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Old 07-31-2014, 01:23 AM   #41
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...I don't understand inflation and anyone could beat the market in the past five years cause everything has gone up and he still did well in 2011 when the market was going all over the place and would I feel comfortable performing surgery without an expert present...you get the idea....

Basically, he just does a ton of research and buys a company right before they get bought out when the buyout price is a bit higher than the market price. A few successful buys a year and you're in the double digits on returns (only one sale has gone south out of dozens over the past few years). His claims this is safer than index funds, which I find laughable, but the real selling point is he's confident he can continue to make 7-15% even if/when the market plummets again because companies are still getting bought and traded. I'm curious to see if this is true. I figure either I will make decent returns through the next downturn or I won't. Either way, 97% of my investable money will not be in his hands.

Honestly 7.5% a year is pretty awful since 2009. Since 2009, I made 17.83%, and while I suspect that is above average for the forum it isn't hugely so. $10,000 at 7.5% grows to $14,880 over the last 5.5 year, at 17.83 it grows to $24,660. That almost an extra $10,000 per 10K. I made 5.11% in 2011 so I am not all that impressed that he also made money.

I wonder how they sleep at night.
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Old 07-31-2014, 07:13 AM   #42
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I have been an Ameriprise client for about 30 years via the purchase of a universal life insurance policy. Other than that I have used Vanguard for TIRA and Roth IRAs and non-qualified mf investments. A recent inheritance that is invested at Ameriprise must be rolled into Ameriprise accounts in my name before I can access this money. These accounts will consist of a brokerage account of primarily bluechip stocks, a bond mutual fund, a money market account, an inherited IRA that must be cashed out or rolled into an annuity, and several other annuities that must either be cashed out with significant tax consequence or annuitized. The total of this inherited money is approx. 23.5% of my total investments.

For the time being I will probably leave the money with Ameriprise as I didn't really plan on making too many changes to the investments and I have no options for the annuities other than to cash them out and pay big taxes. I did just pay a fee to my advisor to help with a financial plan since I am recently retired. We are trying to control income starting in 2015 to maximize ACA subsidies and minimize tax. So far I am satisfied with the work he has done for me.

So, for my situation, I will continue working with Ameriprise, and will be listening to their recommendations, but if I get a bad feeling I will pull the plug on them. My advisor already knows I have little use for their services and have no love lost for his profession.

This forum has beaten to death the negatives with Universal Life policies. Unless you have some special legacy deal in your policy, the fees are killing any return you could be getting.

The annuities are also going to be covered up in fees that will drain any return. Don't let your desire to avoid taxes blind you to your own best interests in getting the best returns on your money. Taxes will have to be paid someday. How does paying Ameriprise fees for many years make this any better?
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Old 07-31-2014, 07:21 AM   #43
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So I had an hour long talk with my Ameriprise Broker.
That's an hour of your life you'll never get back.

I'm always amazed how FAs try to convince clients that they have some special gift that will allow them to make far more money for them (after their hefty fees and commissions) than they could make indexing. This is despite all the academic evidence to the contrary. Unfortuniately, they frequently convice people of their brilliance. Some never realize they've been had.

If one of these guys really did have this special gift, why would they be wasting their time making small change from retail clients. If someone could reliably beat the market year in and year out, they would be in so much demand that they would be managing some massive endowment or pension plan somewhere. Therefore, anyone that will deal with people having less than a billion dollars has no special gift for anything except conning retail clients.
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Old 07-31-2014, 09:15 AM   #44
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I seriously doubt he'll be your advisor after you move most of your money.

When we escaped we moved 95% and within a week our account was 'transferred' to some guy from a call center that we have no ability to ever meet.

The only reason we have anything with them is our stellar FA sold us 2 private REITs that the buffoon told us we could sell after 5 years. 10 years later and a loss of 50% of our principal and we still can't sell because both companies have limited capital to let people cash out. We've kissed the money goodbye.

And to the person who's going to see how it goes you must not be retired yet? Ameriprise charges a minimum of 1% of your assets per year. Once retired you can withdraw about 4% per year 'safely'. So you're going to let Ameriprise have 25% of your retirement income?
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Old 07-31-2014, 11:17 AM   #45
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Not so much about Ameriprise, but a friend of mine who retired from the AF a couple years ago became a FA with Edward Jones and for months he harassed me about managing my money. He was offended that I was a Vanguard guy and even said 'oh, your one of those Bogleheads they told us about in class'.

I don't like the idea of Edward Jones looking for new clients by hunting through neighborhoods that have 'big trees, fat squirrels and long cars'.
LOL! I've been hit up by EJ brokers both in NJ and here. Guess I ought to choose a more modest neighborhood when we downsize.
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Old 07-31-2014, 11:45 AM   #46
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....
A recent inheritance that is invested at Ameriprise must be rolled into Ameriprise accounts in my name before I can access this money. These accounts will consist of a brokerage account of primarily bluechip stocks, a bond mutual fund, a money market account, an inherited IRA that must be cashed out or rolled into an annuity, and several other annuities that must either be cashed out with significant tax consequence or annuitized. ....
Why do you have to roll the inherited IRA into an annuity? Usually it can be rolled into a beneficiary IRA - and if the person you inherited from was over 70.5 (taking RMDs), you start taking RMDs on your own record.

You can roll the inherited IRA, aka beneficiary IRA to another brokerage. I did this with an IRA I inherited from my father.

There's no law, that I know of, that requires you to convert the inherited IRA to an annuity. I would ask long and hard questions about this.
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Old 07-31-2014, 12:17 PM   #47
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Yeah I thought the statement regarding rolling inherited IRA into annuity / cash option was just the way the adviser would make a quick 10% commission as there isn't a law that you have to pay 10% or incur an immediate tax hit to get at YOUR money

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Old 07-31-2014, 01:01 PM   #48
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Yeah I thought the statement regarding rolling inherited IRA into annuity / cash option was just the way the adviser would make a quick 10% commission as there isn't a law that you have to pay 10% or incur an immediate tax hit to get at YOUR money

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+1

There would be a tax hit if the IRA wasn't rolled over to an Inherited IRA at the firm of the OPs choice. I'd call Vanguard and see how it's done.
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Old 07-31-2014, 01:58 PM   #49
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exactly

Converting to cash = taxes
Converting to annuity = 10% commission
Rolling to beneficiary IRA within Ameritrade = no immediate taxes or commission. Suggest then transferring to a discount brokerage such as Schwab or Fidelity where you control it
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Old 07-31-2014, 08:46 PM   #50
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I seriously doubt he'll be your advisor after you move most of your money.

And to the person who's going to see how it goes you must not be retired yet? Ameriprise charges a minimum of 1% of your assets per year. Once retired you can withdraw about 4% per year 'safely'. So you're going to let Ameriprise have 25% of your retirement income?

The FA is a year younger than me, barely legal to be POTUS. I think I was one of his very first clients where he was allowed to do his own thing and not just try to roll me into the standard Ameriprise's portfolio. So he's only had five years with his scheme and he's been competing with a good bear market. Poor guy (sarcasm).

And in his defense, he's averaged 14%. I had omitted one account and some reserve cash in my previous estimate. Still almost 7% worse than my unmanaged 401k.

I'm still curious to see if he does well, and I hope he does, but I've decided to pull all my money out. I don't need to deal with the condescension. Got medallion signatures for all account transfers today, which is a different, irritating bank story. Stupid Chase.

I bet he'd stick with me (our mothers were braiding each other's pigtails in the sixties) and keep using my money for his pet crusade of something "completely unique" and exactly "what investors like Warren Buffet do. You've heard of him, right?" But double talk is almost as bad as condescension.
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Old 07-31-2014, 08:54 PM   #51
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Buffet is my idol. And if your FA could do what Buffet does he wouldn't be working for Ameriprise he'd be starting his own firm like Warren did when he was in his 20s
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Old 08-01-2014, 07:38 AM   #52
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And in his defense, he's averaged 14%. I had omitted one account and some reserve cash in my previous estimate. Still almost 7% worse than my unmanaged 401k.
You'll be ok. As you do these comparisons of performance, it is a moving target. If you had unlimited time and all of the transactions for Ameriprise account, 401(k), and compared to a baseline of S&P500 or similar, you'd have the same problem in front of you: What next? It sounds like you're moving forward, and I wish you well with self-management.
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Old 08-01-2014, 07:51 AM   #53
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You'll be ok. As you do these comparisons of performance, it is a moving target. If you had unlimited time and all of the transactions for Ameriprise account, 401(k), and compared to a baseline of S&P500 or similar, you'd have the same problem in front of you: What next? It sounds like you're moving forward, and I wish you well with self-management.
Picking one index is a poor comparison with an actively managed account. You really need to look at blended index portfolios.

Trying to compare specific indexes with individual mutual funds are more difficult. A fund that calls itself "large cap" might have migrated into significant mid and small cap holdings.
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Old 08-01-2014, 08:11 AM   #54
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1) If the broker gets compensated based only gains, then he would definitely have an incentive to take very aggressive bets. Hey, the worst that can happen (on that particular account) is that he makes nothing (while the customer loses a big %age of his money), and if he "wins", he gets a big payoff. Not well aligned with the customer's interests, IMO. I think it may also be improper/illegal.
Why would that be? Solely because of the incentive to make "aggressive bets"? In my mind, it seems a more fair arrangement (performance based) than a flat fee or loads would be.
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Old 08-01-2014, 08:23 AM   #55
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Picking one index is a poor comparison with an actively managed account. You really need to look at blended index portfolios.

Trying to compare specific indexes with individual mutual funds are more difficult. A fund that calls itself "large cap" might have migrated into significant mid and small cap holdings.
I agree. Instead of writing "S&P500 or similar," I could have written, "S&P500 or whatever." But in discussing these types of successes, I think it is more common to hear, "but you could have put it all in Wellesley or S&P500 and done better."

In the case of OP, his FA is trading in some unspecified way, so what could we compare it to? I would think an index of S&P500 is a good as any other to benchmark the FA.

But that is all in the past. The OP can decide several benchmarks, and have a valid comparison in the future.
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Old 08-01-2014, 02:58 PM   #56
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Why would that be? Solely because of the incentive to make "aggressive bets"? In my mind, it seems a more fair arrangement (performance based) than a flat fee or loads would be.
Snidely, when you go to a doctor, do you pay only if you get cured, or do you pay to be treated?
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Old 08-01-2014, 03:22 PM   #57
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Solely because of the incentive to make "aggressive bets"?
Yes, but I think that's enough. For example, let's say the FA gets nothing if the account breaks even or loses money, but 10% of gains. There are two FA's with this arrangement: Paul Prudent and George Grandslam. They both have 10 clients with $1 million each.

Paul Prudent puts his 10 clients in well-balanced and diversified portfolios, they each gain exactly 10%. He takes home $100,000, nobody loses any money.

George Grandslam has thought about this and realizes that his compensation is heavily weighted to rewarding increased risk. He puts the entire portfolio for each client into one long-shot stock (10 different stocks). As he anticipated, 9 clients lose 50% of their money, but one client's stock goes through the roof, and he gains $2.5 million in one year. George takes home $250,000.

Mr Prudent had overall investment results (10% of all AUM) that were over twice as good as Mr Grandslam, but Grandslam was paid 2.5 times as much money. Which advisor would we rather be with? Is this FA compensation scheme congruent with the interests of the clients?

Obviously, this is an extreme illustration, but compensating an advisor based on gains (without penalizing them out of their own pocket for losses) would provide a strong incentive for them to take high risks, even uncompensated ones. They would be induced to swing for the fences with each client, even if it leads to a lot of striking out. Most investors just need to consistently get on base. "If you don't make money, I don't make money" sounds "fair," but it hides the reality of where the risk would really lie.

Anyway, I seem to recall (not sure) that compensating advisors based on gains is against the law or against some sort of blood oath that they sign.
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Old 08-01-2014, 03:39 PM   #58
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Why do you have to roll the inherited IRA into an annuity? Usually it can be rolled into a beneficiary IRA - and if the person you inherited from was over 70.5 (taking RMDs), you start taking RMDs on your own record.

You can roll the inherited IRA, aka beneficiary IRA to another brokerage. I did this with an IRA I inherited from my father.

There's no law, that I know of, that requires you to convert the inherited IRA to an annuity. I would ask long and hard questions about this.
The inherited IRA was a rollover IRA that was already in an annuity. I understand you can't un-do it out of an annuity so my choices are limited. It's not a big deal as the total account value is only about $15,000.

There are several other annuities that were never in payout so my only options are to annuitize or cash out. This is the frustrating part since my share of the total is about $150,000, of which $40,000 is not subject to taxes which I will cash out. The remaining $110,000 only has the options to cash out and pay the tax bite or annuitize over a chosen number of years. I am not complaining as the annuities are a small % of the inheritance.
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Old 08-02-2014, 12:18 PM   #59
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Snidely, when you go to a doctor, do you pay only if you get cured, or do you pay to be treated?
Also, insurance companies have something to say about doctors' fees. In the FA business fees vary widely. So the marketplace for medical and financial is not the same, I'd say.
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Old 05-08-2016, 02:58 PM   #60
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Didn't want to make a new thread.

Just happened to run across some news about how big Ameriprise is and how much their CEO has made over the years:

$97 million in 2013, $45 million in 2014 based on stock options. But got his pay cut to only $20 million in 2015 due to some declines in the business:

https://www.google.com/url?sa=t&rct=...NqoRoMtuZFkmQw

But the pay of the CEO of a similar-sized financial services firm, also headquartered in Minneapolis, is a lot less:

Quote:
Thrivent Financial and Ameriprise Financial are far more alike than they are different, both big financial services firms with headquarters just a block from each other in downtown Minneapolis.

Both manage money and sell financial products like annuities through a network of representatives.

There are big differences, of course. Thrivent is organized for the benefit of its members. Ameriprise’s stock trades on the New York Stock Exchange. But there’s maybe no difference quite as striking as this:

The top job at Ameriprise pays 25 times more than the top job at Thrivent.

A well-intentioned communications staff member at Ameriprise pointed out that the company’s large size really distorts such comparison, as Ameriprise is ranked 263 on the latest Fortune 500 list.

Yes, but Thrivent is ranked at 325, not that far down.

Brad Hewitt, Thrivent Financial’s CEO, made $3.55 million in salary and incentive pay in 2012.

Brad Hewitt, Thrivent Financial’s CEO, made $3.55 million in salary and incentive pay in 2012.

“Oh,” he said.
Schafer: Two similar firms differ wildly on CEO pay - StarTribune.com

The Wiki entry on Cracchio says Ameriprise provides financial planning services to the "mass affluent and affluent." Not sure what the difference is.

https://en.wikipedia.org/wiki/James_Cracchiolo

But the Ameriprise Wiki says in 2010, it had 3 million clients and managed assets of over $672 billion:

https://en.wikipedia.org/wiki/Ameriprise_Financial

Amazing that it is so successful, though it's been hurting more recently:

Quote:
The CEO’s total compensation was cut to $20.7 million from $24.5 million, driven by a decrease in non-equity incentive plan compensation, the Minneapolis-based firm said Friday in a regulatory filing. Awards were also lowered for Chief Financial Officer Walter Berman, Global Chief Investment Officer Colin Moore and William Truscott, the CEO of global asset management.
Asset managers have come under pressure as some clients withdrew funds, and volatile market swings hurt investment results. Ameriprise faced outflows at its Acorn Fund over the past year, and the company also exited a travel insurance venture in 2015 after it failed to meet profitability targets.
“Total direct compensation for each of our named executive officers was lower in 2015 based on company performance,” Ameriprise said in the filing, which labeled 2015’s results as “solid” compared with the description of “excellent” in the comparable document a year earlier.
Ameriprise slumped 20 percent in New York trading in 2015, the worst drop since 2008. The stock had more than doubled in value in the three years through 2014.
Ameriprise Cuts CEO Pay 15% to $20.7 Million After Stock Slump - Bloomberg


Now we know where those fees go.
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