Hi! Ameriprise client needing advice...

[samclem]

Am I being impatient and jumping the gun?

No, you are apparently doing some good reading and learning a lot. If you want to stop the high fees/costs right now, just move all your funds to Vanguard. You can put it in a fund, or a group of funds, right now as a temporary measure while you do more reading and make plans for your permanent asset allocation.
No one can know what the "best" fund/mix of funds would be. A lot depends on your risk tolerance. I'd say that for most people, the best single-fund, set-it-and-forget-it answer would be the appropriate Target Date Retirement Fund. These contain a mix of assets that the folks at Vanguard believe are likely to be appropriate for a person retiring at various dates in the future. You'd have exposure to US stocks, foreign stocks, bonds, etc. Later you'll probably decide to customize your asset allocation, and that's fine (as 2B says, with the Target Funds you can't tweak them to maximize tax efficiency, etc). I'd say 80% of investors would be better off in a low-cost Target Fund than in following the path they are currently on (hot stock sector of the month, investing in 100% CDs to "avoid risk" etc).

The simplest thing: move everything to a Vanguard money market account (or two: one for your IRA, one for your other investments) while you figure out what to do next. That stops the Amerirpise fees and assures your assets won't go down if the market dips. The big risk with this is that you'll miss any gains if stocks go up while your money is parked there. On average (over many, many years) stocks have gone up over 8% per year, so on average you'd be better off leaving your money in the market (even with Ameriprise) than having it in a money market fund. But, years are very seldom average, and 2014 probably won't be average, either.

Good luck!

 

[Ready]

I find Target Date funds a bit challenging in the ER world. They start with the assumption that you work until 65 years old. So for me, based on my age of 47, it would tell me to have a very high percentage in equities. I would guess around 80%. However, because I'm semi-retired, I would not want to have that much exposure. However, if I choose a fund that is designed for someone in retirement, it will drop the equity exposure significantly, again under the assumption that I'm around 65 years old and have at most a 30 year time horizon to plan for.

So I find myself looking for a target date that is somewhere in between the two, and I realize that by the time I find just the right date, I could have just as easily set the AA myself by using a lazy portfolio of two index funds and a bond fund or two, and then gradually adjusting the mix as I age.

In addition, I suspect that if the stock market does extremely well over the next decade, I may go one of two ways - keep the equity exposure high and go for it, or ratchet back because I've "won the game". I like having control over that, and I would not want some fund manager to be making all of those decisions for me.

 

[Texas Proud]

I find Target Date funds a bit challenging in the ER world. They start with the assumption that you work until 65 years old. So for me, based on my age of 47, it would tell me to have a very high percentage in equities. I would guess around 80%. However, because I'm semi-retired, I would not want to have that much exposure. However, if I choose a fund that is designed for someone in retirement, it will drop the equity exposure significantly, again under the assumption that I'm around 65 years old and have at most a 30 year time horizon to plan for.

So I find myself looking for a target date that is somewhere in between the two, and I realize that by the time I find just the right date, I could have just as easily set the AA myself by using a lazy portfolio of two index funds and a bond fund or two, and then gradually adjusting the mix as I age.

In addition, I suspect that if the stock market does extremely well over the next decade, I may go one of two ways - keep the equity exposure high and go for it, or ratchet back because I've "won the game". I like having control over that, and I would not want some fund manager to be making all of those decisions for me.

I think you are spending WAY to much time analyzing a target date fund... the difference between a 2020 and a 2025 fund is going to be minimal....

And who says they are based on you working till 65 Nope, they ask you what year you plan to retire, not when you turn 65.... now, you might think that when you retire at say 50, the asset allocation is not what you want, but what they are doing is moving money to more income producing investments instead of growth investments as the vast majority of people are going to be living off their income from the fund...


I think the OP can do a target for now, getting it into Vanguard ASAP and then worry later if that AA is not right for her and adjust then....

 

[Ready]

I think you are spending WAY to much time analyzing a target date fund... the difference between a 2020 and a 2025 fund is going to be minimal....

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.

 

[easysurfer]

No, you are apparently doing some good reading and learning a lot. If you want to stop the high fees/costs right now, just move all your funds to Vanguard. You can put it in a fund, or a group of funds, right now as a temporary measure while you do more reading and make plans for your permanent asset allocation.
No one can know what the "best" fund/mix of funds would be. A lot depends on your risk tolerance. I'd say that for most people, the best single-fund, set-it-and-forget-it answer would be the appropriate Target Date Retirement Fund. These contain a mix of assets that the folks at Vanguard believe are likely to be appropriate for a person retiring at various dates in the future. You'd have exposure to US stocks, foreign stocks, bonds, etc. Later you'll probably decide to customize your asset allocation, and that's fine (as 2B says, with the Target Funds you can't tweak them to maximize tax efficiency, etc). I'd say 80% of investors would be better off in a low-cost Target Fund than in following the path they are currently on (hot stock sector of the month, investing in 100% CDs to "avoid risk" etc).

The simplest thing: move everything to a Vanguard money market account (or two: one for your IRA, one for your other investments) while you figure out what to do next. That stops the Amerirpise fees and assures your assets won't go down if the market dips. The big risk with this is that you'll miss any gains if stocks go up while your money is parked there. On average (over many, many years) stocks have gone up over 8% per year, so on average you'd be better off leaving your money in the market (even with Ameriprise) than having it in a money market fund. But, years are very seldom average, and 2014 probably won't be average, either.

Good luck!

Cucumber,

I agree with what Samclem says. Especially the idea of moving everything to a Vanguard (in one money market for non IRA, and one for IRA) while you figure what to do next.

Years ago, I wasn't as deep in with a CFP as you are, but did just that. Moved everything to Vanguard, then learned about index funds and Dollar Cost Averaging (DCA). I've been happy with that strategy ever since.

 

[cucumber]

So I told my advisor that I have been doing research and am seriously considering moving all of our funds to Vanguard. Here is her response.

" I can assist with any changes to Vanguard funds and you can do this within your Ameriprise brokerage account. I do like some of the Vanguard funds, but just because they have lower fees, does not make them the most competitive overall. Which funds were your looking to invest in? I can help compare and offer suggestions."

Does this mean Ameriprise offers Vanguard funds and I don't have to move it? I'm so confused. So low fees aren't necessarily good? Are there times when you would want to pay high fees in order to get high return? But there's no guarantee and it's not really a proven method is it? From what I've read so far, it sounds like I would want the lowest fees and most diversified (i.e. Index funds).

 

[gcgang]

Here is her response.

" I can assist with any changes to Vanguard funds and you can do this within your Ameriprise brokerage account. I do like some of the Vanguard funds, but just because they have lower fees, does not make them the most competitive overall. Which funds were your looking to invest in? I can help compare and offer suggestions."

Reply: "Thank you very much for your offer of assistance. However, I am looking eliminate a significant layer of fees, that being yours."

 

[Animorph]

So I told my advisor that I have been doing research and am seriously considering moving all of our funds to Vanguard. Here is her response.

" I can assist with any changes to Vanguard funds and you can do this within your Ameriprise brokerage account. I do like some of the Vanguard funds, but just because they have lower fees, does not make them the most competitive overall. Which funds were your looking to invest in? I can help compare and offer suggestions."

Does this mean Ameriprise offers Vanguard funds and I don't have to move it? I'm so confused. So low fees aren't necessarily good? Are there times when you would want to pay high fees in order to get high return? But there's no guarantee and it's not really a proven method is it? From what I've read so far, it sounds like I would want the lowest fees and most diversified (i.e. Index funds).

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.

 

[samclem]

So low fees aren't necessarily good? Are there times when you would want to pay high fees in order to get high return? But there's no guarantee and it's not really a proven method is it? From what I've read so far, it sounds like I would want the lowest fees and most diversified (i.e. Index funds).

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.

 

[MRG]

So I told my advisor that I have been doing research and am seriously considering moving all of our funds to Vanguard. Here is her response.

" I can assist with any changes to Vanguard funds and you can do this within your Ameriprise brokerage account. I do like some of the Vanguard funds, but just because they have lower fees, does not make them the most competitive overall. Which funds were your looking to invest in? I can help compare and offer suggestions."

Does this mean Ameriprise offers Vanguard funds and I don't have to move it? I'm so confused. So low fees aren't necessarily good? Are there times when you would want to pay high fees in order to get high return? But there's no guarantee and it's not really a proven method is it? From what I've read so far, it sounds like I would want the lowest fees and most diversified (i.e. Index funds).

She's just looking out for herself. I dont think Vanguard offers funds for FAs (class c) but if Ameriprise is involved you will be paying them something.

You understand, there are few active fund managers that consistently beat their index. Even if they do, in taxable accounts the churn could eat up any extra retuns from taxes. Your on the correct path, run away.

If this advisor thought Vanguard was the correct place to be, likes some of their funds, why didnt they put you in them to begin with? You know why!
Best wishes,
MRG

 

[FinanceDude]

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.

 

[easysurfer]

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.

 

[Texas Proud]

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...

 

[Ready]

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.

 

[cucumber]

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."

 

[travelover]

....... 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.

 

[MRG]

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

 

[Walt34]

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.

 

[easysurfer]

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?

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.

 

[Lisa99]

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?

 

[gcgang]

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.

 

[brewer12345]

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.

 

[thedaily]

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.

 

[dontworry]

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!

 

[cucumber]

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?