Newbie seeking 2nd opinion on Ameriprise Advisor’s advice

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noviceneedshelp
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Newbie seeking 2nd opinion on Ameriprise Advisor’s advice

Post by noviceneedshelp »

Hello,
I am a complete investment novice. I found your forum yesterday and have been spending all of my free time trying to absorb as much as possible. I am looking forward to reading through the resources mentioned throughout the forum. In the meantime, I would be very grateful for your advice on my immediate situation. Thank you so much in advance. Here is a summary: (sorry this is so long)

• My husband and I are recently married, and are both novice investors. We decided to seek the advice of an advisor to help us better understand our options and plan our financial future.
• Yesterday we had our 3rd meeting with our new Ameriprise advisor (we paid her a yearly planning fee). She had made some recommendations previously (listed below), and we agreed to go ahead with recommendations #1 - #4 for now.
• We signed all of the paperwork regarding moving our retirement investments. We were running out of time at the end of the meeting, and we asked her to hold off on the actual transfer until we called her to confirm verbally. The main reason for this is I wanted to find out what fees I would incur for moving my money out of my current funds.
• The wrap fee on the paperwork I signed was 1.25%.
• After I got home, I realized that I felt very unclear about what fees/expenses we would actually pay on this Active Diversified account and how this would compare to the existing Fidelity and Principal funds, as well as what other options were out there and how the total expenses compared.

Ameriprise Advisor Recommendations:

1) Move all of my Fidelity Roth IRA funds into Ameriprise Active Diversified Funds Moderately Aggressive (still within a Roth IRA). The wrap fee stated in the contract I signed is 1.25%.
2) Convert my Principal 401k to a Roth (take the tax hit this year) and move this money into the Ameriprise Active Diversified above.
3) Transfer my husband’s IRA to Ameriprise (C Share fund, need to double check with her on exact name and expense ratio of fund), then move into Active Diversified later where there is a higher balance - EDIT - just to clarify, the C share fund is NOT related to the Active Diversified fund. She recommended that we move my husband into C shares for now and move to Active Diversified later.
4) Put our home downpayment savings into an Ameriprise 12 month CD and keep adding to it each month
5) Buy life insurance (she highlighted the VUL but also gave us the option of Term)
6) Buy disability insurance for my husband



Our financial summary:

Emergency funds = we have 6 months of expenses in savings

Debt: no debt

Tax Filing Status: Married filing Jointly

Tax Rate: 25%

Age: My husband and I are in our mid thirties.

Desired allocation: Advisor recommended moderate to moderately aggressive

Portfolio: Currently about 50k in retirement funds (not including stock)

Taxable
0% cash (all existing cash after emergency funds is being saved for home purchase)
20% stock (exercised options from my old employer)

Her Roth:
Fidelity Advisor Equity Growth Fund - Class C (EPGCX) – 1.9%
Fidelity Advisor Energy Fund - Class C (FNRCX) – 1.9%
Fidelity Advisor Emerging Markets Fund - Class C (FMCKX) – 2.3%

Her 401(k)
Principal LifeTime 2040 - Total Investment Expense - Gross: 0.94%

His IRA & 401k
30%

Total of All Accounts Together (not each account individually) equals 100%

New annual Contributions
$7k his 401k (including matching contributions)
$5k his IRA
$3k her Roth IRA


******


My Questions
1) Is the wrap fee essentially the same thing as an expense ratio?
2) What are the total fees and expenses associated with the suggested Ameriprise fund? How do they compare to my current Fidelity expenses? How do they compare to expenses of other funds that I might consider in our situation?
3) If the Ameriprise fund expenses are higher, are they justified by better long-term performance due to the frequent rebalancing based on performance and market conditions?
4) If the Ameriprise fees are too high, what are some good alternatives?
5) What are some good resources to help us decide about life and disability insurance? We do not have children or any major health issues that we know of. His company does not provide either.
6) If for some reason we decide that we do not want to move forward with moving our retirement funds into Ameriprise, is it too late because we already signed all the paperwork? (even though she stated that she would not start the transfer until we called to verbally confirm)

Thank you again for any advice you can offer!
Last edited by noviceneedshelp on Thu Jul 21, 2011 12:08 pm, edited 3 times in total.
jbdiver
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Post by jbdiver »

You just made your adviser very happy, and you will transfer a significant portion of your wealth to your adviser over the next 30 years. The best thing you could do for your future financial health is halt what you are doing and become educated investors. Read the books recommended in the wiki. Spend 6 months on this site. You don't need to rush into anything. You have plenty of time to figure this out.
trigger455
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Post by trigger455 »

I agree with jb, don't rush into anything...educate yourself first so you know exactly what the adviser is saying and counter them to make sure they are not giving you any fluff
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norookie
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Post by norookie »

:D You've got out inexpensively. Why are you seeking a intermediary advisor to skim your savings? Be it in yearly fees or wrap fees or AUM fees, or the like. Re-read jb's post. Everyone has their weaknesses, posting is mine. :oops: Hopefully theres a grace period to back out and get every penny back, and sit on it for 2 weeks in a MM account, while your read a few of the "gems" mentioned in the wiki.
Last edited by norookie on Thu Jul 21, 2011 10:40 am, edited 2 times in total.
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noviceneedshelp
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Post by noviceneedshelp »

Thank you for your replies, @trigger455 and @jbdiver. After reading through the forum, I realize even more than before that we definitely need to educate ourselves much more, and we plan to do this.

In the meantime - I already signed all the fund transfer paperwork yesterday, so I'm just looking for some specific advice in the next few days on the reasons to potentially halt everything immediately. Are the fees way higher than I can get elsewhere? Is there no benefit to the higher fees? I'm simply looking to come back to the advisor with some specific reasons for suddenly halting everything.

Thank you so much for your advice!!
mamster
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Post by mamster »

The fees are way, way higher than you can get elsewhere, and there is no benefit to the higher fees. Leave the money where it is and spend some time reading the wiki and this forum for a couple of weeks. By that point, it should be clear why we're so adamant that Ameriprise is a poor choice, and we can help you into something simple and low-cost.
ginyah
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Post by ginyah »

In my opinion you should halt everything immediately. Then educate yourself and then think about what you want to do. If you can stop the transfer of all your assets to a single fund, do it - right now. You have time on your side and signing something just because it was getting late is a tactic that car dealers use.
pkcrafter
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Post by pkcrafter »

Welcome to the forum.

STOP! Do not get involved with Ameriprise. I'm sorry to see you have already signed up. Is there a grace period to withdrawal? Where you provided all information on funds and costs?

My Questions
1) Is the wrap fee essentially the same thing as an expense ratio?
No, the wrap fee is in addition to fund expenses.
2) What are the total fees and expenses associated with the suggested Ameriprise fund? How do they compare to my current Fidelity expenses? How do they compare to expenses of other funds that I might consider in our situation?
Ameriprise expenses, especially if you get into the annuities will easily be 10x higher than Vanguard or Fidelity. I'm not sure what AP fund you are referring to, but you did mention C shares, which are the most expensive because they carry an ongoing commission on top of the ER. It is not ethical for your advisor use C shares AND a wrap fee.
3) If the Ameriprise fund expenses are higher, are they justified by better long-term performance due to the frequent rebalancing based on performance and market conditions?
Absolutely not!
4) If the Ameriprise fees are too high, what are some good alternatives?
Vanguard obviously, Fidelity or almost any fund company. You are dealing with an insurance company, which is always bad.
5) What are some good resources to help us decide about life and disability insurance? We do not have children or any major health issues that we know of. His company does not provide either.
The Boglehead Wiki has some good information, but basically never tie investments into insurance.
6) If for some reason we decide that we do not want to move forward with moving our retirement funds into Ameriprise, is it too late because we already signed all the paperwork? (even though she stated that she would not start the transfer until we called to verbally confirm)

I don't know what you can do, but don't allow these transfers if you can stop them.

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.
nimo956
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Post by nimo956 »

The wrap fee is not the same as the expense ratio. The expense ratio is the amount taken out by the individual mutual fund to cover management expenses, research, marketing, etc. This comes directly out of the NAV each day, so it is seemingly invisible. If fund A earns a 10% return and has a 1% expense ratio, and fund B earns a 9% return and has a 2% expense ratio, then both funds actually performed the same. Fund B just has a lower return because it is more expensive. It looks like your average expense ratios are around 1-2%.

The wrap fee is an additional charge you will pay to your advisor. What this means is that you will be paying 1.25% + 1-2% ER = 2.25% - 3.25% in fees, which is egregious. Note that some index funds have ERs around 0.1%-0.2%. This means that you are paying around 22.5x - 32.5x more with Ameriprise each and every year. Those fees you pay also don't get to grow and compound each year, which is an additional loss you need to factor in.

These higher expenses are not justified. It is tremendously difficult for the fund manager to overcome the expenses just to match the performance of an index fund, let alone beat it. The probability that a manager could outperform over something like 20 years is extremely small. The managers that do outperform can only be identified in hindsight, so there's no way of knowing until after the fact.
Last edited by nimo956 on Thu Jul 21, 2011 11:33 am, edited 3 times in total.
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bottlecap
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Post by bottlecap »

I don't want to alarm you, but the first thing to understand is that your Ameriprise Adviser is not an adviser at all, but a salesman selling you products designed to separate you from your money. You should do what you can to undo or exit this relationship now, hopefully before incurring fees. You can always go back to him later (although you won't).

As to your questions:

1) No. The wrap fee is almost always in addition to the mutual fund expenses. Given that these Ameriprise funds can't be found on the web (or more importantly, their expense ratios can't be found on the web), the fee for this fund is almost assuredly greater than an additional percent, and probably closer to 1.5%. So in total, you will likely pay at least 2.75% every year for this investment through this "adviser."

2) See above. When you can't find the expense ratio for yourself, that's a very bad sign. This fund is likely very expensive.

3) No. Study after study shows that active management almost never, over time, justifies the fees. When it does, you can't determine which ones will do best going forward. The best advice is to go with the lower cost fund, preferably and index fund. Your "adviser" will vehemently disagree with this, because his salary depends on it. Don't even argue with him.

4) Good alternatives are low cost index funds. Fidelity is good for diy'ers and Vanguard has some of the best target retirement funds.

5) Life insurance/disability insurance? Do some searches on this site for discussions. That will also lead you to some books on the topic.

6) Don't trust your "adviser". A verbal means nothing to him or her. Immediately write her, even if via email, to tell her not to initiate the transfer until you've had more time to think about it.

Good luck and poke around this site for good advice and reading suggestions. Have you order a copy of (or checked the local library for) the Boglehead's Guide to Investing? It's a ggreat place to start, even if I am biased. :lol:

JT
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Mel Lindauer
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Post by Mel Lindauer »

You may well be able to halt the transfers by contacting your plan custodians and telling them that you're withdrawing these specific transfer requests and instructing them to not honor them if they do come through. Once you've done that, tell your Ameriprise advisor that you've decided to cancel the transfers. You don't have to justify your actions; it's your money.

I'm sure they'll be more than happy to retain your money, so that should be the end of that.

As others have recommended, take your time and learn what you're doing before you hand your hard-earned money over to someone who will likely put their own personal interest ahead of yours, since that's the way they make a living.
Last edited by Mel Lindauer on Thu Jul 21, 2011 10:36 am, edited 1 time in total.
Best Regards - Mel | | Semper Fi
spencer99
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Post by spencer99 »

jbdiver wrote: You don't need to rush into anything. You have plenty of time to figure this out.
Novice,

Above is BY FAR the most important advice you should consider at this point. Down the line you'll get more (both in your reading and on this forum) to answer your specific questions. With respect to any contract you may have signed, most states have a "back-out" period for any contract. Immediately - get on the phone/web to your state's Attorney General's office to ask. (there's a good chance your local Better Business Bureau will have this info as well).

And without getting into too much detail I am as certain as I am of anything I know that this advisor cannot ... cannot add additional performance to your portfolio. All the research shows that the best predictor of performance is cost. And the advisor will charge you extra (not a little - a lot) for their underperfomance. You currently have Fidelity accounts. I do as well. My accounts have an expense ratio of 0.01%, are tax efficient, low turnover, and diversified over the entire world economy. A typical advisor will put you into higher ER funds, perhaps loads, add a manager fee, and subjet you to ancilliary costs associated with high turnover and active management. How do I know? I've been there.

Good luck,

S
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RetiringSomeday
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Don't do it

Post by RetiringSomeday »

I recently got myself away from Ameriprise and shudder to consider going back............... and I wasn't even getting as bad of a deal as they are proposing to you.

I would try to leave things alone if you can and educate yourself for a few weeks or months and then decide what is best.

Life/Disability insurance are very important but don't trust the Ameriprise "adviser" to tell you what is best - look into it yourself.
spencer99
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Insurance info

Post by spencer99 »

... and one more thing - you asked about insurance. In addition to the Boglehead books I thought the topic was handled very well in Jane Bryant Quinn's book "Making the Most of your Money" (should be available at your local library).

S
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Taylor Larimore
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Class C shares ?

Post by Taylor Larimore »

Hi Noviceneedshelp:

You picked your username well. :wink:

It appears you are in the hands of an "adviser" who is more interested in your returns to help themselves rather than to help you. Your adviser recommended class C shares give it away:
Class C shares are level-loaded shares; the load is in the 12b-1 fee, and is paid annually as long as you own the fund. As a rule, Class C shares cannot be converted to Class A or Class B shares.

Class C shares are a marketing gimmick; they have no front-end load and no back-end load, so they appear to be no-load funds. In actuality, they are the worst kind of all because the load goes on forever.

Class C shares would make sense if investing in equities were a short-term activity, and you only expected to own the fund for a year or two. However, investing in equities is a long-term activity; anyone who buys a fund with the expectation of selling within a year or two is a gambler, not an investor, and gamblers are notorious losers.
http://www.bankrate.com/brm/news/dollar ... 20110a.asp

Edit: I Googled: --Ameriprise fined-- and received more than 35,000 hits.
Last edited by Taylor Larimore on Thu Jul 21, 2011 11:40 am, edited 1 time in total.
"Simplicity is the master key to financial success." -- Jack Bogle
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noviceneedshelp
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Re: Class C shares ?

Post by noviceneedshelp »

Thank you for your advice. I just edited the original post to clarify that the C shares fund is NOT subject to the wrap fee. This is the fund recommended for my husband (the Active Diversified with the wrap fee is for me)
Taylor Larimore wrote: Hi Noviceneedshelp:

You picked your username well. :wink:

It appears you are in the hands of an "adviser" who is more interested in your returns to help themselves rather than to help you. Your adviser recommended class C shares give it away:
Class C shares are level-loaded shares; the load is in the 12b-1 fee, and is paid annually as long as you own the fund. As a rule, Class C shares cannot be converted to Class A or Class B shares.

Class C shares are a marketing gimmick; they have no front-end load and no back-end load, so they appear to be no-load funds. In actuality, they are the worst kind of all because the load goes on forever.

Class C shares would make sense if investing in equities were a short-term activity, and you only expected to own the fund for a year or two. However, investing in equities is a long-term activity; anyone who buys a fund with the expectation of selling within a year or two is a gambler, not an investor, and gamblers are notorious losers.
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kwyjibo
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fellow novice

Post by kwyjibo »

Novice,
I found this forum a couple months ago and like you I was a complete investing novice; the biggest thing it has taught me so far is all the "advisors" I've had have taken more of my money than I understood and all the financial decisions I made I should have researched and understood more thoroughly.

If the advisor can't answer your questions about fees or sales loads or expense ratios in a straightforward way with concrete numbers that are lower than the fees and expense ratios you have now -- don't do it. My novice policy is to hold off on any financial decision, take my time, and never make the decision while meeting with an advisor/salesperson.

On the insurance topic:
I bought and then cancelled a VUL this year and found the only good reason to have a VUL is if you are very wealthy and worried about estate taxes for passing money along to your heirs. For average folks "buy term and invest the rest" seems to be the montra around here.
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PaddyMac
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Post by PaddyMac »

Agree with all the above excellent advice. At your age we also made similar mistakes, buying thru a broker and paying load fees etc. At 40 we started managing our money ourselves and despite the downturns we are much happier. We only wish we had someone to warn us at 30...you do...get out now. Also, keep your Roth-IRAs as Roths if you can; I see no reason to convert them.
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SVariance1
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Post by SVariance1 »

I agree with what has been said in th above posts. IMO, you should halt these transactions immediately. This course of action is very expensive and what do you get for money??? Sadly, I am confident the answer is not much. If I were you, I would get up to speed on investments before trying this again. If you are in a hurry, then perhaps you could look for a planner at Vanguard to help you with basic stuff.
Mike
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Mel Lindauer
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Re: Class C shares ?

Post by Mel Lindauer »

noviceneedshelp wrote:Thank you for your advice. I just edited the original post to clarify that the C shares fund is NOT subject to the wrap fee. This is the fund recommended for my husband (the Active Diversified with the wrap fee is for me)
Taylor Larimore wrote: Hi Noviceneedshelp:

You picked your username well. :wink:

It appears you are in the hands of an "adviser" who is more interested in your returns to help themselves rather than to help you. Your adviser recommended class C shares give it away:
Class C shares are level-loaded shares; the load is in the 12b-1 fee, and is paid annually as long as you own the fund. As a rule, Class C shares cannot be converted to Class A or Class B shares.

Class C shares are a marketing gimmick; they have no front-end load and no back-end load, so they appear to be no-load funds. In actuality, they are the worst kind of all because the load goes on forever.

Class C shares would make sense if investing in equities were a short-term activity, and you only expected to own the fund for a year or two. However, investing in equities is a long-term activity; anyone who buys a fund with the expectation of selling within a year or two is a gambler, not an investor, and gamblers are notorious losers.
Are you aware that you'll be paying BOTH the wrap fee PLUS the underlying funds' expenses on the other funds?

Just because there's no wrap fee on that one fund doesn't mean that you're not paying TWO expenses on that one, too, because you'll be paying the normal fund expenses PLUS the ongoing 12b-1 fee that Taylor mentioned.

You can't get away from this situation fast enough. Run, don't walk!
Best Regards - Mel | | Semper Fi
pcola2234
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Post by pcola2234 »

Definitely read the wiki page on the main forum site on investing.

Almost anything at Vanguard or Fidelity will be vastly superior to what the Ameriprise person is recommending.

To illustrate the point, the same funds that your advisor is trying to sell you exist at vanguard. The difference in the fees ameriprise is charging versus what vanguard would charge seems to be about 1.8% per year (2% at ameriprise versus 0.2% at vanguard).

Say you invest $100,000. Let's say you get 10% a year at both Vanguard and Ameriprise. After expenses you get an 8% return at Ameriprise versus 9.8% return at Vanguard.
Over a 30 year period, you would have about $ 1,006,265 . However at Vanguard, you would have had about $ 1,652,228 . In other words, Ameriprise would have gotten about $650,000 free from you for doing nothing. That's why they're trying to trick you and get you to speed into a transaction that would be awful for you. Cancel the transaction and take your time (maybe a couple months before you hopefully choose a passively managed low cost portfolio)
Khanmots
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Post by Khanmots »

Run!

I just escaped Ameriprise myself; they make it a pain to get out once you're in, and they eat you alive with fees ($80/year for a money market sweep account for instance.)

If you read through the fine print hidden away in 3-4 different terms and conditions type documents spread across their website and piece it all together, you'll find that your advisor can only recommend from a select list of funds. And that some of the requirements for funds to be on that list is that they have a nice hefty 12b-1 fee. The minimum for inclusion seems to be 0.75% and to be one of their top tier recommendations it needs to be a 1% fee.

My understanding is that the 12b-1 fee is essentially a fee going to Ameriprise every year for selling you the fund.

So with the wrap fee of 1.25% you mention, you're really paying Ameriprise 2.25%. And for those class C shares, you're still paying them a 1% fee. Forever.

Then remember, each fund has their own managers and analysts to pay. For the funds Ameriprise had me in that was another 1-2% a year.

So you're looking at something along the lines of 2.5-4% of all your assets eaten by fees. Every year. As comparision, the funds I currently have in my Roth at Vanguard that I'm managing have TOTAL expenses of something like 0.2%

If you do feel that you need advice and don't want to go it your own, there are reputable investment advisors out there that will serve on a fee-only basis, or for a small percentage of AUM (0.25% or so) and will use low-cost funds. Personally I'm fine with managing things myself for now, as my investment performance is dwarfed by my savings contributions. Once that changes and my invesmtnets are earning more than I contribute (many years down the road) I might consider finding a low-cost advisor as mentioned above. Or, I might have learned enough by then to feel comfortable to keep doing it myself. So far I've found it to be a lot more fun (and easier) than I thought it'd be. :)

I think others have covered well what to do to keep things from progressing with Ameriprise pulling your funds. Follow their advice. Learn from my pain, you really really don't want to get sucked in with them :)

As for insurance, I think that getting disability insurance is likely a good idea. Getting me thinking about that is the one good thing that my advisor did. But read up on it and decide for yourself.

Good luck, and let us know how it goes!
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ofcmetz
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Post by ofcmetz »

Welcome to bogleheads.

I agree with Nisiprius to contact your companies and tell them not to honor the transfer requests. Then cancel with Ameriprise.

One of the things you will learn as you increase your investment knowledge is that the surest way to increase your returns is to lower your fees. If you can buy two similar investments, one with a 2% fee and one with a 0.2% fee then you just increased your returns by 1.8% per year. And that compounds. The opposite holds true and if you use Ameriprise then your adviser gets these lost gains.
Never underestimate the power of the force of low cost index funds.
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noviceneedshelp
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Post by noviceneedshelp »

Thank you very much to all of your for the quick responses and all the specifics. I will be letting the advisor know today to hold off on initiating a transfer until we've had more time to think it through, and in the meantime will educate myself as much as possible. Thanks again for taking the time to respond!!
i<3Investing
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Post by i<3Investing »

That's some scary stuff.

A simple way to get started is to read some books and then look into some Vanguard Target Retirement Funds. They do a lot of the heavy lifting if the stock market is too scary a place.

The wiki has a list of very good books here:
http://www.bogleheads.org/wiki/Category ... nd_Authors

And don't worry... Asking the questions you're asking now instead of later is probably the best investment decision you will ever make :)
staythecourse
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Post by staythecourse »

I'm sorry I didn't read all your post, but the first few lines gave away the ending: "novice investor" "met with financial advisor".

I congratulate you two for being mature and asking for help. The problem is the help you are asking is likely of a broker who has no legal responsibility in offering the best for you.

My simple advice:

1. Stop doing anything, stop using the advisor, and recoup as much fees as you can. Leave your money in the bank for now.
2. Read a couple simple books, Allen Roth's "How to beat a Second Grader" and Jack Bogles Little book on index funds would do the trick.
3. Spend time on here and ask questions. People on this site are great at lending their knowledge without being demeaning.
4. Don't EVER trust anyone with your money, but especially if they are not a RIA (Registered Investment Advisor). Brokers do not have to have you best interest at heart unlike a RIA.

Good luck.
Last edited by staythecourse on Thu Jul 21, 2011 12:18 pm, edited 1 time in total.
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VGSailor
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Post by VGSailor »

Noviceneedshelp,

I echo everyone's sentiments here 1000-fold. Just stop and don't get involved with Ameriprise at all. They are vultures that will take your hard-earned savings.

Take the time to read and learn. Everyone here will help you.

First things first. Stop the transfer into Ameriprise at all costs!!!

Also, DO NOT get the VUL. If you need life insurance, go term.
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Taylor Larimore
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Bogleheads can help.

Post by Taylor Larimore »

Novice:

After you disengage from your Ameriprise saleslady and read a good book about mutual fund investing so that you understand the suggestions you receive, I think we can help with what appears to be a relatively simple portfolio.
"Simplicity is the master key to financial success." -- Jack Bogle
letsgobobby
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Post by letsgobobby »

to reiterate what others have said, you did not meet with an advisor. You met with a salesperson. Figure out right now the difference between the two. Then run away and get a real advisor.
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dgm
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Post by dgm »

staythecourse wrote:I'm sorry I didn't read all your post, but the first few lines gave away the ending: "novice investor" "met with financial advisor".
I already knew what the responses on this forum would be after I read "ameriprise" in the subject line.

In your defense, by posting your question here and reading everyone's advice, you are now already ahead of 80% of all investors!

so you are no longer a novice!! :D
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Post by yobria »

dgm wrote:I already knew what the responses on this forum would be after I read "ameriprise" in the subject line.
I wasn't sure about the responses, but I had an idea about how the rest of the post would look.

Needless to say, Amerprise did not disappoint.

Nick
Khanmots
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Post by Khanmots »

Personally it was a lack of education on financial issues, combined with a referral from a friend whose household income is far in excess of mine. Lack of interest at the time also contributed.

That said, I only spent 2-3 years there before little things started adding up and I dug in a bit. Then it was digging in a hell of a lot and deciding to run like hell. If they hadn't been quite so blatant in ripping me off (a $20 quarterly fee on a MM sweep account? Really?) it likely would have been years more before I dug in and saw how they were *Really* hosing me.

Unfortunantly there's a lot of inertia in the "leave it to the professionals" mindset to overcome, and there's no real education provided. I'm amazed that the fleecing isn't far worse than it is.
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Post by Winthorpe »

My parents get screwed by their Ameriprise advisor each and every day. He's a very good salesman.
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Duckie
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Post by Duckie »

noviceneedshelp, you left signed paperwork with your "advisor". Even if you call her immediately to delay/halt the transactions, it may be too late. Paper beats words every time. Contact your current 401k and IRA providers to make sure they don't release the funds. If things go through, undoing everything will be a mess.
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Post by Uninvested »

A slightly different bent. The salesperson is not intrinsically evil. She is working within the constraints of her system and job. Having said that, there is a high wrap fee, loaded mutual funds and a recommendation to pay taxes on a 401K and move it to a ROTH.

This cannot proceed. I once had a similar situation with rapidly signed papers.

First, call the adviser. Tell her that you discussed it with your husband and father (or something like that) and would like a little more time to consider all of the recommendations. So please stop the transfers and you will come by and pick up the papers just in case they inadvertently get processed. Then do exactly what nisiprius said if you don't get the paperwork.

To make it smoother, do not even suggest to her at all that you won't proceed, just that you want everything on hold now so you can consider it all.

You CANNOT proceed with this. It will cost you so much.
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Post by LadyGeek »

Also a former Ameriprise client. Your financial advisor is acting as a fiduciary (represents your interests) on behalf of Ameriprise. She's the middle man (woman), you can go around her. Certainly, treat her with respect and explain that you want to put this on hold. But, if you can't get in contact with her and the paperwork got filed, then you need to the next step. You might find her reluctant to return your phone call if you leave a message that you've reconsidered. It's a hit on her income, the incentive is to delay the cancellation as long as possible.

If there is no response, call Ameriprise directly and direct them to cancel your contract. If they say it's not in the system, great. Tell them that you want it canceled even if it shows up later. Give them whatever info they ask for. Do this today. Ask how you can get a refund.

Phone, email & mail contact information. Look for Investments, All other investments. (800) 862-7919, 7 a.m. – 9 p.m. Central time Monday–Friday, 8 a.m. – 5 p.m. Central time Weekends.

Also: Send an email to your financial advisor directing her to cancel your contract. Dear xxxx, I have reconsidered my decision and would like to cancel the contract I signed with you on xxx. You are no longer authorized to act as my fiduciary. If you have any questions, please contact me at xxx. Thank you.

FYI - If the contract goes through, fill this out: Form 402004 - Ameriprise Financial Planning Service Cancellation and Refund Request
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noviceneedshelp
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Post by noviceneedshelp »

Thanks everyone. I agree with the below, I really don't think she is evil. She works for a company that apparently sells a very expensive product. She answered all of the questions we asked, and it's our job to educate ourselves on what her competitors offer.

I sent her an email letting her know that we need a couple of weeks to think things through and that we are not ready for a transfer right now. She wrote back and left a voicemail letting me know that is fine and she will not transfer the funds without our consent. I'm going to give her the benefit of the doubt and assume that she is not going to move forward with the transfer.

We're going to spend the next couple of weeks educating ourselves more and learning about alternatives. I'll post an update on how the next conversation goes :)

@uninvested - am I understanding correctly that it would be better to pay taxes on the 401k at retirement because we will be in a lower tax bracket then? What would be her motive in getting us to convert it now? It a 401k from an old employer that I'm currently paying maintenance fees on... would it be better to roll it over to an IRA?

Uninvested wrote:A slightly different bent. The salesperson is not intrinsically evil. She is working within the constraints of her system and job. Having said that, there is a high wrap fee, loaded mutual funds and a recommendation to pay taxes on a 401K and move it to a ROTH.

This cannot proceed. I once had a similar situation with rapidly signed papers.

First, call the adviser. Tell her that you discussed it with your husband and father (or something like that) and would like a little more time to consider all of the recommendations. So please stop the transfers and you will come by and pick up the papers just in case they inadvertently get processed. Then do exactly what nisiprius said if you don't get the paperwork.

To make it smoother, do not even suggest to her at all that you won't proceed, just that you want everything on hold now so you can consider it all.

You CANNOT proceed with this. It will cost you so much.
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Post by letsgobobby »

In your OP you stated you went with recs 1-4. Ironically, you should have only gone with 5-6, and ignored 1-4:
1) Move all of my Fidelity Roth IRA funds into Ameriprise Active Diversified Funds Moderately Aggressive (still within a Roth IRA). The wrap fee stated in the contract I signed is 1.25%.
2) Convert my Principal 401k to a Roth (take the tax hit this year) and move this money into the Ameriprise Active Diversified above.
3) Transfer my husband’s IRA to Ameriprise (C Share fund, need to double check with her on exact name and expense ratio of fund), then move into Active Diversified later where there is a higher balance - EDIT - just to clarify, the C share fund is NOT related to the Active Diversified fund. She recommended that we move my husband into C shares for now and move to Active Diversified later.
4) Put our home downpayment savings into an Ameriprise 12 month CD and keep adding to it each month
5) Buy life insurance (she highlighted the VUL but also gave us the option of Term)
6) Buy disability insurance for my husband
Well, 4 isn't a bad idea but you should shop around for CD rates.
1. Leave your Roth IRA where it is, with Fido. We can help you pick low cost index funds or other suitable investments. Fido has plenty.
2. I would not recommend taking a tax hit in the 25% bracket. You might rollover your 401k to a traditional IRA, however; exact recommendation will depend on your exact financial circumstances.
3. Leave your husband's IRA at Fido.
4. shop around for CD rates or savings account rates.
5. Yes buy life insurance but do not even consider VUL. Term is what you need.
6. Yes, your husband needs disability insurance.

Consider reposting your entire portfolio with all percentages adding up to 100%. You will get excellent advice, here, free.
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noviceneedshelp
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Post by noviceneedshelp »

Thanks so much, very helpful advice. Will definitely re-post our complete portfolio.

letsgobobby wrote:In your OP you stated you went with recs 1-4. Ironically, you should have only gone with 5-6, and ignored 1-4:
1) Move all of my Fidelity Roth IRA funds into Ameriprise Active Diversified Funds Moderately Aggressive (still within a Roth IRA). The wrap fee stated in the contract I signed is 1.25%.
2) Convert my Principal 401k to a Roth (take the tax hit this year) and move this money into the Ameriprise Active Diversified above.
3) Transfer my husband’s IRA to Ameriprise (C Share fund, need to double check with her on exact name and expense ratio of fund), then move into Active Diversified later where there is a higher balance - EDIT - just to clarify, the C share fund is NOT related to the Active Diversified fund. She recommended that we move my husband into C shares for now and move to Active Diversified later.
4) Put our home downpayment savings into an Ameriprise 12 month CD and keep adding to it each month
5) Buy life insurance (she highlighted the VUL but also gave us the option of Term)
6) Buy disability insurance for my husband
Well, 4 isn't a bad idea but you should shop around for CD rates.
1. Leave your Roth IRA where it is, with Fido. We can help you pick low cost index funds or other suitable investments. Fido has plenty.
2. I would not recommend taking a tax hit in the 25% bracket. You might rollover your 401k to a traditional IRA, however; exact recommendation will depend on your exact financial circumstances.
3. Leave your husband's IRA at Fido.
4. shop around for CD rates or savings account rates.
5. Yes buy life insurance but do not even consider VUL. Term is what you need.
6. Yes, your husband needs disability insurance.

Consider reposting your entire portfolio with all percentages adding up to 100%. You will get excellent advice, here, free.
gabbar
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Post by gabbar »

Wow - How mean can Ameriprise be. This is highway robbery - how do they survive as a business.
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Post by gabbar »

On advice #2 by the Ameriprise guy, is there a good reason to take a tax hit now and move money into Roth IRA this year. I wish I had done this 2 years ago when the stock market was hitting lows and my portfolio was in the dumps. But after a 100% rally in the stock market and the consequent doubling of my Rollover IRA value, is there a good reason to pay tax now? Unless of course you know you are going to have too much money in retirement - which is close to 30 years in the future. I dont see the point even if you assume that we will see higher taxes in the future.

Please educate me if I am missing something.
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Post by K'zoo »

Noviceneedshelp, it is good that your Ameriprise rep said she would hold the transfers, per your request.

You should, however, still contact your 401k and IRA holders and have them block transfers to Ameriprise. It would not hurt to pick up the signed papers as well. 'Accidents' could happen. Call this the "trust, but verify" approach.


Get "The Bogleheads' Guide to Investing." It is very readable and provides the basics. It will serve as a good stepping off point to further education, as well as to enjoying and utilizing this forum.
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Post by afan »

Definitely tell those who hold your current accounts not to comply with the transfer request. And definitely pick up your paperwork, if that is still possible. Remember, you made contact with a representative of Ameriprise, and she responded as you would hope. However, she works for a large organization that could take the discretion out of her hands, and say, in effect "we have the signed forms, we are proceeding with the transfer", and tell her to get with the program.

I agree she need not be evil just because she works for a company that sells overpriced products. It is like someone who sells expensive luxury cars. They know their customers can get the same functionality at a tiny fraction of the price. The job is to convince them that the huge extra cost is somehow worth it. Free country. You don't have to buy.
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Post by LadyGeek »

gabbar - the wiki can help.

Wiki article link: Roth IRA conversion

Be sure to read EmergDoc's Roth Conversion thread (under External links). If you have further questions, please start a new thread, as it stray's from noviceneedshelp's purpose.

noviceneedshelp - the wiki can guide you on the basics: Bogleheads℠ investing start-up kit (Be sure to watch the videos: Video:Bogleheads℠ investment philosophy)

======================
Just as banks and loan institutions do credit checks when you apply for a loan, you should do a check on your financial advisor. It's all part of doing your due diligence. To performing transactions, she must be a registered broker - meaning she has a license.

Wiki article link: Tools and Calculators (Broker Check)

You will find out her qualifications, where she is licensed to practice, and if there are any outstanding complaints. Hopefully, all is OK. If something looks out of place (like an outstanding complaint), you now have something to discuss with her.
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Post by halpain17 »

K'zoo wrote: You should, however, still contact your 401k and IRA holders and have them block transfers to Ameriprise. It would not hurt to pick up the signed papers as well. 'Accidents' could happen. Call this the "trust, but verify"
So you have completed step one and that is asking the ameriprise rep to hold off

Step 2: do what K'zoo said above.

Step 3: Read. Learn. At least read the following 2 books:

The Bogleheads Guide to Investing and The Four Pillars of Investing.

You will have a much better understanding of what you should do as well as why the ameriprise rep is an ameriprise rep and not a multi-millionaire.
“ The only way to “beat an index” is to invest in something other than the index. Why would you, when the only source of long-term risk and return data is the index ?” -Hebner, Mark
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Post by Uninvested »

noviceneedshelp wrote:Thanks everyone. I agree with the below, I really don't think she is evil. She works for a company that apparently sells a very expensive product. She answered all of the questions we asked, and it's our job to educate ourselves on what her competitors offer.

I sent her an email letting her know that we need a couple of weeks to think things through and that we are not ready for a transfer right now. She wrote back and left a voicemail letting me know that is fine and she will not transfer the funds without our consent. I'm going to give her the benefit of the doubt and assume that she is not going to move forward with the transfer.

We're going to spend the next couple of weeks educating ourselves more and learning about alternatives. I'll post an update on how the next conversation goes :)

Yes, exactly. Although you do not know what taxes will be in the future, you are guarnateed to pay them if you convert now. I can only assume her motive was getting the assets (which is reasonable) but why she picked a conversion to a ROTH I do not know. Maybe she isn't that solid on tax aspects. Just roll it to a Vanguard IRA. Easy as pie and they will help you do it.

@uninvested - am I understanding correctly that it would be better to pay taxes on the 401k at retirement because we will be in a lower tax bracket then? What would be her motive in getting us to convert it now? It a 401k from an old employer that I'm currently paying maintenance fees on... would it be better to roll it over to an IRA?

Uninvested wrote:A slightly different bent. The salesperson is not intrinsically evil. She is working within the constraints of her system and job. Having said that, there is a high wrap fee, loaded mutual funds and a recommendation to pay taxes on a 401K and move it to a ROTH.

This cannot proceed. I once had a similar situation with rapidly signed papers.

First, call the adviser. Tell her that you discussed it with your husband and father (or something like that) and would like a little more time to consider all of the recommendations. So please stop the transfers and you will come by and pick up the papers just in case they inadvertently get processed. Then do exactly what nisiprius said if you don't get the paperwork.

To make it smoother, do not even suggest to her at all that you won't proceed, just that you want everything on hold now so you can consider it all.

You CANNOT proceed with this. It will cost you so much.
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Taylor Larimore
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Rolling over from a 401K to an IRA ?

Post by Taylor Larimore »

Its a 401k from an old employer that I'm currently paying maintenance fees on... would it be better to roll it over to an IRA?
noviceneedshelp:

When an employee leaves a company, it is nearly always better to rollover a 401K to an IRA for three primary reasons:

1. Lower costs including no maintenance or hidden administrative fees.

2. Greater selection of funds.

3. Fewer restrictions, including restrictions for heirs in most 401K plans.

NOTE: When rolling over 401K funds to the IRA company, it is VERY important for the employee not to cash the check. The best way is to have the fomer employer make the check payable to the IRA company.
"Simplicity is the master key to financial success." -- Jack Bogle
Uninvested
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Re: Rolling over from a 401K to an IRA ?

Post by Uninvested »

Taylor Larimore wrote:
Its a 401k from an old employer that I'm currently paying maintenance fees on... would it be better to roll it over to an IRA?
noviceneedshelp:

When an employee leaves a company, it is nearly always better to rollover a 401K to an IRA for three primary reasons:

1. Lower costs including no maintenance or hidden administrative fees.

2. Greater selection of funds.

3. Fewer restrictions, including restrictions for heirs in most 401K plans.

NOTE: When rolling over 401K funds to the IRA company, it is VERY important for the employee not to cash the check. The best way is to have the fomer employer make the check payable to the IRA company.
Taylor, quite true. There has been, however, a change in how most employers do this. I ahve moved a large 401K from a blue chip company to Vanguard and a small one from a small company serviced by Mass Mutual to Vanguard. The standard is to actually send the check to the person while made out to Vanguard FBO the person. Then you forward the check to Vanguard. You get a 100R which is of course reportable but not taxable. WIth IRA to IRA transfers, they usually do that directly and you don't get a 1099R>
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Taylor Larimore
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Rollover checks

Post by Taylor Larimore »

Uninvested:

Thank you for enlightening me about the new procedure for transferring rollover checks.
"Simplicity is the master key to financial success." -- Jack Bogle
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noviceneedshelp
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Update

Post by noviceneedshelp »

I just wanted to provide an update for those who graciously took the time to help me out with this. Here's where we are today:

1) Froze our funds after reading your responses to ensure that money would not be transferred

2) Purchased Bogleheads' Guide to Investing. Currently reading through it, very helpful.

3) Created a spreadsheet to attempt to understand what kind of money we're talking about in terms of Ameriprise Fees. Had to look up each of 20 funds on Morningstar because Ameriprise does not include expense ratios in the prospectus. Calculated that if I invest $31k into the Ameriprise Active Portfolio (Moderately Aggressive), after 20 years I would pay about $20k in fees. This of course does not account for the amount of money lost on not being able to invest the money paid in fees, or for any additional money I will be adding to this fund over the next 30 years.

---> If anyone has the time, would LOVE some feedback on whether or not my calculations are correct. I used the FINRA fund analyzer online tool to estimate the fees on each fund after 20 years assuming a 5% return. Here is a link to my google doc spreadsheet: https://spreadsheets.google.com/spreads ... E&hl=en_US

4) Called Ameriprise advisor to confirm my expense calculations and get her side of the story. I asked her what the benefit would be of paying all of these fees, as opposed to putting our money into, for example, something like the Vanguard 2045 Target Retirement Fund. After 20 years of the same $31k in this fund, assuming the 5% return, the fees would be $2k instead of $20k. Also asked her what the strategy was behind moving my husband's money from low expense balanced funds (JBALX, FBALX) to more expensive C shares she had recommended (ACERX).

5) Her answer about the benefit of the Ameriprise Active Diversified portfolio was that it is managed by Ameriprise on the recommendations provided by the Wilshire Group, which has a great reputation for beating the market. She said the return would be much greater, although of course this could not be guaranteed. (Side note: Ameriprise only launched these funds 5 years ago. The disclosure documents state that although they try to follow the advice of the Wilshire group, they don't technically have to. Their disclosure docs also state that they have a very strong incentive to recommend certain funds, like Columbia, which they make a much greater commission on).

Her answer about moving my husband into ACERX was pretty vague and she almost immediately said that I was right and it didn't make sense to move him into that fund right now, and she had misunderstood the amount of money he had to invest before he had enough to move into the Active Diversified Portfolio as well.

6) After having given her the chance to at least explain the reasons for her original recommendations, I called her this morning and cancelled the meeting we had scheduled for next week, letting her know that we had decided to go with less expensive options. She was very nice and said she wanted us to feel comfortable with where we put our money, and she completely understood that we had decided to go a different way. She assured me that money would not be transferred and we would incur no cancellation fees.

CURRENT TO DO LIST:
- Finish reading Bogleheads' Guide to Investing
- Create a plan for moving my Roth IRA into less expensive fund(s), and rolling over my old employer's 401k into an IRA
- Post the plan to this forum and gather feedback :)
- Roll over my husband's old 401ks into current employer's 401k
- Put house savings into Ally Bank CD (better rate than Ameriprise)
- Research term life and disability insurance rates


THANK YOU, THANK YOU, THANK YOU for all of your help. I feel like we are on a much better path now. The biggest challenge is making time to read and make a plan for all of this, but now more than ever we realize how important it is and that paying someone to do it for you can potentially be very costly.[/list]
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