Intro and questions about Ameriprise accounts

[willongo]

Hi all!

I am an "old" student who has had an account with Ameriprise for three years. Needless to say, I have joined the club of the ignorant who are slowly educating themselves and realizing what a scam Ameriprise is and switching over to Vanguard.

Reading the posts on people's experience with Ameriprise was like reading my autobiography!! Since I first opened my account with Ameriprise I always had a hunch that my adviser was taking me for a ride but not knowing anything about anything I chalked it up to paranoia. That is, until she did a few things that left such a bad taste in my mouth that I decided to just get rid of her and take over my finances. I'm learning very slowly, but what I am learning is so much fun and interesting! I get an adrenaline rush everytime I learn something about investing for my retirement!

Anyway, a few snapshots of what is going on in my accounts: I have three accounts, a rollover IRA, an SPS account and the dreaded Variable Annuity. I called Vanguard to switch over my IRA and I called Ameriprise to liquidate my SPS which I will drop into Vanguard as well.

Question 1: Do I have reason to be livid?? Looking over my IRA and SPS accounts I see that there is a total of approximately $60,000 dollars invested in seven funds. The average Front Load fee is 5.0%, average expense ratio is 1.3%, average 12b-1 fee is 0.3% and average Morningstar rating is 3 (five of the funds are 2 but there is a 4 and a 5 star that bring up the average to 3).

Question 2: Is there a compelling reason why anyone invest in funds with low Morningstar ratings? I'd like to think that my adviser had a good reason.

Question 3: In my variable annuity, can I regularly take out the amount available without surrender charge and reinvest that in my Vanguard account? I see in my account that this amount is about $1600 and I figure this is a nice sum to reinvest away from Ameriprise (!).

I'm so glad I found this forum. You guys rock!! I also ordered a whole bunch of books from Amazon to educate myself, books that were recommended in the mymoneyblog site.

Soon I'll be advising my friends!!

 

[MasterBlaster]

Question 1: Do I have reason to be livid??

yes, you should be livid. better yet be livid and move your accounts to a better and less expensive family such as Vanguard.

Is there a compelling reason why anyone invest in funds with low Morningstar ratings?

I suspect that first on his list were his fees. Second on his list was a balanced portfolio for you.

Question 3: In my variable annuity, can I regularly take out the amount available without surrender charge and reinvest that in my Vanguard account?

You will probably have to pay surrender charges to make up for payments to your "advisor". yes you can transfer what's left to vanguard.

You just had one of those "Life lessons" or "Teachable Moments". Learn from it and move on.

 

[FIREd]

Question 1: Do I have reason to be livid?? Looking over my IRA and SPS accounts I see that there is a total of approximately $60,000 dollars invested in seven funds. The average Front Load fee is 5.0%, average expense ratio is 1.3%, average 12b-1 fee is 0.3% and average Morningstar rating is 3 (five of the funds are 2 but there is a 4 and a 5 star that bring up the average to 3).

Question 2: Is there a compelling reason why anyone invest in funds with low Morningstar ratings? I'd like to think that my adviser had a good reason.

Question 3: In my variable annuity, can I regularly take out the amount available without surrender charge and reinvest that in my Vanguard account? I see in my account that this amount is about $1600 and I figure this is a nice sum to reinvest away from Ameriprise (!).

Q1: I don't know if you should be livid. You have learned a very valuable lesson after only 3 years! It took some of us much longer... Now apply what you've learned.

Q2: Morningstar ratings are quite useless IMO because they are backward looking. In other words, yesteryear's 5-star fund could be next year's 1-star flop. I suspect many of your funds were Riversource funds and they are generally expensive and under-performing. When picking a fund, you have to look past the Morningstar rating. You have to drill down to the nitty-gritty like risk, diversification, cost, tax efficiency, etc... It's really not that difficult with a little bit of education.

Q3: I don't see why not.

Welcome!

 

[willongo]

thanks for the quick replies

So, I'm a little confused about MasterBlaster's response to my variable annuity question. You said that I would have to pay a surrender charge. I know that there is a surrender charge for liquidating or transferring my variable annuity but in my account overview there is a value of $1600 under the heading "Amount available without surrender charge". I interpreted this to mean that I could take this $1600 out of my account without a surrender charge but that the rest of my variable annuity (about $17,000) would be subject to a surrender charge. So, I thought that I could take out the $1600, reinvest it in Vanguard, and leave the remaining $17,000 in the Ameriprise VA. I figured that I would be able to slowly chip away at my VA everytime there was a non-surrender charge amount available and reinvesting it rather than waiting ten years for the surrender charge to come down to zero.

As far as being livid, I'm not too livid. But very annoyed. My original investment was a little over 80,000 and tanked to about 30,000 and now has gone back up to about 70,000. It's really the combination of high front loads, high expense ratios, and low Morningstar ratings that makes me wonder if my adviser truly wasn't caring about my funds' performances and was more concerned about her take while dismissing my attempts at getting help in understanding investment strategies. I was operating under the naive assumption that we had a working relationship in which I would allow her to make money off of me in return for her taking care of my finances in a way that would truly benefit the both of us.

You're right, guys, lesson learned and move on!

 

[FinanceDude]

So, I'm a little confused about MasterBlaster's response to my variable annuity question. You said that I would have to pay a surrender charge. I know that there is a surrender charge for liquidating or transferring my variable annuity but in my account overview there is a value of $1600 under the heading "Amount available without surrender charge". I interpreted this to mean that I could take this $1600 out of my account without a surrender charge but that the rest of my variable annuity (about $17,000) would be subject to a surrender charge. So, I thought that I could take out the $1600, reinvest it in Vanguard, and leave the remaining $17,000 in the Ameriprise VA. I figured that I would be able to slowly chip away at my VA everytime there was a non-surrender charge amount available and reinvesting it rather than waiting ten years for the surrender charge to come down to zero.

Is the VA account in an IRA or is it non-IRA?

As far as being livid, I'm not too livid. But very annoyed. My original investment was a little over 80,000 and tanked to about 30,000 and now has gone back up to about 70,000. It's really the combination of high front loads, high expense ratios, and low Morningstar ratings that makes me wonder if my adviser truly wasn't caring about my funds' performances and was more concerned about her take while dismissing my attempts at getting help in understanding investment strategies. I was operating under the naive assumption that we had a working relationship in which I would allow her to make money off of me in return for her taking care of my finances in a way that would truly benefit the both of us.

You're right, guys, lesson learned and move on!

Most Amerprise reps have to sell Riversource VAs, not sure if Riversource has MF but that is possible........

 

[FIREd]

Most VAs will allow you to withdraw a portion of your account each year, free of surrender charges. In some cases, you may still have to pay taxes and penalties on the withdrawals though.

 

[ziggy29]

I am an "old" student who has had an account with Ameriprise for three years. Needless to say, I have joined the club of the ignorant who are slowly educating themselves and realizing what a scam Ameriprise is and switching over to Vanguard.

Welcome to the club. We've had some pretty sharp and motivated people graduate through those ranks here...

Question 1: Do I have reason to be livid?? Looking over my IRA and SPS accounts I see that there is a total of approximately $60,000 dollars invested in seven funds. The average Front Load fee is 5.0%, average expense ratio is 1.3%, average 12b-1 fee is 0.3% and average Morningstar rating is 3 (five of the funds are 2 but there is a 4 and a 5 star that bring up the average to 3).

Front load of 5% is enough to be livid, yes. But don't base future decisions on past mistakes; these are "sunk costs" that can't be recovered either way. You'd need to look at what you think of these funds moving forward after the loads have been paid (and obviously not buying any additional crap with a 5% load). I'm willing to bet these aren't any better, long term, then you can get elsewhere with no load and lower fees.

Question 2: Is there a compelling reason why anyone invest in funds with low Morningstar ratings? I'd like to think that my adviser had a good reason.

The short answer, IMO, is "rarely." There are times when I think M* overly punishes mostly good funds with the same management in place that had a relatively short bad run. So I wouldn't say I'd *never* invest in a fund with less than (say) 3 stars, but there's no way I ever would unless I had enough additional information that led me to strongly believe the rating was unjustifiably harsh. And in most cases there are enough clearly high-rated funds that it would be unnecessary to "reach" to a 2-star fund.

Look at the performance over 3-year, 5-year and 10-year periods after expenses. If you don't want to search for reasonable expense, high performing managed funds, once you get out of the clutches of the jackals you may want to simply index instead.

Having said that, I have once knowingly invested in a fund that M* gave only two stars. Based on my own supplemental due diligence I was convinced the fund was considerably better than their rating. (And it did slightly better than its benchmark after fees while I held it.)

Question 3: In my variable annuity, can I regularly take out the amount available without surrender charge and reinvest that in my Vanguard account? I see in my account that this amount is about $1600 and I figure this is a nice sum to reinvest away from Ameriprise (!).

Some annuities allow you to withdraw a certain percentage of an account per year without surrender charges. You'd need to check whether that's the case where you are. Some of them may allow up to (say) 10% a year without surrender charges; some will ding you for every dime until that 8th year (or whatever it is) goes past. There's no reason why you couldn't take out as much as they allow per year without surrender charges.

And if you are going to get slammed with a huge surrender penalty, as we've said in other "Ameriprise Escape" threads in the past you may have to suck it up and wait until the surrender charges expire, then do a 1035 exchange to something like a Vanguard variable annuity to avoid taxes and penalties. Right now you are still "underwater" from your cost basis so a 1035 wouldn't be needed if your contributions were all after-tax. But if this account goes "into the black" and you want to avoid taxes and penalties on the gains, a tax-free 1035 into a low-cost VA provider with a decent array of low-cost funds would be ideal.

 

[yakers]

I think what MB meant was forget the $1,600 clear, take all the $ out, even with penalty, ASAP to a better company. Generally good advice. I did not do that with DW's 403b as she was near to turning 55 and getting it all out free. Maybe there is a 'special circumstance' that allows for complete fee free transfer.

 

[frayne]

My two cents, avoid Amerprise, like it was the plaque.

 

[Sarah in SC]

was the plaque.

Teeth?

I'd set up new accounts at a brokerage and transfer your accounts fairly soon. You will be hit with transfer fees, fees to sell, fees to wash your undershorts (you get the idea). Although it is hard to, just try to move on without getting totally embroiled in the anger.

Keep reading here and at your library, and try to spend your time thinking about your risk tolerance and time horizon. Those will point you toward the right asset allocation and if you select funds with those in mind, you will be better able to hold on in times of panic because you know why you own a given fund.

Good luck to you!

 

[Lisa99]

Hi Willongo, welcome to the "we hate Ameriprise club" and CONGRATS on working to get out of their clutches.

I stumbled on the early-retirement.com website in mid-August and quickly found out that Ameriprise was sucking us dry. Using the reading recommendations we were able to better educate ourselves on investing and get all of our money moved in about a month even though we have a high six figure portfolio. We went from having expense ratios that mirror yours to an average expense ratio today of about .15.

The thought process we went through on deciding whether or not to pay the VUL surrender charge came down to the fact that there were no good funds available in the VUL to invest in. They were all very high expense ratio and I felt that by sucking it up and paying the surrender charge ($5500) I could quickly recoup the charge.

We've now been with Vanguard for 10 weeks and have a total return that is beating the pants off what our advisor was doing AND WE'RE IN INDEX FUNDS!! Doesn't take an advisor to advise on index funds!

As you're taking this great step, one of the most important things to remember is to consider each account (company 401k, IRAs, current Ameriprise accts) as individual components of your entire investment picture. This will make more sense as you learn about asset allocation...I promise

 

[ziggy29]

Hi Willongo, welcome to the "we hate Ameriprise club" and CONGRATS on working to get out of their clutches.

I was hoping our latest "Dump Ameriprise" graduate would chime in...

 

[Sarah in SC]

I was hoping our latest "Dump Ameriprise" graduate would chime in...

Me, too! Thanks, Lisa for your helpful advice to the newest member of the club!

 

[Lisa99]

Ya know Ziggy, this dump Amerprise move has literally changed out lives.

It sounds overly dramatic but it's true. Now that we have control, we've been able to confidently estimate our FIRE date and make informed decisions about where to invest that next dollar.

With Ameriprise we were in a fog because the advisor made it just seem so darn hard and to OP, it isn't hard at all as long as you keep the strategy simple...and in investing, simple is good!

 

[willongo]

Wow!

So many replies!

So far, I haven't been socked with so many fees for removing my money. I can't remember offhand, but I doubt I haven't had to pay more than about $150 for transferring my IRA to Vanguard and liquidating my SPS account.

I have been musing about also taking out my variable annuity. The total fees I would have to pay would amount to about $1800, something that I think I would be willing to give up just to be completely rid of Ameriprise.

However, I'll do a little more research before making that decision. I'm trying to figure out if there is anything I can do in terms of moving money around with regards to the VA while leaving it at Ameriprise, or if the best bet is too just pay surrender charges and be rid of them.

It's really the math that is daunting!

By the way, what is the purpose of a VA anyway. At first, I thought that it was just basically life insurance and basically useful only for those with dependents or beneficiaries. But, after reading what I could from the Ameriprise website (not very user friendly, by the way!) and from what I think I recall my adviser telling me, I get the impression that the VA would give me a guaranteed income after retirement. However, I don't see how exactly this would be any different from an IRA.

 

[Sarah in SC]

IRAs don't have guaranteed income (but then again, hard to say if the VA really guarantees much). IRAs hold securities, pretty much anything you want to buy security-wise can be bought in there and you make the investment decisions. And, of course, if the said security tanks, with it does your IRA balance.
The VA promises otherwise. Does it deliver? Who knows?

 

[MasterBlaster]

So many replies!
By the way, what is the purpose of a VA anyway. At first, I thought that it was just basically life insurance and basically useful only for those with dependents or beneficiaries. But, after reading what I could from the Ameriprise website (not very user friendly, by the way!) and from what I think I recall my adviser telling me, I get the impression that the VA would give me a guaranteed income after retirement. However, I don't see how exactly this would be any different from an IRA.

The concept is that your VA grows tax deferred in the variable annuity accounts. Then when you retire you "annuitize" it into a stream of income payments over your remaining lifetime.

Were it not for all the fees and the crappy rates, it almost would be worth considering. Ameriprize will be the big gainer should you stay on this course though.

If you want to do the variable annuity path then consider a low cost provider like vanguard. Keep in mind though that annuities are insurance. thereffore they will always have some extra fees to provide for the "can't lose" death benefit and will usually trail a similar IRA/401k account.

 

[Lisa99]

I decided not to go down the 'math' path to determine whether or not to leave the VUL at Ameriprise.

Mentally I wanted to be done with them, so paid the $5500 surrender charge and considered it the cost of education.

And one of the reasons you're getting so many replies is because we're passionate about helping people get away from Ameriprise!

 

[mickeyd]

Hey willongo,

Welcome here.

On top of the mostly accurate advice that you have received already, I recommend that you take action to insure that you make no further contributions to any of the accounts until you decide what to do. If you decide to continue with these plans you can always crank it up again but once you have given them the cash, you are stuck.

Remember, the Ameriprise rep has no fiduciary responsibility to you.

 

[willongo]

Yeah, mentally, I think I just want to be done with Ameriprise so I might just forgo the research and just pull out.

On a positive note, I checked my accounts online. One of them, the SPS account, has disappeared! That means I should receive a check soon that I will send to Vanguard pronto.

Only two more to go! Vanguard should take care of the second account. I've already received a welcome letter from them so I expect that in a couple of weeks or so the IRA account will disappear as well.

As for the VA, I'll probably wait until next month to surrender it, as that is when the surrender charge steps down from 8 to 7%.

 

[Lisa99]

Isn't it satisfying to see those accounts disappear from Ameriprise?!

 

[willongo]

It's almost life changing to see that account disappear! LOL!

Even better, I can't wait to see all my accounts pop up in Vanguard's website and watch them grow beyond anything that would happen in Ameriprise!

 

[target2019]

When I go to financial dinners and eat heartily at their, I also feel very satisfied. Just feel sorry for those who will get hooked.

 

[aida2003]

In regards to M* ratings, the same analysts who assign those stars to the funds advise investors not to be too hung up on them. The stars are all about the past. But yes, I agree it's psychological and so comforting to see more stars like a hotel .
E.g. Total Stock Index fund (VTSMX) is rated 3*. How different will it be if I move my $$ from this fund to a similar fund at a different co.? It's an index fund and its managers are barely involved in it. Well, maybe Fidelity has a lower expense ratio for this kind of index fund, but again I like Vanguard and I don't want to keep moving my money around + tax considerations if I had to sell in one co. in order to move to another co.

 

[MasterBlaster]

Total Stock Index fund (VTSMX) is rated 3*

By definition an index fund can't beat the market, or under perform it. hence the 3 stars.

Trying to beat the market is a fools errand. You either delude yourself or end up with a higher risk portfolio.

Those 5 star funds almost always are a flash in the pan. Almost nobody can consistently beat the market.

Check out this discussion (from the Coffeehouse Investor website) on trying to beat the market to see the futility of trying:

http://www.coffeehouseinvestor.com/investing-you-understand/outfox-the-box/