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Ameriprise workers sue over company's own 401(k) funds
Old 09-30-2011, 07:38 PM   #1
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Ameriprise workers sue over company's own 401(k) funds

Saw this over at Bogleheads. Hilarious.

Ameriprise workers sue over company's own 401(k) funds - InvestmentNews


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A group of workers at Ameriprise Financial Inc. have filed suit in federal court against their employer, alleging the company placed their 401(k) contributions in proprietary funds, ringing up $20 million in excessive costs.
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Old 09-30-2011, 08:02 PM   #2
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Priceless. "Hey, they put my money in the same crappy, overpriced funds we sell to those suckers our customers!"

From the article:
Quote:
For example, Ameriprise's diversified bond fund cost 78 basis points in 2010 — some 71 basis points more than a comparable offering from Vanguard, according to the complaint. Target date funds from RiverSource ranged from 84 to 92 basis points, costing 74 basis points more than a Vanguard alternative, the suit claims. Plaintiffs say that Ameriprise selected the R4 share class of RiverSource mutual funds, when it could have saved the workers 17 to 34 basis points by choosing the R5 share class.
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Old 09-30-2011, 08:13 PM   #3
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I am curious how does one go about filing a friend of the court brief? Maybe we could team up with Bogleheads and help out here.
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Old 09-30-2011, 08:26 PM   #4
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"This is a copycat lawsuit by a law firm that has brought similar cases against companies across the country, and we plan to defend it vigorously," wrote Ameriprise spokesman Ben Pratt in an e-mail.

Um, Ben, I'm not sure I would play the copycat card....it might come true. The lead counsel for the plaintiffs has filed similar suits and won over $15 million each from Bechtel, General Dynamics and Caterpillar.

Schlichter, Bogard and Denton: A personal injury law firm practicing in Missouri, California, Illinois and Wisconsin: Practice Areas - Pension Plan & ERISA Litigation
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Old 09-30-2011, 09:29 PM   #5
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Karma's pretty sweet, eh?
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Old 10-01-2011, 06:38 AM   #6
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Wouldn't one think that employees who work for a financial firm such as Amerprise would be savvy enough to look at their basket of investment choices and see which ones carry the highest expense ratios, 12b1 fees, etc. Not knowing all the facts, on the surface I have little sympathy for these people. Just my two cents.
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Old 10-01-2011, 06:47 AM   #7
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Originally Posted by frayne View Post
Wouldn't one think that employees who work for a financial firm such as Amerprise would be savvy enough to look at their basket of investment choices and see which ones carry the highest expense ratios, 12b1 fees, etc. Not knowing all the facts, on the surface I have little sympathy for these people. Just my two cents.
I'd betcha there weren't significant low-cost options. If there were, then the employees who were duped reaped just what they sowed.

I'd love to know how many of these folks left their 401k money with Ameriprise-linked funds when they left the company. And how many rolled them over into Vanguard IRAs. That would be a good indicator of the true beliefs/financial acumen of these reps.
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Old 10-01-2011, 07:29 AM   #8
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Originally Posted by samclem View Post

I'd love to know how many of these folks left their 401k money with Ameriprise-linked funds when they left the company. And how many rolled them over into Vanguard IRAs. That would be a good indicator of the true beliefs/financial acumen of these reps.
The group of former suckers investors who files a copycat suit against Ameriprise should ask for that in discovery.
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Old 10-01-2011, 08:01 AM   #9
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You can bet the lawyers are going to be the ones making money on this deal. Hope the plantiffs were wise enough to hire the lawyers to work on a contingent basis.
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Old 10-01-2011, 08:12 AM   #10
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This is one mess (companies receiving benefits as a result of offering only crappy/high fee choices for employee 401Ks) I'm happy to see the trial lawyers pounce on. Apparently only the fear of litigation losses, not any feeling of financial responsibility to their employees, is going to clean things up. Let the trial lawyers do their thing: every one occupied with this isn't suing a store for a bogus slip and fall, hot coffee in the lap, etc.
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Old 10-01-2011, 08:32 AM   #11
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How many insurance companies, mutual fund companies, banks, etc... do think are doing this?

If the employees win at Ameriprise... look out.... there will be a slew of class action law suits to follow.

Think about it... If there was an average of a 1% or even .5% overcharge compounded over 25 years or more... that is a lot of money to most people.

It is shameful!
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Old 10-01-2011, 08:37 AM   #12
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Originally Posted by chinaco View Post
How many insurance companies, mutual fund companies, banks, etc... do think are doing this?

If the employees win at Ameriprise... look out.... there will be a slew of class action law suits to follow.

Think about it... If there was an average of a 1% or even .5% overcharge compounded over 25 years or more... that is a lot of money to most people.

It is shameful!
I think this is happening a whole lot more than people think. I have to wonder what the ratio of managed funds to index funds is, in a typical company 401K basket. Anybody venture a guess ?
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Old 10-01-2011, 08:37 AM   #13
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I looked up their plan on Brightscope
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Old 10-01-2011, 08:46 AM   #14
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If the employees were to win it would kill the company, but there is little chance of that happening. There have been many efforts to attack the costs of investing and to date they have failed miserably. If there is overt conflict of interest there could be a case, but the law generally does not protect us from high prices.

As others have pointed out, there is a sense of moral appropriateness here.
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Old 10-01-2011, 09:48 AM   #15
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I'm curious whether the plaintiffs are financial advisors themselves or just the salaried/hourly office workers like the secretaries that probably don't understand what they're doing.
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Old 10-01-2011, 12:33 PM   #16
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Originally Posted by samclem View Post
I'd betcha there weren't significant low-cost options.
Betcha you are right.

Digging a little deeper in the Brightscope report referenced by Alan:

Name of Investment ........Investment Manager ..........Dollar Value
Alliance Bernstein Int'l .....Alliance Bernstein .............$56,722,728
Rvs Trust Eq. Index Fund..Ameriprise Trust Company ...$41,591,348
Wel'ton Midcap Growth.....Wellington Trust ................$41,122,825
Rvs Trust Stable Cap I .....Ameriprise Trust Company ...$13,820,987
Rvs Us Gov't Securities I ...Ameriprise Trust Company .. $13,553,503
Wel'ton Large Cap Growth...Wellington Trust ...............$13,363,572
Rvs Trust Gov't Income Fund. Ameriprise Trust Company .$4,469,568
.................................................. .........................Total $184,644,531

The current 11-K form for the plan can be found here:

SEC Info - Ameriprise Financial Inc - 11-K - For 12/31/10

"
Investment Options

A summary of investment options at December 31, 2010 is set forth below:

Mutual Funds“Columbia and RiverSource® Funds” — Columbia Diversified Bond Fund, RiverSource Balanced Fund, Columbia Retirement Plus 2010 — 2045 Funds, Columbia Mid Cap Value Fund, Columbia Diversified Equity Income Fund and Columbia Large Core Quantitative Fund — are mutual funds offered to the general public. Each of the funds is managed by Columbia Management Investment Advisers, LLC (formerly RiverSource Investments, LLC), a wholly-owned subsidiary of the Company. James Small Cap Fund is managed by James Investment Research. Alger Small Cap Growth Institutional Fund is managed by Alger Group.

Collective Investment Funds — RiverSource Trust Equity Index Fund III is a collective fund, managed by Ameriprise Trust Company. Wellington Trust Mid Cap Growth Portfolio and Wellington Trust Large Cap Growth Portfolio are managed by Wellington Management Company LLP. AllianceBernstein International Style Blend Collective Fund is managed by AllianceBernstein LP.

Ameriprise Financial Stock Fund — The Ameriprise Financial Stock Fund is an Employee Stock Ownership Plan (“ESOP”) that invests primarily in the Company’s common stock, purchased in either the open market or directly from the Company, and in cash or short-term cash equivalents.

Self-Managed Brokerage Account— The SMBA gives participants the freedom to invest in a wide variety of mutual funds in addition to the other aforementioned investment options. Participants are provided over 800 mutual funds from which to choose. American Express Company common stock is held in the SMBA on a hold or sell basis only and new purchases are not allowed.

Income Fund — Invests primarily in various book value wrap contracts, directly or indirectly, offered by insurance companies and banks, backed by fixed income securities issued by the U.S. government and its agencies. See Note 5 for a more comprehensive discussion of book value wrap contracts. Ameriprise Trust Company is the investment manager for the Income Fund. The Income Fund also invests in the RiverSource Trust U.S. Government Securities Fund I (which invests primarily in short-term debt instruments issued by the U.S. government and its agencies), the RiverSource Trust Government Income Fund (which invests primarily in U.S. Treasury, agency and mortgage backed securities) and the RiverSource Trust Stable Capital Fund I (which invests primarily in a diversified pool of U.S. Treasury, agency and mortgage backed securities together with book value wrap contracts of varying maturity, sizes and yields). The goal of these funds is to maximize current income consistent with the preservation of principal."
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Old 10-01-2011, 12:44 PM   #17
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There have been many efforts to attack the costs of investing and to date they have failed miserably. If there is overt conflict of interest there could be a case, but the law generally does not protect us from high prices.
I would speculate that fussing over "overt" will be a pretty big part of the case here, both in fact and law.

Looking over the fine print above, I see that the majority of the investment choices are managed by the employer for a fee. There are some other options, but not many.
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Old 10-01-2011, 01:00 PM   #18
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I noticed that Ameriprise is now running commercials on ABC (news) during their prime time eveing report, with Tommy Lee Jones as a commercial commentator.

I have yet to see any such commercial on a (cable) financial channel, where (I hope) some of the "more astute" audiences are viewing.

Do you thing they are "trolling" for customers on the general info channels, for folks that are little/un-aware of the scams they could be following?
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Old 10-01-2011, 01:10 PM   #19
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Originally Posted by rescueme View Post
I noticed that Ameriprise is now running commercials on ABC (news) during their prime time eveing report, with Tommy Lee Jones as a commercial commentator.

I have yet to see any such commercial on a (cable) financial channel, where (I hope) some of the "more astute" audiences are viewing.

Do you thing they are "trolling" for customers on the general info channels, for folks that are little/un-aware of the scams they could be following?

Here's something making fun of that commercial.

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Old 10-01-2011, 06:46 PM   #20
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The BrightScope rating is pretty high (I am not familiar with BrightScope to they do a good job rating 401Ks). I did notice that most common plan choices are self directed brokerage accounts, so presumably a fair number of Amerprise adviser know their dog food taste bad.
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