Leaving Ameriprise - One Year Later

[Lisa99]

This is long, but I wanted to share a one year update since finding E-R.org and leaving Ameriprise has literally changed our lives.

Before E-R.org, I superficially understood investing terms like asset allocation, risk tolerance, and expense ratios and I thought investing was so hard that I could never do it myself. Then, a year ago this week I found this site and quickly realized how staying ignorant of investing was costing us a small fortune.

I asked for help in learning how to leave Ameriprise and manage our own investments. We got tremendous advice and have made such great progress toward FIRE that I wanted to share both a financial and personal update since the most unexpected part of this journey has nothing to do with FIRE!

The Financial Picture
Aug 2010 – all non-qualified investments were with Ameriprise and included a VUL. Even though 2009 was a good year for the market we were still underwater by $27,000 (10% of the Ameriprise portfolio) due to frequent shifting in and out of funds. We were in a total of 19 funds, had wrap fees of 5% on most and had an average ER of 1.9%. Our 401k choices were self-selected by past return and not part of any asset allocation. I’m sure you’re cringing about now, but we didn’t know these stats/facts were bad!

Aug 2011 - We’re now in a total of five funds across the entire portfolio (qualified and non-qualified), all of which are Index funds. Average expense ratio is 0.09% which is a fraction of last year! Our AA is 60/40 with equities being 35% large cap, 15% small cap and 10% Intl. The bond portion is in a single Fido Total Bond Market Index which is held in my 401K. We also cashed out all of DH’s options and ESPP from CSCO and put them into Vanguard. We made this move because of the ongoing underperformance of the stock.

The Financial Result One Year Later
Until the market drop this week we had increased our total portfolio by 25% in one year and met one of our milestones for total investable assets. The 25% increase is higher than market returns because we had a good amount of cash languishing in the credit union that I didn’t want to give to Ameriprise. Most importantly we're in control of our financial destiny and every penny we scrape up goes into Vanguard.

The FIRE Plan
Aug 2010 – We HOPED to retire when I turned 59 and DH was 55 (11 years away at the time). I knew about FireCalc and had run scenarios that showed it was possible. Why 59/55? It never occurred to us that ER could be any age as long as you have the funds to support it.

Aug 2011 – We KNOW we can retire at 55/51 (now only five years away) IF the market doesn’t stay in a swan dive. That’s a big IF, but we know how to tweak the variables and if retiring at 55/51 doesn’t come to pass it really is ok. We know we’re doing everything possible to retire as early as possible.

The Unexpected – Our Health
As part of our plan to retire at 55/51 we started looking into health care insurance. I thought my company subsidized HC at 55, but I had never read the fine print. Turns out we pay the full premium but we get a group rate which is still higher than COBRA. Since learning about the high cost of health care on this site if you’re not in virtually perfect health, we finally had two motivating factors to get serious about getting healthy; 1) we wanted to be healthy in early retirement so we could have fun and 2) we needed our healthcare premiums to be as affordable as possible.

Aug 2010 – While we were in good health for now, we were both overweight, didn’t exercise consistently and probably drank more than we should. DH had been on BP medicine for more than 10 years.

Aug 2011 – DH has lost 30 pounds. His BP meds have been cut in half and when he gets to goal (another 30 lbs) his doc expects him to be off medication. I’ve lost 20 pounds and have a normal BMI for the first time in years. We have taken up serious bike riding and are training for a Century ride in Fallon, NV in October. We have also started playing racketball again and taken up yoga.

And the best part of getting healthy has been that it helped define one our ER goals – ride a Century in each of the 50 United States.

Thank you for sharing your words of wisdom throughout this last year. As you can see, my statement that you wonderful folks at E-R.org changed our lives was not an exaggeration.

[clifp]

Thanks Lisa for providing me some good news in an other wise crappy day.

Sometime when I spent 30 minutes or so to provide a detailed (and I generally include some fact check and calculation.) I wonder why in the hell do I bother, people don't generally listen to advice from their friends and family much less random people on the internet.

It is gratifying to know that collective wisdom of the board does really make a difference at time.

Congratulations and love your goal. Let me know when you get to Hawaii for your Century, I know plenty of bike riders which can give you some advice. FYI, The 112 mile ride around Oahu is the basis for the Ironman triathlon.

[Midpack]

I remember the thread, hard to believe it was a year ago, but I don't doubt it. That's outstanding, glad it has worked out for you, despite today (a temporary setback).

Now we can be inspired by your progress in getting healthier!

[powerplay]

This is a great update to your journey towards ER. It's hard to believe a year has gone by since you started the discussion here and look at the progress you and your DH have made both financially and personally. Congratulations, you are doing great!

That 5 years will go by quickly.

[FIREd]

One year already? I remember your first post like it was yesterday!

Congratulations on all your successes.

[donheff]

Wow, what a great turnaround story. And welcome to the ER cycling community. DW and I took it up after ER and T-Al (who may pipe in) did as well. I like the idea of a 100 miles in every state but not centuries - 30 to 60 at a time is my style

[grasshopper]

You guys are ROCK STARS. I think thats a good thing

[Rustward]

Congratulations!

Quote:

Originally Posted by Lisa99 We were in a total of 19 funds, had wrap fees of 5% on most and had an average ER of 1.9%.

Just to clarify, you had wrap fees of 5% AUM (mostly), AND funds with an average ER of 1.9%? If so, I see why so many people call Ameriprise thieves. And I would be the first to agree that that is thievery.

[Berkshire_Bull]

Congrats on the health accomplishments. As far as your portfolio, I hope you understand what you're doing because it sounds like you're still getting a handle on it.

A common fee structure for hedge funds is "2 & 20" which means 2% of the investment + 20% of the profits. Ameriprise is a retail brokerage outfit and not a fee-only RIA meaning they can't assess fees in that manner. I have no love for Ameriprise or brokers at all for that manner, but it's not fair to spout-off lies about these guys.

[Lisa99]

Quote:

Originally Posted by Berkshire_Bull Congrats on the health accomplishments. As far as your portfolio, I hope you understand what you're doing because it sounds like you're still getting a handle on it. A common fee structure for hedge funds is "2 & 20" which means 2% of the investment + 20% of the profits. Ameriprise is a retail brokerage outfit and not a fee-only RIA meaning they can't assess fees in that manner. I have no love for Ameriprise or brokers at all for that manner, but it's not fair to spout-off lies about these guys.

Thank you for the congrats and I know EXACTLY what I'm doing with the investments. I have no idea how a hedge fund is set up so I'll have to take your word for it.

As far as spouting lies, I'm quoting exactly what was in my annual report for fees incurred. Oh and BTW, I left off the $750 annual fee paid directly to the FA for his services. So I'm not sure which part you think I'm lying about but the accusation is disturbing.

[Lisa99]

And to everyone else, thank you for your kind words. It has been a year of learning and taking action. We're now experiencing the first market downturn since we've started self-managing so we'll see whether the 60/40 AA is appropriate for our level of risk tolerance or not very quickly.

[ziggy29]

Quote:

Originally Posted by Berkshire_Bull Congrats on the health accomplishments. As far as your portfolio, I hope you understand what you're doing because it sounds like you're still getting a handle on it. A common fee structure for hedge funds is "2 & 20" which means 2% of the investment + 20% of the profits. Ameriprise is a retail brokerage outfit and not a fee-only RIA meaning they can't assess fees in that manner. I have no love for Ameriprise or brokers at all for that manner, but it's not fair to spout-off lies about these guys.

OK, I've reread the original post, and I don't know where you got that Lisa suggested Ameriprise had them in a hedge fund (you are correct about the "2 and 20") or anything like it. Any outfit, pretty much, can charge high surrender fees and current expenses on the annuity investments they peddle. Maybe "wrap fees" means load and/or surrender charges, I don't know. But most surrender charges are closer to 6-8%.

And that's another thing -- knowing what I do of their situation in the year since we've come to know them, VUL seemed like a wildly inappropriate "investment" vehicle to begin with. And if they had a particular need for an annuity (needing more tax deferral and asset protection depending on the state) a self-directed annuity from a low-cost provider like Vanguard would make much more sense.

[Berkshire_Bull]

Quote:

Originally Posted by Lisa99 Thank you for the congrats and I know EXACTLY what I'm doing with the investments. I have no idea how a hedge fund is set up so I'll have to take your word for it. As far as spouting lies, I'm quoting exactly what was in my annual report for fees incurred. Oh and BTW, I left off the $750 annual fee paid directly to the FA for his services. So I'm not sure which part you think I'm lying about but the accusation is disturbing.

I apologize if I offended you, but it's impossible that you paid a 5% wrap fee and 1.99% expense ratios, so you're claiming you paid 6.99% per year to invest with Ameririrpse? Thus you led another member to conclude that Ameriprise is a bunch of thieves. That's not very productive.

[Lisa99]

Quote:

Originally Posted by Berkshire_Bull I apologize if I offended you, but it's impossible that you paid a 5% wrap fee and 1.99% expense ratios, so you're claiming you paid 6.99% per year to invest with Ameririrpse? Thus you led another member to conclude that Ameriprise is a bunch of thieves. That's not very productive.

People here can draw any conclusion they wish regarding what they consider thieves. I simply stated the facts as depicted in my report.

And for clarification - the 5% wrap fee is a one time fee not an annual fee.

[Gumby]

Quote:

Originally Posted by Berkshire_Bull it's impossible that you paid a 5% wrap fee and 1.99% expense ratios

And how do you know this to be true? Are you an Ameriprise rep? You sure sound like it. And even if you're not, you've certainly been rude for no good reason that I can see.

I'd say the one with the evidence in black and white (Lisa99) wins the point.

[KingB]

Lisa,
Thanks for the update on your ER plans. 5 years will go very fast.

[Lisa99]

Quote:

Originally Posted by KingB Lisa, Thanks for the update on your ER plans. 5 years will go very fast.

I'm sure it will KingB. The last year has flown by! And it seems the older I get the faster it goes.

[Berkshire_Bull]

Quote:

Originally Posted by Gumby And how do you know this to be true? Are you an Ameriprise rep? You sure sound like it. And even if you're not, you've certainly been rude for no good reason that I can see. I'd say the one with the evidence in black and white (Lisa99) wins the point.

Heh. Isn't the personal "call out" always the reply when someone doesn't know the answer to the response. It is impossible anyone is paying 6.99% for someone managing her money with a FINRA licensed firm, no way no how.

If it matters to you I work in internal advanced markets doing case analysis for a Fortune 500 financial services firm with my primarily focus/case-load in retirement and estate taxation. I have a securities license but I can't sell. I don't have a dog in the fight.

[Lisa99]

It has become clear to me that you assume that the 5% wrap fee is an annual fee. It isn't, it is a one-time fee.

[Berkshire_Bull]

Quote:

Originally Posted by Lisa99 It has become clear to me that you assume that the 5% wrap fee is an annual fee. It isn't, it is a one-time fee.

A wrap fee is annual, a sales load is not. My accusation of you lying is detracted as well. It is unlikely, but not impossible, that your broker could have sold you a sales load and then sometime thereafter moved you into a wrap account at 1.99% in which case you may re-apply the "thief" label as that would be appropriate