Ameriprise + steps to transfer to Vanguard

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Ameriprise + steps to transfer to Vanguard

Postby Dendag » Thu Jun 27, 2013 10:54 pm

First, great forum. I've done alot of reading, and it's helped.

After my friend at work talked about how fees are the real problem for middle class investors, I began to talk about the financial advisor I use, and why he doesn't use one. I've since rudely been awakened to the fees I'm paying my advisor, when there is really no need. But I was never good with money, and after my father died and left me an inheritance, I was nervous that I was going to do something stupid like blow it all on silly things. I decided I was going to be mature and responsible, and get an advisor. I hired the guy that my sister and brother in law uses, and they're well off so this guy must be great. And he has been very nice, responsive and helpful when I had questions. But I think I'm paying too much.

My investments with Ameriprise right now are:
-- $108K Riversource variable annuity (5 years I believe but I'll have to check - it could be 10)
-- $112K SPS Advantage mutual fund
-- $92K IRA
-- $45K in an IRA account that includes $15K in REITs, and then $30K in some "thermostat" funds - I think they are conservative / haven't been doing well

I opened up these accounts about 18 months ago. My advisor charges $750/year + about 1% on the funds themselves. I'm still trying to get him to tell me if he's making money off the funds in other ways. He sent me a report on the net return on all my investments with him this past year (June 2012 to June 2013) and the total net return after fees was 12.2%. My friend at work said that just putting my money in index funds w/ Vanguard would've meant a 13.5% return.

I think my first step is to call Vanguard. I see alot of you guys using / recommending them. They are also who my friend at work uses. I'm guessing I can transfer most of my accounts easily except for the annuity. I'm planning on asking Vanguard what the options are, but I'm pretty sure I'll need to pay some severance or whatever you call it.

I feel pretty duped at this point, but I guess I'll chalk it up to a hard lesson learned. Other quick info about me:

42 years old
Single - no children
$20K in emergency fund
Maxing out my 401K contribution but apart from the above investments I only have an additional $75K in my work's 401K
Saving $1200/ month into my emergency fund - which will soon go into invesments
Salary is $130K/year with about $15K in annual bonuses after taxes

Guess what I'm looking for at this point are:
-- Anything apart from calling Vanguard you'd recommend? Anything I want to ask them?
-- My advisor is paid in mid-January so I'm assuming I just ride out the rest of this year before transferring?
-- Does it sound like I'm in trouble re: retirement - do I need to save more / month?

Thanks.
Den
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Re: Ameriprise + steps to transfer to Vanguard

Postby Jim180 » Fri Jun 28, 2013 12:04 am

The first thing you need to do is find out what the annual fee is on that annuity. Then find out what the surrender penalty is. Vanguard has a very low cost annuity you might want to get into. What you save in fees would most likely make up for the surrender penalty over the long term. If you decide to move that annuity to Vanguard you will have to do what's called a "1035 exchange". That is how you change annuities without creating a taxable event. One thing you did not tell us about your finances is "Do you have a mortgage?"
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Re: Ameriprise + steps to transfer to Vanguard

Postby Dendag » Fri Jun 28, 2013 12:17 am

I'm trying to get more info about my annuity but it's been very difficult to find the info on the Ameriprise site. It's actually hard to see what the term is. I'm going to dig deeper, if I can't find the info, I'm going to ask my advisor who I'm sure knows something is up at this point.

RE: mortgage... yes. I owe about 315K at 3.875%.
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Re: Ameriprise + steps to transfer to Vanguard

Postby tractorguy » Fri Jun 28, 2013 10:38 am

Guess what I'm looking for at this point are:
-- Anything apart from calling Vanguard you'd recommend? Anything I want to ask them?
-- My advisor is paid in mid-January so I'm assuming I just ride out the rest of this year before transferring?
-- Does it sound like I'm in trouble re: retirement - do I need to save more / month?


You should try to get the stock ticker code or at least the true names of the funds you own. Then you can ask the Vanguard representative if you want to transfer them "in kind" or sell the funds and then buy something at Vanguard. If you transfer in kind, then it may be cheaper to sell the funds at Vanguard and you can do so after you figure out what you want to put the money in to. You also might want to spread the sale over a couple of years to minimize taxes if you have had significant capital gains in the taxable (non IRA) part of the investments. If you've had a loss, then I'd sell right away to get into cheaper Vanguard funds. If you decide to sell the funds at your current broker, you'll have to pay his fees but then you can transfer the money with no hassle. Bear in mind that you'll probably have to pay a small account closing fee at your current guy. (they get you coming and going).

I would not wait until January. In addition to your adviser's fees, it is likely that you are paying a high expense ratio for the funds and possible that you are paying loads on any new investments (including re-investing dividends). Most funds have year end dividends. You want to avoid any fees on re-investing these.

Re your savings rate. You haven't given us enough information to tell. There are two rules of thumb out there. The first is that you need about 80% of your salary for a comfortable retirement. The second is that you can safely take 4% out of your investments for 30 years. So... if you have saved enough that 4% of your savings + Social Security + any pension = 80% of your salary at retirement, then you are in the ball park. However...... There are a lot of people who say that 80% isn't enough for an active retirement (think lots of travel) and 4% is optimistic in this investment environment. They would argue strongly that you need more money. If you extrapolate your savings rate and income to your desired retirement date then are you going to be near to this? Vanguard has a retirement calculator that uses these rules of thumb. It is here: https://personal.vanguard.com/us/insigh ... ment-goals
I wouldn't put blind faith in the calculator. It will tell you if you're in the ball park. It won't tell you if you're going to win the game.
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Re: Ameriprise + steps to transfer to Vanguard

Postby BL » Fri Jun 28, 2013 10:41 am

Good for you for following up on the idea that you are paying more than necessary. Take your time to educate yourself and make a plan.

The Wiki here is a good place to start - see "getting started". Reading a couple recommended books would be a good idea. I like Bogleheads' Guide to Investing. You want to learn and be convinced that your new plan is right for you. Then you should decide what AA (asset allocation) is right for you. It is possible to get a good diversified portfolio over all by using only: Total Stock, Total International, and total bond (or other fixed interest funds or CDs). It is usually suggested that fixed interest funds be in tax-advantaged accounts to lessen taxes.

Your funds also cost much more than Vanguard funds, so you would be saving at least 1% there, too. These fees are hidden in the net asset value of the funds but should be available somewhere such as in the prospectus. There is no guarantee that your current funds might not occasionally do better, but I am fully convinced that moving would be a financial boost in the long run, even though it will cost you to get out of your current funds and annuities (find the date that annuity withdrawal drops 1% each year as you might want to wait if it is a few months, before you do a 1035 transfer to a lower-cost Vanguard-affiliated annuity). The loads you paid to buy your funds are sunk costs, so forget about them and realize there are no loads to pay when you buy at Vanguard, and AFAIK, no costs to sell funds, either.

Edt: You will want to get the "basis" for your taxable funds so you can tell what the tax cost (or benefit) will be to sell them. Immediately stop reinvesting dividends/capital gains to avoid short-term gains. Reinvested costs are added to the basis or cost of investing in that fund. You can put everything into money market at Vanguard and come back here for suggestions on what funds to put where or possibly pay Vanguard for advice (?$250-500) if you would rather do that.
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Re: Ameriprise + steps to transfer to Vanguard

Postby pkcrafter » Fri Jun 28, 2013 12:45 pm

Welcome, you have been given good advise, so I just wanted to help you focus. When first starting up the learning curve, things can seem overwhelming.

Dendag wrote:First, great forum. I've done alot of reading, and it's helped.

After my friend at work talked about how fees are the real problem for middle class investors, I began to talk about the financial advisor I use, and why he doesn't use one. I've since rudely been awakened to the fees I'm paying my advisor, when there is really no need. But I was never good with money, and after my father died and left me an inheritance, I was nervous that I was going to do something stupid like blow it all on silly things. I decided I was going to be mature and responsible, and get an advisor. I hired the guy that my sister and brother in law uses, and they're well off so this guy must be great. And he has been very nice, responsive and helpful when I had questions. But I think I'm paying too much.

Hey, you took responsibility for the inherited money and that is a primary component to investing success.


My investments with Ameriprise right now are:
-- $108K Riversource variable annuity (5 years I believe but I'll have to check - it could be 10)<--yes, you need to get details on costs associated with this. One option might be to use a 1035 exchange to Vanguard.

-- $112K SPS Advantage mutual fund
-- $92K IRA
-- $45K in an IRA account that includes $15K in REITs, and then $30K in some "thermostat" funds - I think they are conservative / haven't been doing well

See if you can get ticker symbols for these funds. Do you know what your asset allocation is?

I opened up these accounts about 18 months ago. My advisor charges $750/year + about 1% on the funds themselves.

Advisors usually charge on a percentage basis, not counting expense ratios of the funds.

I'm still trying to get him to tell me if he's making money off the funds in other ways. He sent me a report on the net return on all my investments with him this past year (June 2012 to June 2013) and the total net return after fees was 12.2%. My friend at work said that just putting my money in index funds w/ Vanguard would've meant a 13.5% return.

You have to be very careful about these comparisons. You can't compare your returns to the S&P500 unless you have a portfolio that matches the S&P500. Returns depend on the amount of risk taken. Your returns most likely don't include the advisor's fees either.

I think my first step is to call Vanguard. I see alot of you guys using / recommending them. They are also who my friend at work uses. I'm guessing I can transfer most of my accounts easily except for the annuity. I'm planning on asking Vanguard what the options are, but I'm pretty sure I'll need to pay some severance or whatever you call it.

Don't call Vanguard yet. There are several issues you need to learn about and it's best to learn them before making any moves. All the information you need can be obtained here (forum and Wiki) and in reading a few recommended books. Search for Books on the Wiki. Link to Getting started--

http://www.bogleheads.org/wiki/Getting_Started

I feel pretty duped at this point, but I guess I'll chalk it up to a hard lesson learned.<--We call it the cost of education.

Other quick info about me:

42 years old
Single - no children
$20K in emergency fund
Maxing out my 401K contribution but apart from the above investments I only have an additional $75K in my work's 401K<--We need to know what your 401k fund choices are. Provide tickers, if any, and expense ratios.

Saving $1200/ month into my emergency fund - which will soon go into invesments
Salary is $130K/year with about $15K in annual bonuses after taxes

Guess what I'm looking for at this point are:
-- Anything apart from calling Vanguard you'd recommend? Anything I want to ask them?

Don't call yet. Better if you understand what you're doing and what you want to do before making changes. One expample: If you transfer funds to Vanguard they will end up in a brokerage account and you'll have to sell them there and then open another account on the mutual fund side and transfer there to buy Vanguard funds. Vanguard charges some fees on selling, but they are probably less then what Ameriprise will charge you.

-- My advisor is paid in mid-January so I'm assuming I just ride out the rest of this year before transferring?<--No rush. Transfer time will depend on when you feel comfortable with an investment plan.

-- Does it sound like I'm in trouble re: retirement - do I need to save more / month?


No, you're not in trouble, but we will help you get more efficient.



Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Re: Ameriprise + steps to transfer to Vanguard

Postby Dendag » Fri Jun 28, 2013 12:55 pm

Thanks guys. I am feeling overwhelmed and a bit panicked, but I'll hold on for now and read the getting started wiki, and start on Boglehead's Guide to Investing. I've got a few vacation days coming up, will be good to dig into this. Meanwhile, my advisor wants to have a call to answer other questions I have on fees, assuming he wants to reassure me. I know I want to ask more about the annuity, the specific funds it's invested in, their stock ticker, and then also any fees beyond the .75, but if you have thoughts on more specific questions about the fees let me know. Our call will be next week sometime.
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Re: Ameriprise + steps to transfer to Vanguard

Postby Dendag » Fri Jun 28, 2013 1:06 pm

Earlier post didn't go through - here is some more info that a few of you asked for:

Ticker quotes for annuity:
-- It says I'm 100% invested in something called "VP - MODERATELY AGGRESSIVE PORT CL2". It lists a ton of funds (50+) underneath it, but not sure if I'm in any of them or none of them.

Annuity term is 10 years - purchased a year and a bit ago. Surrender fee is 8% for the first 3 years. :(

Advisor says his fee on this annuity is 0.75 not 1%. He said that Ameriprise gets a small portion of the expense ratios, 25 cents on every 100 dollars. He didn't say anything beyond that but asked to setup a call to go over fees in more depth next week. Let me know if there are more specific questions I should ask. It's really hard to see the fees and the funds I'm invested in!

Also, in case this makes a difference, he says that he doesn't work for Ameriprise but is an independent contractor so maybe his fees are better? I know I'm reaching here...
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Re: Ameriprise + steps to transfer to Vanguard

Postby feh » Fri Jun 28, 2013 2:25 pm

Dendag wrote:Also, in case this makes a difference, he says that he doesn't work for Ameriprise but is an independent contractor so maybe his fees are better? I know I'm reaching here...


An adviser that sells people variable annuities needs to be sent packing, IMO. Sooner rather than later.
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Re: Ameriprise + steps to transfer to Vanguard

Postby VGSailor » Fri Jun 28, 2013 2:46 pm

Dendag wrote:
-- My advisor is paid in mid-January so I'm assuming I just ride out the rest of this year before transferring?

Thanks.
Den


This is my favorite part about helping someone who is looking to switch from Ameriprise.

http://www.ameriprise.com/content/files/AMP_402004.pdf

Fill out this form and at least get a pro-rated version back! My former advisor tried to charge me for the whole year. He said he already did all this work for me for the year already so no refund. I was like, ok, great...but fortunately found this form, filled it in and got a check from Ameriprise.
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Re: Ameriprise + steps to transfer to Vanguard

Postby Jim180 » Fri Jun 28, 2013 3:03 pm

I think your advisor only explained one of the fees to you. Ask the advisor about the following fees:

1. Mortality Expenses (M&E)
2. Administrative expenses
3. Annual expense ratio of the portfolio (I think this was the one he gave you)
4. Expenses of any additional riders you may have purchased. ( You may not have this expense because additional riders are typically purchased by married people, but ask anyway).

Only when you have been given all four of those expenses can you determine the TOTAL annual fees you pay for the annuity.
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Re: Ameriprise + steps to transfer to Vanguard

Postby Dendag » Fri Jun 28, 2013 4:21 pm

VGSailor wrote:
This is my favorite part about helping someone who is looking to switch from Ameriprise.

http://www.ameriprise.com/content/files/AMP_402004.pdf

Fill out this form and at least get a pro-rated version back! My former advisor tried to charge me for the whole year. He said he already did all this work for me for the year already so no refund. I was like, ok, great...but fortunately found this form, filled it in and got a check from Ameriprise.


Amazing find thank you!

Jim180 wrote:I think your advisor only explained one of the fees to you. Ask the advisor about the following fees:

1. Mortality Expenses (M&E)
2. Administrative expenses
3. Annual expense ratio of the portfolio (I think this was the one he gave you)
4. Expenses of any additional riders you may have purchased. ( You may not have this expense because additional riders are typically purchased by married people, but ask anyway).

Only when you have been given all four of those expenses can you determine the TOTAL annual fees you pay for the annuity.


This is perfect! I'm ready for my call with him. I'm going to send this to him ahead of time and ask him to review the fees w/ me on the phone.
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Re: Ameriprise + steps to transfer to Vanguard

Postby 4th and Inches » Fri Jun 28, 2013 4:54 pm

Welcome to the board. I'll defer to others much more knowledgeable than me on specific advice, but when it comes to getting out of Ameriprise there is no doubt that it is the best thing to do overall even if there are expenses to pay to get out. It may take some time to avoid the worst of the fees, but it will be worth it. I had some funds there that my parents started when I was a kid. I am free and clear of that company now. I'm still trying to get my parents out of there. Do a search on here for "Ameriprise" if you are not 100% convinced about getting out of there. What you read will make it crystal clear that you need to leave.

Good luck!
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Re: Ameriprise + steps to transfer to Vanguard

Postby gurujji » Fri Jun 28, 2013 5:52 pm

4th and Inches wrote: when it comes to getting out of Ameriprise there is no doubt that it is the best thing to do overall even if there are expenses to pay to get out. It may take some time to avoid the worst of the fees, but it will be worth it

Do a search on here for "Ameriprise" if you are not 100% convinced about getting out of there. What you read will make it crystal clear that you need to leave.

Good luck!


+1 . all great information. To add -

a) Get a copy from Library or Halfprice , and read "Four pillars of investing" - http://www.bogleheads.org/wiki/William_Bernstein

b) Speak with Vanguard Concierge Services - 800-841-7999. create vanguard accounts .

c) Fill out "Fund transfer request" from Vanguard

d) when ready , ask portfolio/AA question -- viewtopic.php?f=1&t=6212

e) share small portion of happiness with a charity ;-)


good luck.
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Re: Ameriprise + steps to transfer to Vanguard

Postby Dendag » Sat Aug 10, 2013 6:37 pm

OK, so finally got more info on the fees for the various funds I'm using. I've also read about half of the guide to investing book and feel like I'm getting a better understanding of what to look for. The one thing I haven't quite figured out what I need to do is selections that will be the most tax efficient.

Anyway, here are the details on my fees:

Annuity:
Can change funds within, but it's got a severance fee of 8% for the next two years. 10 year annuity, only 1 year old atm.
Tax deferred until revenue withdrawn.
- 1.06% = annual fund operation expense
- 0.85% = M/E fee
- original investment amount $100K, currently $113K+

SPS:
Can change whenever.
Pay taxes on dividends or earnings.
- 1% annual that comes out monthly
- 1.25% for the funds
- Original investment amount $100K, currently $117K+

Traditional IRA:
No taxes. Any withdrawals count as earnings.
C shares
Can change whenever.
- Columbia Thermostat 1.85%
- Goldman Sachs 2.17%
- REIT
- $46K

Inherited IRA / Active Portfolio:
No taxes.
- 1% annual that comes out monthly
- 1.2% management
- $95K

My financial advisor said that if I wanted to go the "low cost" route to investing then he'd understand, so I think he sees this coming.

I'm guessing my next step is to call Vanguard? Or do I need to figure out which funds I'm going to invest there? I know the thinking is to use your age as percentage in the bond fund but 42% feels high to me, I'm thinking of doing something closer to 20% bond funds.

Any thoughts on which actions will be the most tax efficient at this point?

thanks for the help - if I need to go read more stuff just let me know.
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