Ameriprise and loaded MFs

[CompoundInterestFan]

Thanks to this board, I've been doing a lot of financial housecleaning lately and really scrutinizing how my money's invested. I've had the bulk of my money with Ameriprise for about 3 years now, after I rolled over my previous employer's 401k into an IRA with Ameriprise. Ever since I came on this board, I've seen warnings to stay away from loaded mutual funds, and while I knew I had some with Ameriprise, I never paid close attention. After all, what's a few percentage points? Besides, I felt I had bigger fish to fry, like getting rid of an old VUL policy I had.

Well, after doing some reading (this board, 4 Pillars, etc) and experimenting, I understand just how big a difference those few percentage points make over the long haul. So I start looking at how my money's invested w/Ameriprise, and it's all in loaded MFs (some examples: AWPAX, CFICX, MDIDX, GTABX, OMSBX). Not only that, but Ameriprise charges a 1.5% flat fee on all my assets on top of any individual fund fees. So my plan is to start moving money either out of Ameriprise and into Vanguard (or something similar) or at least start moving it to no-load funds within Ameriprise.

So, one question I have is, are loaded MFs ever worth having? I see some with high Morningstar ratings, but after reading 4 Pillars I'm a little leery of anything having to do with the financial industry. Is the Morningstar rating legit?

 

[JustCurious]

So, one question I have is, are loaded MFs ever worth having?

No.

 

[LOL!]

Your CFICX caught my eye. I own it in my 401k. It has outperformed the Vanguard Intermediate Term Bond Index fund for many, many years. CFICX has done so by taking on more risk with more lower quality bonds than the VG fund.

With an er of 1.2% CFICX has 6 times the expense ratio of the VG fund and a huge annual turnover. With our 401k we don't pay loads nor do we pay additional fees. It is one of the highest ranked intermediate bond funds out there. BUT: CFICX has not outperformed by 1.5% which is the additional fee that you pay each year. That 1.5% is a killer, so switching to no-loads at Ameriprise is not going to help you much.

Also consider that the commonly accepted annual safe withdrawal rate in retirement is 4%. If you are paying an extra 1.5% to Ameriprise and an extra 1% to the fund company, that's an extra 2.5% or a 62.5% effective tax on your safe withdrawal rate. And that doesn't event take into account the front-end load that you apparently paid. Furthermore, that 'tax' is easily avoided and you now know how to do so.

 

[HFWR]

Loaded MFs are the guys/gals collecting those fees...

 

[FinanceDude]

Thanks to this board, I've been doing a lot of financial housecleaning lately and really scrutinizing how my money's invested. I've had the bulk of my money with Ameriprise for about 3 years now, after I rolled over my previous employer's 401k into an IRA with Ameriprise. Ever since I came on this board, I've seen warnings to stay away from loaded mutual funds, and while I knew I had some with Ameriprise, I never paid close attention. After all, what's a few percentage points? Besides, I felt I had bigger fish to fry, like getting rid of an old VUL policy I had.

Well, after doing some reading (this board, 4 Pillars, etc) and experimenting, I understand just how big a difference those few percentage points make over the long haul. So I start looking at how my money's invested w/Ameriprise, and it's all in loaded MFs (some examples: AWPAX, CFICX, MDIDX, GTABX, OMSBX). Not only that, but Ameriprise charges a 1.5% flat fee on all my assets on top of any individual fund fees. So my plan is to start moving money either out of Ameriprise and into Vanguard (or something similar) or at least start moving it to no-load funds within Ameriprise.

So, one question I have is, are loaded MFs ever worth having? I see some with high Morningstar ratings, but after reading 4 Pillars I'm a little leery of anything having to do with the financial industry. Is the Morningstar rating legit?

You're in a wrap program, but you can cancel that agreement at anytime. You're paying close to 2% on your money every year........

 

[FIREd]

I used to invest with Ameriprise and one day I totaled up the amount of fees and commisions I had been paying over the years and I was astonished (and disgusted), especially given the fact that overall my returns were no better than the market's. I see NO POINT in buying loaded funds. They are not necessarely better than no load funds (many are actually quite bad, I am thinking about the Riversource funds that Ameriprise likes to push), and quite frankly I find it ridiculous to pay an advisor hundreds of dollars to process a simple market order. I give you an example: several years ago I bought a municipal bond fund through my advisor (14K worth of it). The load was 5.75%. so I paid the advisor more than $800 crazy to... process the order (which probably took him less than 1 minute). It took more than 2 years to gain that money back. I could have bought a similar fund with Vanguard (no commision, no fees) and it would have required just a few minutes of my time. So ever since I have been a no-load advocate and I can clearly see a big difference on my returns (also because many loaded funds have higher expense ratios).

 

[SamHouston]

My Ameriprise "advisor" screwed me royally by talking me into opening an annuity with funds that were already in an IRA. At the time, I didn't realize how stupid it was to move IRA money into an annuity. Of course, by the time that I figured it all out I was locked into an annuity that with an "early withdrawal" penalty that is still more than I want to pay, so I'm still in the stupid thing. I complained to my advisor who gave me a song and dance routine about why it still made sense but the end result was that I pulled out every other dime that Ameriprise was managing for me. That was quite a bit more than is in the annuity that is still with them.

I'm going to close the annuity down and tell Ameriprise where to shove it just as soon as I can stomach the hit that I'm going to have to take. The frosting on the cake is that my ex-advisor is no longer with Ameriprise himself. And he actually tried to recruit me to do business with his new company. Needless to say, I laughed in his face and refused to take any more phone calls from the guy.

I've, too, switched over to Vanguard where I'm earning more money than ever simply by not having to help put someone else's children through college by paying ridiculously high fees to an "adviser" who is worthless...at best.

 

[FIREd]

My Ameriprise "advisor" screwed me royally by talking me into opening an annuity with funds that were already in an IRA. At the time, I didn't realize how stupid it was to move IRA money into an annuity. Of course, by the time that I figured it all out I was locked into an annuity that with an "early withdrawal" penalty that is still more than I want to pay, so I'm still in the stupid thing. I complained to my advisor who gave me a song and dance routine about why it still made sense but the end result was that I pulled out every other dime that Ameriprise was managing for me. That was quite a bit more than is in the annuity that is still with them.

Well I got suckered into 2 pretty bad investments with Ameriprise (I was young and not well educated about money matters): The annuity within the IRA thing like you, and a variable annuity life insurance policy. Those 2 things are the only accounts I left at Ameriprise (I pulled everything else out and moved it to Vanguard) and like you I am waiting for the early withdrawal clause to expire to pull my money out. Three more years to go... But actually both investments did pretty good, with all things considered, so I don't feel too bad about having made these mistakes. Live, learn, and buy only no-load funds...

 

[SamHouston]

I sort of look at it as paying to be "schooled" about annuities. Like you, the investments in the account did pretty well, all things considered. But they could have done so much better in funds without all the fees and being tied up for a number of years that it still ticks me off to think about it. I would still have to eat $7,000 in fees if I pulled the money out now...I'll wait a while longer.

 

[JustCurious]

Live, learn, and buy only no-load funds...

.... with low expense ratios and no 12b1 fees.

 

[CompoundInterestFan]

You're in a wrap program, but you can cancel that agreement at anytime.

Well, according to my FA at Amerprise, all clients are subject to this 1-2% fee depending on how much they have with Ameriprise, the frequency of trades, etc. So as far as I can tell, the only way I can "cancel the agreement" is to pull my money out of Ameriprise, which is what I'm planning on doing anyway.

 

[FinanceDude]

Well, according to my FA at Amerprise, all clients are subject to this 1-2% fee depending on how much they have with Ameriprise, the frequency of trades, etc. So as far as I can tell, the only way I can "cancel the agreement" is to pull my money out of Ameriprise, which is what I'm planning on doing anyway.

What I meant was that quarterly management fees are assessed usually at the BEGINNING of a quarter, so if you cancel let's say ONE WEEK after the fee is assessed, you will get most of your money paid back for that quarter, on a pro-rated basis. So, you don't have to wait to get out..........

Speaking as an advisor, I would rather have those that see no value in having an advisor leave..........it's not good for the client or the advisor to stay in a pissing match...........

The whole 12B-1 discussion is inteesting.....it would probably put 50% of all Ed Jones reps out of business...........

 

[CompoundInterestFan]

What I meant was that quarterly management fees are assessed usually at the BEGINNING of a quarter, so if you cancel let's say ONE WEEK after the fee is assessed, you will get most of your money paid back for that quarter, on a pro-rated basis. So, you don't have to wait to get out..........

Ah, gotcha.

Speaking as an advisor, I would rather have those that see no value in having an advisor leave..........it's not good for the client or the advisor to stay in a pissing match...........

Well, it's not that I don't see value in advisors, but I can't think of much my advisor's done other than put me in a bunch of expensive mutual funds that are sure to cost me in the long run.

 

[FinanceDude]

Well, it's not that I don't see value in advisors, but I can't think of much my advisor's done other than put me in a bunch of expensive mutual funds that are sure to cost me in the long run.

Well, you got the wrong advisor, it happens..........best of luck going forward........

 

[megacorp-firee]

Well, according to my FA at Amerprise, all clients are subject to this 1-2% fee depending on how much they have with Ameriprise, the frequency of trades, etc. So as far as I can tell, the only way I can "cancel the agreement" is to pull my money out of Ameriprise, which is what I'm planning on doing anyway.

I am with Ameriprise and what your A FA stated is not entirely true. My FA initially charged me $800 for consulation and evaluation (1st year). Then he 'made his money' from (higher priced) commisions (60 to 90 bucks depending upon the transaction). Now we have agreed to a flat fee of $1000 per year for up to 3 consulations (usually about 3 hours per session) per year. So I think that they have flexibility to charge you whatever and however you are willing to pay.
I find that he is worth $1000 per year ... but I would not get enough value if I had to pay him 1 to 2 percent. He knows it and he knows that I know it! We all need to be educated consumers. This board is a great learning tool.

 

[CompoundInterestFan]

I find that he is worth $1000 per year ...

Just curious--what value do you get from his services? That question isn't meant as a challenge; I'm genuinely curious.

 

[megacorp-firee]

Being lazy and needing a bit of help with the income side of my portfolio, he helps with some suggestions on preferreds and other income investments. I get a bit over 7%. He also gives me his opinion on my asset allocations and how it compares to (I think it is) Riverside product allocations. I have a 401K and am considering rolling it over to Vanguard. We discussed ETFs to accomplish the same. He is doing an analysis on if there are any differences.
I originally used him to verify that I was good to go for retirement (about 4 years ago).
Then I used him to help me organize my portfolio (I was about 90% equities, now am about 65/35). Now, 2 months plus into retirement, I am using him to help decide on 401K rollover. I do periodic re-assessment to see if I am getting value. So far the answer is still yes.

 

[chinaco]

I read a book about VG 20 years ago. Out of all of the investment books I have read, it was the simplest and the most profitable.

I have never paid a load and for the most part, have mostly used low-cost funds... The one exception was being sucked into the idea of momentum investing and a boutique MF that did nothing but cost me money.

For the most part, I steer away from MF owned by insurance companies. Not because I do not trust them, but because they tend to over charge.