Ameriprise employees sue firm for lousy 401k choices

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Ameriprise employees sue firm for lousy 401k choices

Post by Rick Ferri » Thu Sep 29, 2011 3:59 pm

Here is good one for you. Ameriprise employees are suing their own firm for terrible investment choices in their own 401k account. They want Vanguard funds!

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

From the article:

"The workers allege that Ameriprise and its committees, as the plan's overseers, violated their fiduciary duty to the retirement plan. Investments in the 401(k) plan included mutual funds and target date funds from Ameriprise subsidiary RiverSource Investments LLC, which is now known as Columbia Management Investment Advisers LLC. Between 2005 and March 2007, an average of $500 million in plan assets went annually into RiverSource and Ameriprise Trust Co., the trustee and record keeper of the plan...Ultimately, the investment generated fee revenue for RiverSource and its affiliates, as well as for Ameriprise Trust Co., the plaintiffs claim. Further, the funds themselves were costly when compared to offerings from The Vanguard Group Inc., the workers say. For example, Ameriprise's diversified bond fund cost 78 basis points in 2010 — some 71 basis points more than a comparable offering from Vanguard, according to the complaint."

This is hilarious. Brokers are suing their firm for poor fund selection in their own 401k while selling the same junk to their clients.

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Re: Ameriprise employees sue firm for lousy 401k choices

Post by Mel Lindauer » Thu Sep 29, 2011 4:02 pm

Rick Ferri wrote:Here is good one for you. Ameriprise employees are suing their own firm for terrible investment choices in their own 401k account.

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

From the article:

"The workers allege that Ameriprise and its committees, as the plan's overseers, violated their fiduciary duty to the retirement plan. Investments in the 401(k) plan included mutual funds and target date funds from Ameriprise subsidiary RiverSource Investments LLC, which is now known as Columbia Management Investment Advisers LLC. Between 2005 and March 2007, an average of $500 million in plan assets went annually into RiverSource and Ameriprise Trust Co., the trustee and record keeper of the plan...Ultimately, the investment generated fee revenue for RiverSource and its affiliates, as well as for Ameriprise Trust Co., the plaintiffs claim. Further, the funds themselves were costly when compared to offerings from The Vanguard Group Inc., the workers say. For example, Ameriprise's diversified bond fund cost 78 basis points in 2010 — some 71 basis points more than a comparable offering from Vanguard, according to the complaint."

This is hilarious. Brokers are suing their firm for poor fund selection in their own 401k while selling the same junk to clients.

Rick Ferri
Now that's a real hoot! You gotta love it when the employees know that what they're selling is so bad that they don't want any parts of it in their 401k plan.

Like us Bogleheads, they want Vanguard! :D
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Post by RadAudit » Thu Sep 29, 2011 4:09 pm

Bond funds with costs 71 basis points higher than Vanguard's funds!!

Well, at least the brokers' could see they were being had. Too bad they can't see it when they are working with their clients.
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Post by KyleAAA » Thu Sep 29, 2011 4:09 pm

I would think they have a good case solely from a conflict-of-interest standpoint. Obviously, if Ameriprise is getting fee income from their own employees' investments, the plan is clearly not being operated "solely in the best interests of plan participants." You can't turn a profit on your own 401k and pretend you're doing your employees a favor!

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Post by ofcmetz » Thu Sep 29, 2011 4:11 pm

Almost unreal! karma for these brokers to have to use the same funds they recommend, although I suspect even then they get a better deal than they give their clients. Maybe they should all quit simultaneously and transfer everything to Vanguard IRA's. :D
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This is a bit worrisome

Post by kmurp » Thu Sep 29, 2011 4:12 pm

I'm trustee of a small company plan and we have mostly active management funds. The reason is that the funds rebate part of their fees to the company to offset (partially) the cost of running the plan.
I did insist that we have a few Vanguard funds : Total stock, total bond and TIPS, so if someone wanted to, they could probably get by with just those three.
Hope I don't get sued.....

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Post by aainvestor » Thu Sep 29, 2011 4:13 pm

It's already on my Facebook page. I have a couple of friends who work for Ameriprise, I do wonder what they may comment on that.

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Post by ofcmetz » Thu Sep 29, 2011 4:13 pm

RadAudit wrote:Bond funds with costs 71 basis points higher than Vanguard's funds!!

Well, at least the brokers' could see they were being had. Too bad they can't see it when they are working with their clients.
Clients of Ameriprise sometimes have these in wrap accounts that charge fees in addition to this. Some may get these bond funds for 200 basis points or more from what I've read.
Never underestimate the power of the force of low cost index funds.

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Re: Ameriprise employees sue firm for lousy 401k choices

Post by Oneanddone » Thu Sep 29, 2011 4:13 pm

Rick Ferri wrote:Here is good one for you. Ameriprise employees are suing their own firm for terrible investment choices in their own 401k account. They want Vanguard funds!

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

From the article:

"The workers allege that Ameriprise and its committees, as the plan's overseers, violated their fiduciary duty to the retirement plan. Investments in the 401(k) plan included mutual funds and target date funds from Ameriprise subsidiary RiverSource Investments LLC, which is now known as Columbia Management Investment Advisers LLC. Between 2005 and March 2007, an average of $500 million in plan assets went annually into RiverSource and Ameriprise Trust Co., the trustee and record keeper of the plan...Ultimately, the investment generated fee revenue for RiverSource and its affiliates, as well as for Ameriprise Trust Co., the plaintiffs claim. Further, the funds themselves were costly when compared to offerings from The Vanguard Group Inc., the workers say. For example, Ameriprise's diversified bond fund cost 78 basis points in 2010 — some 71 basis points more than a comparable offering from Vanguard, according to the complaint."

This is hilarious. Brokers are suing their firm for poor fund selection in their own 401k while selling the same junk to their clients.

Rick Ferri
Rick, have you read additional information on this? I don't see any indication that brokers are suing their firm.

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Re: Ameriprise employees sue firm for lousy 401k choices

Post by Rick Ferri » Thu Sep 29, 2011 4:31 pm

Oneanddone wrote:Rick, have you read additional information on this? I don't see any indication that brokers are suing their firm.
Ameriprise is a brokerage firm. Most other their employees are brokers. I don't understand the question.
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Post by stratton » Thu Sep 29, 2011 5:18 pm

Vanguard ought to build a little advertising around this...

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Post by yobria » Thu Sep 29, 2011 5:40 pm

That's awesome. Thanks.

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Post by Mel Lindauer » Thu Sep 29, 2011 6:44 pm

stratton wrote:Vanguard ought to build a little advertising around this...

Paul
It just might happen. I sent it to Vanguard, Paul.
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Re: This is a bit worrisome

Post by billern » Thu Sep 29, 2011 6:53 pm

kmurp wrote:I'm trustee of a small company plan and we have mostly active management funds. The reason is that the funds rebate part of their fees to the company to offset (partially) the cost of running the plan.
I did insist that we have a few Vanguard funds : Total stock, total bond and TIPS, so if someone wanted to, they could probably get by with just those three.
Hope I don't get sued.....
I think the key here is that the trustees of the Ameriprise 401k plan have chosen funds that directly benefit Ameriprise.

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Post by norookie » Thu Sep 29, 2011 7:01 pm

:lol: HAAAaaaaaaa However they"ll SELL you whatever makes THEM MONEY! I love it!
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Re: Ameriprise employees sue firm for lousy 401k choices

Post by Oneanddone » Thu Sep 29, 2011 7:08 pm

Rick Ferri wrote:
Oneanddone wrote:Rick, have you read additional information on this? I don't see any indication that brokers are suing their firm.
Ameriprise is a brokerage firm. Most other their employees are brokers. I don't understand the question.
I want to be careful with responding because it's always fun to make fun of Ameriprise and I don't have good things to say about them.

However, I do like criticisms to be fair.

Rick, you made the claim that Brokers are suing the firm. IF this is true, I agree that it is one of the most hillariously ironic things that I have ever read. "Mr. Customer, please buy this fund. It's great for you, but so bad for me that I need to sue my firm."

I asked the question because my read of this is something different. This is 6 people suing a giant company and 1-5 of those people are not even employeed there. There is no indication that any of these people have anything to do with investment sales on any level.

This appears to be a suit in which a law firm will get rich and a bunch of litigants will each get $50 and the firm will admit no wrongdoing. In other words, I'm guessing that this is law firm driven.

The part of this suit that seems to be the real issue is the share class of the funds being used.

For the humor of it, I hope that my read of the situation is completely wrong.

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Post by Higman » Thu Sep 29, 2011 7:13 pm

Not only are Ameriprise employees getting substandard returns but so are their clients. Four years ago a relative invested $100K with them. Her Ameriprise financial advisor’s actions can be characterized by the following:
1. The Good. He sliced and diced her investments across a very diverse portfolio.

2. The Bad. He used thirty three funds!!!

3. The Ugly. One third of them were River Source.

4. The Unconscionable. Over time he has been selling her non-River Source funds and buying more River Source funds.

5. The Outrageous. He charges a management fee!

I can only hope his 401K was tied to River Source funds.

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Post by redarmymembe » Thu Sep 29, 2011 7:15 pm

The firm made a policy of only offering investments that made them money when much better investments were available.

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Re: This is a bit worrisome

Post by fcirullo » Thu Sep 29, 2011 7:23 pm

Thank you for posting this story, Rick!
"The employees assert that the plan lost more than $20 million related to excessive fees and expenses." Wow! Let's see how this legal action turns out.
kmurp wrote:I'm trustee of a small company plan and we have mostly active management funds. The reason is that the funds rebate part of their fees to the company to offset (partially) the cost of running the plan.
I did insist that we have a few Vanguard funds : Total stock, total bond and TIPS, so if someone wanted to, they could probably get by with just those three.
Hope I don't get sued.....
Thank you for sharing this information about your plan. It's like this: Choosing managed funds that have revenue sharing is probably not a good reason to select managed funds. For instance...if you and the experts you hired do not have a long term track record (more than ten years) of selecting a core mix of managed funds that beat a core mix of index funds in performance, does it really make sense for you as trustee for the plan to select managed funds when you can easily match the market's performance--less your cost--by selecting a menu of index funds? Also, did you know that it requires less time to select and monitor a menu of index funds versus a menu of managed funds?

Edited on 9/29/2011 to include the phrase "and monitor" in the second to the last sentence.
Last edited by fcirullo on Thu Sep 29, 2011 7:31 pm, edited 1 time in total.
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Re: Ameriprise employees sue firm for lousy 401k choices

Post by LadyGeek » Thu Sep 29, 2011 7:28 pm

Rick Ferri wrote:
Oneanddone wrote:Rick, have you read additional information on this? I don't see any indication that brokers are suing their firm.
Ameriprise is a brokerage firm. Most other their employees are brokers. I don't understand the question.
Oneanddone wrote:Rick, you made the claim that Brokers are suing the firm. IF this is true, I agree that it is one of the most hillariously ironic things that I have ever read.
Rick - This brings up a point that I learned in another thread. For new investors, I think your and Oneanddone's comments, as well as one in the article:
Comment by SAVERIO_PAGLIONI wrote:With respect to Ameriprise advisors, are they brokers and therefore only rise to "suitability" and not "fiduciary"? Sure, they sold these same crummy funds to their clients, but they may have been "suitable" for the purpose.
... may miss the point if one does not understand the difference between a Registered Investment Advisor and a Broker-Dealer. I just rewrote a wiki article which missed this point.

Wiki article link: Tools and Calculators (Broker check) Be sure to read the footnotes.

My former Ameriprise advisor is registered with the SEC as well as FINRA.
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Post by Rick Ferri » Thu Sep 29, 2011 7:39 pm

Suitability means that a broker can sell any fund or any investment as long as it fits the purpose. For example, if stocks are suitable for an investor, then it doesn't matter if a broker pitches an 8% load stock fund that has 3% in annual fees because it's agreed that stocks in general are a suitable, thus any diversified stock mutual fund will do.

Suitability is quite different than fiduciary standard. Under a fiduciary standard, not only does an investment advisor have to recommend suitable investments, the advisor must recommend funds that are in the best interest of the client. Clearly, a fund with an 8% load and 3% in fees is not in the best interest of investors. Low-cost index funds are in the best interest of clients.

This is the difference between investment recommendations of brokers under a suitability standard and those of investment advisors under a fiduciary standard.

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Post by joe8d » Thu Sep 29, 2011 8:36 pm

Think that's bad.One of my family members just asked my opinion her 401k plan that she just became eligible for. It is run through an insurance company and the best offering was a TRP Retirement fund with a 2.68 % total expence fee.
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Post by LadyGeek » Thu Sep 29, 2011 8:47 pm

Rick Ferri wrote:Suitability means that a broker can sell any fund or any investment as long as it fits the purpose...
Thanks, wiki updated.

Wiki article link: Tools and Calculators (Broker check)
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Post by stratton » Thu Sep 29, 2011 8:53 pm

joe8d wrote:Think that's bad.One of my family members just asked my opinion her 401k plan that she just became eligible for. It is run through an insurance company and the best offering was a TRP Retirement fund with a 2.68 % total expence fee.
Ick!

2% is a huge difference. I mean gigantic. 2.68% total expenses is worse.

These two portfolios have approximately the same expected return.

A: 80/20 stocks/bonds with a 2.25% ER.

B: 40/60 stocks/bonds with a 0.25% ER.

Guess which will go down less in a bear market?!

You can make an argument that 30/70 stock/bonds with a 0.2% ER would have about the same expected return as 80/20.

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Post by LadyGeek » Thu Sep 29, 2011 9:11 pm

This article just hit the street, which contains more details: Ameriprise Facing Revenue-Sharing Lawsuit
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Post by NateH » Thu Sep 29, 2011 9:36 pm

A very good friend of mine works for Ameriprise at a corporate office (not a broker). Through various conversations i learned that Ameriprise's 401(k) DOES include a self-directed brokerage option that contains a nearly infinite number of very low cost index funds / index ETFs through Schwab, as well as any VG ETF. The SDA option has been in place nearly ten years.

I question if these plaintiffs are really all that concerned about their plan fees if they didn't know they had a Self-Direction option and/or didn't utilize it. Maybe some lawyers are trying for a quick buck.

I got a glimpse at the Ameriprise 401k, and these Ameriprise employees are fools to keep their money in the dumpy, expensive, regular 401k options. Even the Riversource 500 index fund (the only index fund) was about 0.5% ER. The life-style funds are about 1%. My friend lets their contributions and matching funds sit in the index fund and xfers it once or twice a year to make large purchases of the Self-Directed funds according to their AA. Even for funds that are charged a brokerage fee (not all), it is still way less expensive than the base funds.

The irony is still very notable.

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Post by madbrain » Fri Sep 30, 2011 3:03 am

NateH wrote: Through various conversations i learned that Ameriprise's 401(k) DOES include a self-directed brokerage option that contains a nearly infinite number of very low cost index funds / index ETFs through Schwab, as well as any VG ETF. The SDA option has been in place nearly ten years.
How much of the details of their plan did you get ?

Self-directed brokerage options usually entail fees for each transaction. My old 401k plan with a DJIA company had many excellent index funds with ERs < 0.1%. However, the self-directed option entailed a $25 transaction fee for each purchase or sale of any fund, stock, option, etc that was not in the plan's regular options.

That would add up to a very high expense ratio if you wanted to make regular purchases to take advantage of dollar cost averaging, eg. at each pay period like you can with the regular plan funds. With 26 pay periods and say, 3 funds, it would cost you $1950 a year in transaction fees.

So, I don't think the self-directed option is really practical.

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Post by nisiprius » Fri Sep 30, 2011 5:49 am

Reputedly, financial-services companies in general are supposed to have great benefits. I know a friend of a friend who works at a mutual fund company that's practically the reverse of Vanguard--call it dragnaV to suggest the drag of a >1% ER. He has an extremely generous match in the company 401(k). It's limited to dragnaV funds, but there is a 100% match up to 12% of salary. Although he uses Vanguard (!) for his Roth and his kids' Utah 529, he feels that he has no complaints about his 401(k) choices because the match is so generous.

Why would anyone care about a 1.16% expense ratio--even compounded for 30 years, that's 41%--if you are getting a 100% subsidy?

Do Ameriprise employees not get a generous 401(k) match?
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Post by dbr » Fri Sep 30, 2011 6:00 am

madbrain wrote:
NateH wrote: Through various conversations i learned that Ameriprise's 401(k) DOES include a self-directed brokerage option that contains a nearly infinite number of very low cost index funds / index ETFs through Schwab, as well as any VG ETF. The SDA option has been in place nearly ten years.
How much of the details of their plan did you get ?

Self-directed brokerage options usually entail fees for each transaction. My old 401k plan with a DJIA company had many excellent index funds with ERs < 0.1%. However, the self-directed option entailed a $25 transaction fee for each purchase or sale of any fund, stock, option, etc that was not in the plan's regular options.

That would add up to a very high expense ratio if you wanted to make regular purchases to take advantage of dollar cost averaging, eg. at each pay period like you can with the regular plan funds. With 26 pay periods and say, 3 funds, it would cost you $1950 a year in transaction fees.

So, I don't think the self-directed option is really practical.
These are legitimate concerns but are practical or not depending on circumstances and how the investor manages the account. It is certainly possible to accumulate assets in the regular account and make purchases in larger amounts less frequently. A young investor with minimal assets may not be much helped by a brokerage option while an older investor with large assets can use such an option effectively. An interesting quirk is the fee schedule in my 401K wherein funds in the brokerage option are not assessed the 0.08% management fee for the 401K but rather pay their way through transaction fees. That gives me a 0.08% head start on paying off what small fees are incurred. I am currently running rather less than 0.08% drag due to transactions in the brokerage account which however benefits me by giving access to Vanguard Admiral funds in non-index fund offerings, such as TIPS.

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Post by fcirullo » Fri Sep 30, 2011 10:18 am

nisiprius wrote:Why would anyone care about a 1.16% expense ratio--even compounded for 30 years, that's 41%--if you are getting a 100% subsidy?

Do Ameriprise employees not get a generous 401(k) match?
This is an interesting point! Should employees care if expenses are too high if they end up with more money in their account as a result of the match? And does long term performance matter to employees who get a generous match--do employees believe that long term performance is just a crap shoot, and it does not matter if a core mix of index funds is likely to beat their plan's mix of managed funds long term?

To me, what makes this case fascinating is how the high cost of this particular plan will be defended, what Ameriprise's 401(k) clients will do when they learn about this case, and what the court will ultimately decide to do about the employees asserting that the plan lost more than $20 million related to excessive fees and expenses.

Edited on 09/30/2011 to correct two typographical errors.
Last edited by fcirullo on Fri Sep 30, 2011 3:15 pm, edited 1 time in total.
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Post by Winthorpe » Fri Sep 30, 2011 10:41 am

My brother-in-law is an Ameriprise advisor. Those guys are so brainwashed by by the company/industry that I'm impressed they still believe that costs still matter!!

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Re: Ameriprise employees sue firm for lousy 401k choices

Post by LadyGeek » Fri Sep 30, 2011 11:00 am

LadyGeek wrote:... may miss the point if one does not understand the difference between a Registered Investment Advisor and a Broker-Dealer. I just rewrote a wiki article which missed this point.

Wiki article link: Tools and Calculators (Broker check) Be sure to read the footnotes.

My former Ameriprise advisor is registered with the SEC as well as FINRA.
We just updated the wiki to put this topic as a stand-alone article; references to the rules and regulations are included.

Wiki article link: Investment adviser

(Please keep this thread focused on the lawsuit, not Ameriprise adviser competency.)
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Post by retiredjg » Fri Sep 30, 2011 11:32 am

It would be nice if one of our lawyer types can figure out just what the suit is about. One article talks about fiduciary duty and the other talks about revenue sharing. If I understand, these are two different issues.

Is the suit about one or the other? Is it about both?

With a company match and the (apparently excellent) self-directed brokerage option, I would think a fiduciary duty suit would be a difficult task to prove (but that is just common sense thinking which is often different from law).

Anyway, at some point, the actual filings should be available. Right now, all we have is two reporters' interpretations of the suit - which could be way off the mark.

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Post by Alskar » Mon Oct 03, 2011 2:05 pm

KyleAAA wrote:I would think they have a good case solely from a conflict-of-interest standpoint. Obviously, if Ameriprise is getting fee income from their own employees' investments, the plan is clearly not being operated "solely in the best interests of plan participants." You can't turn a profit on your own 401k and pretend you're doing your employees a favor!
So true, especially in light of the recent small-company 401(k) offering from Vanguard: http://moneywatch.bnet.com/investing/bl ... blog-river and from Employee Fiduciary: http://moneywatch.bnet.com/investing/bl ... blog-river

As a person that has spent years trying to get various employers to live up to their fiduciary responsibility, I hope these employee lawsuits help employers take their fiduciary responsibility more seriously.

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Post by yobria » Mon Oct 03, 2011 2:42 pm

Winthorpe wrote:My brother-in-law is an Ameriprise advisor. Those guys are so brainwashed by by the company/industry that I'm impressed they still believe that costs still matter!!
Me too - as in all types of retail financial product sales, it's usually not the clueless rep that's knowingly providing lousy products. It's the corporate HQ.

Nick

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Post by Majormajor78 » Mon Oct 03, 2011 4:09 pm

madbrain wrote:
NateH wrote: Through various conversations i learned that Ameriprise's 401(k) DOES include a self-directed brokerage option that contains a nearly infinite number of very low cost index funds / index ETFs through Schwab, as well as any VG ETF. The SDA option has been in place nearly ten years.
How much of the details of their plan did you get ?

Self-directed brokerage options usually entail fees for each transaction. My old 401k plan with a DJIA company had many excellent index funds with ERs < 0.1%. However, the self-directed option entailed a $25 transaction fee for each purchase or sale of any fund, stock, option, etc that was not in the plan's regular options.

That would add up to a very high expense ratio if you wanted to make regular purchases to take advantage of dollar cost averaging, eg. at each pay period like you can with the regular plan funds. With 26 pay periods and say, 3 funds, it would cost you $1950 a year in transaction fees.

So, I don't think the self-directed option is really practical.
We use the brokeragelink option in my wife's 401K plan and don't pay any fee's. Fidelity's normal commission schedule applies but they have a large list of NTF funds to choose from and we just select the Spartan Funds.
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Post by edge » Mon Oct 03, 2011 7:47 pm

This is classic.

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Post by lawman3966 » Mon Oct 03, 2011 8:11 pm

Rick Ferri wrote: Clearly, a fund with an 8% load and 3% in fees is not in the best interest of investors. Low-cost index funds are in the best interest of clients.
Rick Ferri
Not to be picky, but do you have any evidence in the form of a DOL rule, or court decision establishing what the fee limits are for an advisor operating under the ficudiary standard? I've seen numerous practices that appear not to be in the interest of clients that nevertheless seem to continue.

To be clear, I think we all agree that load and fee levels you recite are abhorrent and not in the best interest of the client. Moreover, from all I've seen, the fiduciary standard is preferable to the suitability standard. That leaves the impression that, because the fiduciary standard is better than the suitability standard, that the fiduciary standard is somewhere between good and excellent. However, I see no evidence that this is the case.

J. Bogle has written that the average mutual fund fee in the U.S. is 1.3%. If this is coupled with a typical advisor wrap fee of 1% (many people pay more) we arrive at total asset-based fees of 2.3% per year. From all I know, it is perfectly legal for an advisor under the fiduciary standard to charge such fees, even though I personally find them appalling.

A colleague at work suggested that the "best interest of the client" standard is imposed on conduct by the adviser only after the advisor is hired, and not on the decision to hire the advisor. I'm not certain that this is the case, but it seems reasonable.

If the index fund fee level were considered the standard for "best interest of the client", most advisors operating under the fiduciary standard would be under an ongoing obligation to tell clients not to use their services, which is clearly not the case.

I'm not saying that there aren't good advisors, but I don't believe that the good ones are so because of a govt standard. It's just possible that the suitability standard offers no minimum protection to clients and that the fiduciary standard offers minimal protection to clients. If I'm right, advisors who offer excellent service to their clients do so because of their own ethics and professionalism and not because of a govt requirement.

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Post by Beagler » Mon Oct 03, 2011 10:19 pm

Not the first, not the last of this sort of thing. http://tinyurl.com/634qhlq

Plaintiffs want the cheapest funds and apparently the courts usually do not see it that way. The courts seem to look for a process of due diligence, fund diversification, average costs (or better), average performance (or better), and good client education efforts.
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Post by fcirullo » Tue Oct 04, 2011 9:51 am

lawman3966 wrote:If I'm right, advisors who offer excellent service to their clients do so because of their own ethics and professionalism and not because of a govt requirement.
True! People do the best they can for themselves, and our actions are always based on how we feel about the decisions we make.
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Oneanddone
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Post by Oneanddone » Tue Oct 04, 2011 10:07 am

If I'm right, advisors who offer excellent service to their clients do so because of their own ethics and professionalism and not because of a govt requirement.
That is so true.

"Look at me. I'm more ethical because I'm a fiduciary."

If someone is claiming that they are more ethical because they are acting as a fiduciary, they are also telling you that they would be less ethical if they were not a fiduciary. What this really says is that they aren't ethical.

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Post by leonard » Tue Oct 04, 2011 8:12 pm

I am sure the Ameriprise plan is a wreck. Company probably has plenty of explaining to do on if and how they executed their fiduciary duty.

However, let's line up 100% of the hypocrisy in this story. I doubt the Ameriprise 401k became bad mid stream, after all the plaintiffs were on board. So, I am betting nearly 100% of these plaintiff signed up to work at a company that had what they themselves defined subsequentally as bad 401k.

It's a bit like taking a job with a company in another city, then suing because they want you to relocate.

They should have asked a question or 2 and known the deal before they signed up to work for a company with a bad 401k.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

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Re: Ameriprise employees sue firm for lousy 401k choices

Post by tfb » Fri Oct 07, 2011 4:51 pm

Oneanddone wrote:Rick, you made the claim that Brokers are suing the firm. IF this is true, I agree that it is one of the most hillariously ironic things that I have ever read. "Mr. Customer, please buy this fund. It's great for you, but so bad for me that I need to sue my firm."

I asked the question because my read of this is something different. This is 6 people suing a giant company and 1-5 of those people are not even employeed there. There is no indication that any of these people have anything to do with investment sales on any level.
Exactly. Not all Ameriprise employees recommend investments to clients. Think people in IT, accounting, receptionists, ...
Harry Sit, taking a break from the forums.

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Post by Noobvestor » Fri Oct 07, 2011 5:03 pm

leonard wrote:I am sure the Ameriprise plan is a wreck. Company probably has plenty of explaining to do on if and how they executed their fiduciary duty.

However, let's line up 100% of the hypocrisy in this story. I doubt the Ameriprise 401k became bad mid stream, after all the plaintiffs were on board. So, I am betting nearly 100% of these plaintiff signed up to work at a company that had what they themselves defined subsequentally as bad 401k.

It's a bit like taking a job with a company in another city, then suing because they want you to relocate.

They should have asked a question or 2 and known the deal before they signed up to work for a company with a bad 401k.
Sounds a bit like victim blaming to me ... if you move to another city for a job, you know you're moving to another city. You might not know precisely what that entails, but you have a pretty good idea from common sense and a little research. A lot of people go into jobs -particularly their first serious ones - without a clue about how 401ks even work, let alone what they want in theirs. It might well be that many of these people learned *on the job* that their options were inferior. Moreover, once they had, what do you want them to do? Quitting is not always an option.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Post by leonard » Fri Oct 07, 2011 6:08 pm

Noobvestor wrote: A lot of people go into jobs -particularly their first serious ones - without a clue about how 401ks even work, let alone what they want in theirs.
Ok. But, should they? It would be less than a 2 minute conversation to ask the recruiter for the 401k terms and listing. This by the same people who know to the letter whether they get 4th of july off or their co-pay is $5 or $15, but don't ask about the 401k.

Ignorance isn't an excuse.

And, in this case, the extent to which people do not learn what the complete compensation plan entails, they aren't victims. It's one thing for an employer to switch 401k's mid stream. It is quite another to take a job at a company that has an existing "bad" 401k at a company that with the bare minimum research shows they are in the business of administering "bad" 401ks.

So, both employers and employees need to be accountable for their choices in this matter. The reality and bottomline is employers couldn't do this w/o willing employees to sign up anyway. It's just a fact.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

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Post by NateH » Mon Oct 10, 2011 9:36 am

nisiprius wrote: Why would anyone care about a 1.16% expense ratio--even compounded for 30 years, that's 41%--if you are getting a 100% subsidy?

Do Ameriprise employees not get a generous 401(k) match?
50 cents on the dollar up to 6%.

Oneanddone
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Post by Oneanddone » Mon Oct 10, 2011 9:48 am

leonard wrote:
Noobvestor wrote: A lot of people go into jobs -particularly their first serious ones - without a clue about how 401ks even work, let alone what they want in theirs.
Ok. But, should they? It would be less than a 2 minute conversation to ask the recruiter for the 401k terms and listing. This by the same people who know to the letter whether they get 4th of july off or their co-pay is $5 or $15, but don't ask about the 401k.

Ignorance isn't an excuse.

And, in this case, the extent to which people do not learn what the complete compensation plan entails, they aren't victims. It's one thing for an employer to switch 401k's mid stream. It is quite another to take a job at a company that has an existing "bad" 401k at a company that with the bare minimum research shows they are in the business of administering "bad" 401ks.

So, both employers and employees need to be accountable for their choices in this matter. The reality and bottomline is employers couldn't do this w/o willing employees to sign up anyway. It's just a fact.
Leonard, I understand your point, but I think that you are way overstating it. It makes no sense for someone to make their work decision based upon the 401(k) unless they have multiple job offers and the more important stuff is close to equal.

Ex. Jim is making $50K. He has a job offer to do the exact same type of work at an expanding company with room for advancement that will pay him $60K. Unless the 401(k) is going to be a deciding factor in taking the job, why should he get into a discussion about this before getting an offer?

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Post by NateH » Mon Oct 10, 2011 9:50 am

madbrain wrote:
NateH wrote: Through various conversations i learned that Ameriprise's 401(k) DOES include a self-directed brokerage option that contains a nearly infinite number of very low cost index funds / index ETFs through Schwab, as well as any VG ETF. The SDA option has been in place nearly ten years.
How much of the details of their plan did you get ?

Self-directed brokerage options usually entail fees for each transaction. My old 401k plan with a DJIA company had many excellent index funds with ERs < 0.1%. However, the self-directed option entailed a $25 transaction fee for each purchase or sale of any fund, stock, option, etc that was not in the plan's regular options.

That would add up to a very high expense ratio if you wanted to make regular purchases to take advantage of dollar cost averaging, eg. at each pay period like you can with the regular plan funds. With 26 pay periods and say, 3 funds, it would cost you $1950 a year in transaction fees.

So, I don't think the self-directed option is really practical.
100% disagree. Self-directed options are very practical if you plan funds are expensive and low-cost funds are available in your SD options.

If you let your withholdings accumulate in the least-worst option then make one large purchases (say, 10k) per year, the extra cost amounts to 0.2% per purchase. you come out ahead by switching to a lower cost fund, even with the transaction fee. You can use your other IRA accounts to maintain your AA with a simple spreadsheet.

to make a $25 brokerage purchase ever other week is dumb.
to DCA into three funds this way is galactically stupid.
That said, someone probably is doing it and thinking they are outsmarting the market.

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Post by gatorking » Mon Oct 10, 2011 10:18 am

nisiprius wrote: Why would anyone care about a 1.16% expense ratio--even compounded for 30 years, that's 41%--if you are getting a 100% subsidy?
The 41% drag acts on your contribution and on the match. Assume you put in $100 and left it for 30 yrs at a return =0. At the end you have $59 of your initial contribution and $59 of the match, i.e. $118 instead of $200, so your 100% subsidy is effectively 18%. That would make me care.

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Post by Beagler » Mon Oct 10, 2011 10:36 am

It's my understanding (speaking with a good friend who manages corporate retirement plans for a big wire house) that the courts have usually decided against the employees in these cases. (I hope my friend is wrong.)
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