differently. So now we are planning on meeting with her to discuss all the fees on our account. Here was her response. I am thoroughly confused and will obviously need more time to study investments. 😥 Thanks to everyone for your support and guidance!! I truly appreciate it.

"There are no 5% load fees on the investments that we made. Here are how your 2 accounts are set up:

1. Active Portfolios: This is a wrap account that is being actively managed via Home Office/Wilshire investments- who manage institutional dollars. They buy and sell on your behalf and don't charge any transaction fees to do so. It does have a management fee of 1%. All your dollars were invested when we first opened the account and no initial fee was charged.

2. Your brokerage account is invested in "C" shares which has a 1% backend fee if we sell them prior to 1 year. Thereafter we can make changes at any time and there is cost to do so."
That sounds correct.

Your active portfolios are in Class A or I shares, which have "lower" expense ratios, probably around 1%. You are then paying 1% for the wrap features on top of the individual funds' ER. Loads are normally waived when you're in a wrap.

The Class C shares' ER usually run 0.75-1.00% higher than their comparable A or I shares equivalents, meaning again, you are paying about 2% per year in 1 and 2 above.
__________________
In theory, there's no difference between theory and practice. In practice, there is. YB
gcgang is offline   Reply With Quote
Old 02-11-2014, 09:28 PM   #72
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by gcgang View Post
That sounds correct.

Your active portfolios are in Class A or I shares, which have "lower" expense ratios, probably around 1%. You are then paying 1% for the wrap features on top of the individual funds' ER. Loads are normally waived when you're in a wrap.

The Class C shares' ER usually run 0.75-1.00% higher than their comparable A or I shares equivalents, meaning again, you are paying about 2% per year in 1 and 2 above.

Holy crap! That is starting to get close to variable annuity territory, AKA getting banged in the bakehole.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 02-11-2014, 09:34 PM   #73
Dryer sheet aficionado
 
Join Date: Dec 2013
Posts: 32
I was with Ameriprise. Horrible decision on my part. Smartest decision was leaving them. I guarantee you'll pay more than the surrender charge in fees. I had an annuity with Ameriprise and I ate the surrender and was down 50% before I moved it over to Vanguard. It took many years but I'm finally up 20% or so. The fees at Ameriprise will drain your bank account.
__________________
thedaily is offline   Reply With Quote
Old 02-11-2014, 10:29 PM   #74
Recycles dryer sheets
 
Join Date: Mar 2010
Location: Rural
Posts: 120
Your FA at Ameriprise will continue to try to talk you into staying. They are trained to do so and most are pretty darn good at it because they are salespeople. I would suggest just calling Vanguard and they will assist you with transferring your money. You can bypass the Ameriprise FA that way.

I had the same song and dance when deciding to leave Primerica. First I discussed with the PA FA. Wasn't long and I got a call from another PA FA higher up the food chain. She was going on and on about how actively managed funds will make more money etc. I wasn't confident enough yet at that point but finally got to the point where I just called Vanguard and it was pretty easy (with their help) to transfer all of our IRA money to them. Didn't have to deal with any more high pressure calls from Primerica.

You can do this!!!

Just a little anecdote...my DH is on a small town rural fire department. They have a small retirement benefit which apparently has been managed by Ameriprise. The guys just found out their fund only made 6.something % in 2013. Needless to say, there will be some changes coming with the management of that fund!
__________________
dontworry is offline   Reply With Quote
Old 02-14-2014, 12:48 PM   #75
Dryer sheet aficionado
 
Join Date: Jan 2014
Posts: 31
What's the difference between the $750 annual advisory fee and the wrap fees that apparently is also being charged to me which I had no idea of? Is that something that my FA is collecting as commission on top of the annual advisory fee that we are paying?
__________________
cucumber is offline   Reply With Quote
Old 02-14-2014, 01:03 PM   #76
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,038
Do you get a "personalized" financial plan from your advisor every year? The $750 fee sounds like what I used to pay annually for my computer-generated plan bound in pleather. Then, on top of that, I had to pay for any wrap fees and/or commissions.
__________________
FIREd is online now   Reply With Quote
Old 02-14-2014, 01:27 PM   #77
Dryer sheet aficionado
 
Join Date: Jan 2014
Posts: 31
She supposedly evaluates where we are versus our financial goals and tells us how much more we need to invest to meet those goals. Or if we need to move our funds or for example move my 401(k) monies to Ameriprise so it's consolidated. If that's what you mean by a "personalized" plan, then yes she does.
__________________
cucumber is offline   Reply With Quote
Old 02-14-2014, 01:37 PM   #78
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,038
Quote:
Originally Posted by cucumber View Post
She supposedly evaluates where we are versus our financial goals and tells us how much more we need to invest to meet those goals. Or if we need to move our funds or for example move my 401(k) monies to Ameriprise so it's consolidated. If that's what you mean by a "personalized" plan, then yes she does.
Then I think you are paying her $750 for doing that annual review for you. And you have to pay her extra to actually invest the money. That's where the wrap fee and/or commissions come in. I urge you to comb through your statements and try to figure out how much that advisor is costing you on a yearly basis. You might be shocked. Once I went though that exercise, there was no doubt left in my mind that I was paying way too much for the service provided.

Looking back through my 2001 statements:
We paid $500 for the annual review
Then:
My IRA contributions: invested in A shares at 5.75% sales charge = $39 paid in commissions
DW's IRA contributions: invested in A shares at 5.75% sales charge = $86 paid in commissions
Muni bond fund: invested in A shares at 4.75% sales charge = $57 paid in commissions
Rolling over DW's old IRA into a variable annuity (!!!): $147 paid in commissions to purchase funds

Total $829 for a total under management of ~$50K. That's a whopping 1.66% of portfolio value paid in fees and commissions. But it's even worse because I have no idea what DW's IRA annuity and the 2 VUL insurance policies he put the rest of our money in actually cost us. So we were possibly well over 2%.
__________________
FIREd is online now   Reply With Quote
Old 02-14-2014, 04:23 PM   #79
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2013
Posts: 5,570
Quote:
Originally Posted by cucumber View Post
What's the difference between the $750 annual advisory fee and the wrap fees that apparently is also being charged to me which I had no idea of? Is that something that my FA is collecting as commission on top of the annual advisory fee that we are paying?
My thinking is the advisor fee is to pay for advice.

My understanding of wrap accounts is they 'wrap' fund loads and other fees/charges into one place. I also understand they don't include all costs, like being able to buy the same fund yourself for 30bps lower ER.

Wrap accounts were introduced by FA's because they weren't making enough from some customers. The public was also starting to realize that a 5% front end load may not be a good choice. If I call it something different maybe a percentage of people will ignore it.

Bottom line they are there so some FA's can make more money. I wonder who's paying for that? IMHO.
Best wishes,

MRG
__________________
MRG is offline   Reply With Quote
Old 02-14-2014, 11:16 PM   #80
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
easysurfer's Avatar
 
Join Date: Jun 2008
Posts: 7,886
Cucumber,

Another thing to consider is in a bad market year, you'd still be paying the advisor fees. If you expect the advisor to be on the ball and protect you from losses...more likely the advisor will tell you that's how the market is.
__________________

__________________
Have you ever seen a headstone with these words
"If only I had spent more time at work" ... from "Busy Man" sung by Billy Ray Cyrus
easysurfer is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Musicians needing financial tuneup advice Kavakos Hi, I am... 17 05-20-2013 12:48 PM
Newbie needing advice Sassy Hi, I am... 135 04-14-2013 09:08 PM
Needing Florida Real Estate Advice wdrevell FIRE and Money 17 02-03-2013 06:32 AM

 

 
All times are GMT -6. The time now is 09:24 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.