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Old 08-13-2013, 07:25 AM   #21
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Originally Posted by NW-Bound View Post
It's not too different than investing in private companies or ventures.
That's what I was thinking: I don't see this as being unique to Ameriprise, but rather simply a reflection of investing in private investments. Our financial planner (despite a lot of forewarning against such shinanigans) kept trying to get us to consider private investments that he, as a member of LPL, could get us into. The fact that they're not open to the public, not subject to the same rules as regular investments, is a big red flag for me that there are possible downsides that mitigate whatever advantages that they may offer.
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Old 08-13-2013, 07:31 AM   #22
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Originally Posted by ziggy29 View Post
These would be the "non-traded REITs" that I've heard Ray Lucia suggest should be part of a real estate portfolio, yes?

(To be somewhat fair, this was mostly all before the 2008 meltdown in that sector.)
I've looked at several private placements for both real estate and oil & gas partnerships. The one common thread is that the master partners get a gigantic upfront fee and lots of annual fees before the other partners get anything. It's also not uncommon for the master partner to buy from a prior partnership where they get a fee going in and coming out. They also get to negotiate the selling price with themselves.

With very limited liquidity, there is a totally ill-defined time horizon for the investment no matter what the brochure implies. They will also screw up your taxes since any phantom financial results will flow through to your tax return.
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Old 08-13-2013, 07:48 AM   #23
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After leaving Ameriprise in 2010 we had a single rollover IRA account left with them that contains two private REITs.

We were told by the advisor when he put us in these that they were completely liquid after 5 years.

So 7 years have gone by, we call Ameriprise to liquidate and move the IRA to Vanguard. Guess what, one REIT has closed reimbursements unless the original buyer has died and the other can only be sold on a secondary market because the REIT has no money to pay out. And of course on the secondary market we'd get pennies on the dollar...

Lesson learned yet again, DO NOT let Ameriprise touch your money.
Are they still charging you an annual custodial/account fee?

I think the "lesson" is less against Ameriprise, and more of an indictment of investing in things you don't fully understand.
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Old 08-13-2013, 07:48 AM   #24
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I've looked at several private placements for both real estate and oil & gas partnerships. The one common thread is that the master partners get a gigantic upfront fee and lots of annual fees before the other partners get anything. It's also not uncommon for the master partner to buy from a prior partnership where they get a fee going in and coming out. They also get to negotiate the selling price with themselves.

With very limited liquidity, there is a totally ill-defined time horizon for the investment no matter what the brochure implies. They will also screw up your taxes since any phantom financial results will flow through to your tax return.
Oil and gas MLPs, (KMP, EPD, MMP, etc) are very liquid and have performed well for the last 5 or so years. Plus, the pass through "hidden" income is only reportable if you own a real large slug of any one of them and exceed $1000.00. I have many thousands of dollars of MLPs and never hit that tax reporting item. The tax reporting K-1 is pretty simple to navigate and most MLPs provide you downloadable files to import that K-1 into your Turbo Tax program.

Actually, Schwab does the tax filing for me on the MLPs I have in my IRA (pretty nice of them).

I'm not pushing MLPs, but don't put them in the same basket as these private REITs.
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Old 08-13-2013, 08:01 AM   #25
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Oil and gas MLPs, (KMP, EPD, MMP, etc) are very liquid and have performed well for the last 5 or so years.
From your avatar you may know more about the O&G business than I do. If you do, you also know that we are in some golden years for the industry. It's pretty hard to lose money since even BP is back to profitability. The next 5 years may not be as pretty.

Do the MLPs take 20+% off the top for a new partnership? What's their annual fee as a % of assets? The fees are what turned me away from these investments. In the good times, you might still make money despite the fees.

What is "very liquid?" Is there an active market being made in these partnerships or is it "put your name on a list" and hope someone is interested? If there is an active market, that's new since I've looked at them.
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Old 08-13-2013, 08:59 AM   #26
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I don't have any experience with private placements as I've never invested in one. However, my general rule of thumb is that any time someone has to work really hard to sell me something, and they stand to gain a big commission when they do, it's not a good investment for me. And usually for good reason.

Has anyone ever cold called you and pushed you really hard to buy a low cost index fund?
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Old 08-13-2013, 09:02 AM   #27
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I don't have any experience with private placements as I've never invested in one. However, my general rule of thumb is that any time someone has to work really hard to sell me something, and they stand to gain a big commission when they do, it's not a good investment for me. And usually for good reason.

Has anyone ever cold called you and pushed you really hard to buy a low cost index fund?
+1

The best argument of all.
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Old 08-13-2013, 09:05 AM   #28
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What is "very liquid?" Is there an active market being made in these partnerships or is it "put your name on a list" and hope someone is interested? If there is an active market, that's new since I've looked at them.
MLPs are traded daily on the stock exchanges and are purchased as if you were trading a stock. Try it with EPD or any of them. Plus, there are MLP ETFs if you don't care to deal with the MLP directly. One is the Alerian ETF.

Alerian MLP ETF

Yes, I work in the energy business. One note of caution is stay away from oil and gas production MLPs and only buy ones that are associated with pipelines as they make money transporting products.
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Old 08-13-2013, 09:17 AM   #29
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MLPs are traded daily on the stock exchanges and are purchased as if you were trading a stock. Try it with EPD or any of them. Plus, there are MLP ETFs if you don't care to deal with the MLP directly. One is the Alerian ETF.

Alerian MLP ETF

Yes, I work in the energy business. One note of caution is stay away from oil and gas production MLPs and only buy ones that are associated with pipelines as they make money transporting products.
Brain fart on my part. I was only thinking of O&G production partnerships and not the pipeline/storage companies. Some of these used to be C corps but tax laws make it better for their shareholders if they are structured as partnerships. I don't consider these in the same class as the production MLPs. They are structured entirely differently. They act and are treated much like any stock. There isn't the predatory "master partner."
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Old 08-13-2013, 10:14 AM   #30
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I At one point, he asked, as if he was giving away a piece of financial knowledge that only the anointed know, if anyone knew what the "Rule of 72" was. I raised my hand and explained exactly what it was. This "financial advisor" was blown away that anyone other than members of his "profession" could know such things. He literally said, "I've never met anyone who knew what that was." That told me that I had no desire to deal with Ameriprise. If this was the "inside knowledge" they brought to the table, I didn't need it.
How did you get access to that coveted piece of knowledge. You must of had one of the "Top Secret" military clearances or something like that.
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Old 08-13-2013, 10:24 AM   #31
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Or read a basic investing book?

Wow I've stayed away advisors(other than my Fido rep), mainly due to fees.

Lisa sorry that happened, maybe you just saved one or more others from a similar fate.

I consider myself to be somewhat knowledgeable of investment vehicles, but had never heard of private Reits, or the issues that may be associated with them.

Thanks for sharing,

MRG
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Old 08-13-2013, 10:29 AM   #32
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Brain fart on my part. I was only thinking of O&G production partnerships and not the pipeline/storage companies. Some of these used to be C corps but tax laws make it better for their shareholders if they are structured as partnerships. I don't consider these in the same class as the production MLPs. They are structured entirely differently. They act and are treated much like any stock. There isn't the predatory "master partner."
This is not quite true. There is at least one old line production MLP with a 2% fee for the Master Partner, and no IDF. And there are many gathering, transportation, storage MLPs with up to a 50% Incentive Distribution right.

The main reason to prefer infrastructure partnerships is that their business, while often impacted by product prices, is not to the extent that producers are, and also they are not drilling any dry holes.

There are also publically traded GPs, sometimes themselves partnerships and sometimes C-corps. These are usually my preferred holding, for the reason that when the underlying partnership does a secondary, there is no dilution at the GP level. In fact, GP distribution tend to go up.

Nevertheless, in these as in all other investments, the details tell the main story.

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Old 08-13-2013, 10:31 AM   #33
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I don't see this as being unique to Ameriprise.
Yes. The title of this thread is a bit misdirected. The real issue is the product. Any implication that private REITs purchased through a different broker would be fine for the typical investor is misdirected.

Not defending Ameriprise, their high fees or their commissioned sales staff here........ Just sayin' that the focus of the thead title should be private REITs. The issues with Ameriprise are much broader and private REITs can be inappropriately purchased at numerous venues.
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Old 08-13-2013, 10:55 AM   #34
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Yes. The title of this thread is a bit misdirected. The real issue is the product. Any implication that private REITs purchased through a different broker would be fine for the typical investor is misdirected.

Not defending Ameriprise, their high fees or their commissioned sales staff here........ Just sayin' that the focus of the thead title should be private REITs. The issues with Ameriprise are much broader and private REITs can be inappropriately purchased at numerous venues.
Agreed that you can buy this product in many places, but our overall experience with Ameriprise during the period of time before I became educated in investments was that they took significant advantage of our 'ignorance' to heavily line their own pockets. And unfortunately everything they did was perfectly legal.

Financial advice is absolutely a buyer beware 'service' and even if you think you understand what you're being told, don't count on it. So yes, Ameriprise did stick it to us again, but for the very last time. That was the point of this thread since many here know my story with Ameriprise and how we successfully ended that relationship.
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Old 08-13-2013, 11:05 AM   #35
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In the process, looking at the quarterly reports, I see how the managing partners make a killing on the overall deal, while the rest of the fund (the general partners, aka schleps like me) don't quite come out so sweet smelling. The general partners put up a relatively small amount of capital, and get something like the first 2% of all revenue generated by the partnership - essentially making an obscene % return off of their initial investment, while the rest of us barely make a respectable return, and hope the property values rise in line with inflation.

Would I do it again if the property market were right? Perhaps.....

Not only that.... but the mgmt. fee is very high.... unless you are saying that the 2% is the mgmt. fee... which seems low to the ones that I saw....
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Old 08-13-2013, 11:15 AM   #36
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The OP was told by her Ameriprise advisor that the investments would be completely liquid in 5 years so not surprising that when they were not, in this case Ameriprise can be perceived as being at fault, regardless of the quality of the investment.
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