Ameriprise just stuck it to us again

[Lisa99]

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.

 

[brewer12345]

.

 

[clifp]

Ouch that is painful. Unfortunately there problem is no recourse for you.. Although you probably could go to amerprisesuck.com and add your tale of woe.

 

[Bestwifeever]

I hope that you can have a sense of warped humor over this last reason to have ditched Ameriprise, Lisa. Thank goodness this was all that was left.

So when would a holder of these "assets" ever make money from them?

 

[Lisa99]

Perfect picture Brewer!

Bestwife I have no idea how you can ever 'make' money since you can't sell. When customer service told us that we couldn't sell I basically chalked it up to a final indelible reminder that we will NEVER pay a financial advisor again unless it is for an hourly consult on a very specific topic.

 

[NW-Bound]

Well, if you don't or can't sell, you don't "lose" either.

Your money is just, umm, stuck!

It's not too different than investing in private companies or ventures. I have not lost too much money, but plenty of free labor doing work in exchange for some equities that ended up being worthless. However, I knew there was a risk of that, in exchange for a potential outsize reward.

No more. For me, nothing other than shares of publicly traded companies, whose bid and ask prices I can see updated by the second on the stock exchanges, and then no microcaps either.

 

[LOL!]

So why not file a lawsuit? There probably are even some class action lawsuits already going on with these things. Have you checked? Would threat of lawsuit spring some money loose?

 

[shasta]

Ouch

 

[travelover]

I'll be looking for this in the next Ameriprise advertisement that I see. "Our investment products are so great that you will never [-]be able[/-] want to sell."

 

[friar1610]

I remember about 15 years ago when I went to a Navy retirement seminar. There was one impending retiree in the audience who had already started working for Ameriprise on part-time basis. Somehow he got the course director to give him some platform time as a "financial planner" who could give advice to those of us heading toward military retirement.

The guy was careful to point out that since he was still on active duty he was not allowed to have any financial relationship with anyone in the military junior to him. But he would be happy to refer anyone who wanted to pursue the Ameriprise relationship further to one of his co-workers who was not a military person. I was several grades senior to this guy so that situation didn't apply to me.

At the time, I had recently become a Boglehead. 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.

 

[Ready]

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...(

I'm not that familiar with REITS, so for the benefit of the rest of us, can you help us understand how something like this could happen. Was this a REIT mutual fund that trades in shares, or something more complex? Real estate has done well over the past seven years, so how could they be completely unable to fund your refund request? What happened to the underlying real estate assets being held by the REIT? And why would they able able to refund the money if you were dead, but not alive? It seems like there must be more to the story here, or everyone would be suing them.

 

[MooreBonds]

I'm not that familiar with REITS, so for the benefit of the rest of us, can you help us understand how something like this could happen. Was this a REIT mutual fund that trades in shares, or something more complex? Real estate has done well over the past seven years, so how could they be completely unable to fund your refund request? What happened to the underlying real estate assets being held by the REIT? And why would they able able to refund the money if you were dead, but not alive? It seems like there must be more to the story here, or everyone would be suing them.

Many financial products have 'death put' features whereby the estate is able to redeem the value of the investment without penalty upon death of the original account holder. It makes people more willing to purchase certain investments, while at the same time not forcing them to liquidate holdings to pay estate taxes and distribute money to heirs and settle the estate's bills within 9 months of death.

As far as the private REIT the OP refers to...there are 'private placement' REITs that are offered to investors who state that they meet certain criteria (used to be either 250k in income or $100k or some other level in assets). They are structured such that your money is tied up by buying property for a number of years. Most claim to have an exit strategy at some number of years down the road.

Some, as the OP found out, may simply be a little liberal in their assumptions in the marketing brochures.

I actually participated in such a private placement about 6 years ago with a company called AEI. They've put together perhaps 20 or so such private placement funds over the past 15-20 years. The ones started in the 90s have done phenominally well. I Bought 500 shares at a NAV of $10/share. In about 2007. My AEI fund's performance: not-so-phenominally well.

Current quarterly reports indicate NAV is about $7.50 or so a share. Still pays a quarterly dividend that is about $.50/year, or about 5% yield from initial investment.

I did it as a way to add a small amount of diversification to my portfolio - didn't necessarily have huge hopes or a lot riding on it. Figured "what the hell? Why not? It's a small % of my portfolio."

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.....

 

[Lisa99]

Moore got it right, private REITs that are way underwater. The both hold commercial property that got blasted in the 2008 market.

 

[Gumby]

I'm not that familiar with REITS, so for the benefit of the rest of us, can you help us understand how something like this could happen. Was this a REIT mutual fund that trades in shares, or something more complex? Real estate has done well over the past seven years, so how could they be completely unable to fund your refund request? What happened to the underlying real estate assets being held by the REIT? And why would they able able to refund the money if you were dead, but not alive? It seems like there must be more to the story here, or everyone would be suing them.

Some reading material that may be helpful.

Private REITs Backfire on Investors - Forbes

FINRA warns about misleading investors in non-traded REITs | Reuters

 

[ziggy29]

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.)

 

[haha]

Over the years we've had various long gone posters who explained how dense we were not to see the splendid advantages of private REITs. I always wondered, how do you take a serviceable product that is widely available on publically traded markets, is required to make regular and frequent audited SEC filed reports, make it illiquid and not traded, and with only sketchy, occasional reports, and have this crippled product be more valuable?

Stardust.

Ha

 

[NW-Bound]

Apparently, this is the "long-term buy-and-hold" part of one's portfolio. Good grief!

I listened to Lucia's show a few times, but never happened to hear one of his pitches about these really, really long-term assets. Buy and never sell!

Sorry Lisa!

 

[MooreBonds]

Over the years we've had various long gone posters who explained how dense we were not to see the splendid advantages of private REITs. I always wondered, how do you take a serviceable product that is widely available on publically traded markets, is required to make regular and frequent audited SEC filed reports, make it illiquid and not traded, and with only sketchy, occasional reports, and have this crippled product be more valuable?

Stardust.

Ha

Well, as I've said before, I'm a big believer in diversification.

Plus, it's almost like it's a 'collectible' thing. Some people collect bobble heads. Others collect Barbies.

I collect stocks. And hate parting with them.

Although I have made progress over the past year or so in selling some as they reach high valuations, and am starting to experience the concept of "capital gains" - a concept heretofore mostly foreign and unbeknownst to me for many years, as my collection of capital losses became tiresome and I searched for new conquests.

 

[clifp]

Over the years we've had various long gone posters who explained how dense we were not to see the splendid advantages of private REITs. I always wondered, how do you take a serviceable product that is widely available on publically traded markets, is required to make regular and frequent audited SEC filed reports, make it illiquid and not traded, and with only sketchy, occasional reports, and have this crippled product be more valuable?

Stardust.

Ha

I must say I've never heard private placement REITs marketed in quite that fashion before.

I will also say that I've never been tempted to buy one.

Ameriprise and private placement REITS now that is winning combo...

I am so glad Lisa99 found this forum.

 

[mathjak107]

private reits may have a target of five -7 years but if you read your prospectus you will see that is only if conditions are favorable for selling and they can even find a buyer.

i know of no untraded reits that give you a definite date. i own an untraded reit and i think we may be stuck in it for as long as 10 years and not the estimated 7 years the target is.

 

[bUU]

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.

 

[2B]

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.

 

[gcgang]

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.

 

[aja8888]

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.

 

[2B]

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.