Tommy Lee Jones, Ameriprise and the Double-Deal

Thursday, November 15, 2012 at 10am
By John Friedman

I like Tommy Lee Jones, the actor. He can play lunatic nuclear-bomb-thrower as well as wise-old self-sacrificing native American father-in-law hero and everything in between. He also plays cops a lot — good cops. And these days, as time changes his face, he can do a fantastic quiet melancholy without saying a word, his craggy face saying it all.

Right now, though, many of us are seeing him as a pitchman for Ameriprise, a context I find quite discombobulating. Founded in 1894, the ad says, Ameriprise has always been committed to putting clients first.

That’s most definitely not my take on Ameriprise.

So the first time I saw the ad, my thought was, Tommy, did you really have’ta?

*  *  *

In most segments of the Financial Services Industrial Complex — the FSIC — bigger truly is better, and the focus is on HNWs and UHNWs. These abbreviations, quite familiar to everyone in the industry but gobbledy-goop to everyone else, stand for High Net Worth and Ultra High Net Worth, as in, We’re targeting HNW individuals and families, or, more simply and more jargon’y, We’re targeting UHNWs.

So just about all financial planners and money managers and insurance sellers and bankers, etc., etc., etc., want to work exclusively with HNWs and UHNWs. Many succeed.

(Are you curious about what numbers go with those tags? As best I know, there is no firm agreement on the numbs, but I can tell you this: a BigDeal Silicon Valley lawyer once told me that $50 million liquid was, by his yardstick, big money. That was 1995, and when he said liquid he was referring to wealth held in discretionary assets, i.e., assets that could be spent, on pretty much a moment’s notice, when desired, e.g., not the house(s) and not the business(es), but yes the stocks and yes the bonds.)

Ameriprise, to its credit, works with NFs (an abbreviation I might have just termed; I use it here to stand for Normal Folks). In fact, way back when, at the dawning of my career in financial planning, I interviewed with Ameriprise (back when it was still part of American Express) and was told that standard operating procedure for all newcomers was to require them to dial-for-dollars, every Saturday morning, all morning long, with AmEx cardholders being their warm-call targets, with no minimum account floors or anything else along those lines, the mantra being to simply get them in the door as paying customers.

Sure, Ameriprise advisors, like everyone in the FSIC, are exceedingly happy to work with HNWs and UHNWs, but most of them start with NFs and, as best I can tell, many of them do a quantity business (lots of customers and clients) throughout much or all of their career.

So kudos and gosh-speed to all of you Ameriprisers who work with NFs: they need able assistance, and the FSIC is, on the whole, really just not that into them.

And kudos also to the many of you Ameriprisers who are great people doing many great things for many great communities out there.

Such are the positives as I see them.

*  *  *

And then there are the negatives.

I’m sorry to say that I cannot recall ever having seen someone with Ameriprise in their life whose overall financial health was improved as a result of that relationship.

And I also cannot recall ever seeing someone who thought that Ameriprise had been good for them.

To these broad statements, though, I add one exception, which is that I have seen people who, but for Ameriprise, would not have IRA accounts in their lives. As it happens, then, and within my admittedly limited number of data-points on this topic, I’ve seen people who knew that Ameriprise had been good for them insofar as it had gotten them to open up and then contribute to IRAs.

But after that . . .

*  *  *

In a bit of delicious irony, some of the NFs (normal folks . . . ) who work within Ameriprise, i.e., Ameriprise’s own employees, have been a bit P.O.’ed at the company for allegedly larding up its 401k plan with . . . drum roll please . . . Ameriprise-centric mutual funds — so much so that, about a year ago, some of them got together with some lawyers and filed a class action law suit.

In a regulatory filing from just last week, Ameriprise described the situation thusly (see bottom of Page 46):

The action alleges that Ameriprise breached fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), by selecting and retaining primarily proprietary mutual funds with allegedly poor performance histories, higher expenses relative to other investment options and improper fees paid to Ameriprise Financial or its subsidiaries. The action also alleges that the Company breached fiduciary duties under ERISA because it used its affiliate Ameriprise Trust Company as the Plan trustee and record-keeper and improperly reaped profits from the sale of the record-keeping business to Wachovia Bank, N.A. Plaintiffs allege over $20 million in damages.

The Court held a hearing on the motion to dismiss on June 13, 2012, and the Company is awaiting the decision

 

In other words, some Ameriprise employees are saying, “Ameriprise, when you selected the menu of investments offered within our 401k plans, your selection process was driven, not so much by whether the investments were great or even decent investments for us employees to invest in, but, rather, because those investments would help you, Ameriprise, make, in at least a couple’a different ways, your bottom line each quarter. And, oh yea, you know those dollars that flowed to your bottom line? Well, a decent number of those dollars came straight out of our pockets, and did so in a way which is not OK under the law.”

*  *  *

So remember all the talk in here about the FSIC’s asset-gathering model and AUM fees? And remember how, for asset-gatherers, success is defined by the numbers of assets gathered, i.e., the grand-total dollar-amounts in all of the asset-gathering-business’s customer and client accounts? That’s what’s involved in the employees’ assertions here — that Ameriprise is viewing its employees’ 401k plans as assets to be gathered in a way that is not OK under the law.

Now it’s not unusual to see businesses with their hands in many different pots, steering good things from one of their pots to another of their pots — with each pot backscratching the other. It happens all the time, and most of the time it’s legal (if often a bit stenchy). So stock brokerages hawk their own products, and doctors send their own patients’ lab-work to labs the doctors own, etc., etc., etc.

But in some places it works better than others.

And it just so happens that a company’s own 401k plan is among the least great places for it to attempt to backscratch one part of its business with another part of its business, i.e., it’s a lousy place from which to gather lots of assets in order to bundle them into the company’s own asset-base.

This is where the phrase fiduciary duties, as used in the block quote up above, comes in, because it just so happens that a 401k plan, run by a company on behalf of its employees, is a place where the definition of doing the right thing gets a little bit more persnickety and little bit more demanding than usual, i.e., it’s a context in which you’ll find fiduciary duties.

Now, the exact places in which you’ll find those duties is complicated and beyond the scope of this piece, as is talking in detail about any particular element of fiduciary duties. Those are big topics.

For here it’ll suffice to say that, among the concepts that fall well outside of dutiful fiduciary compliance is that of double-dealing — or backscratching as I used the term above, or self-dealing as lawyers might call it. 

*  *  *

So even though FSIC companies sell their own stuff to their customers all the time (indeed, doing so is straight down the middle what may of them do), here in the 401k context it might be entirely possible (quite likely?) that Ameriprise bent over a little too far when making the selection of which funds would be on the 401k menu, and decided to make that selection in a way that, while providing an employee benefit (if an allegedly lessened one), was much more about providing top-line revenue and bottom-line profit generators for itself.

And, if it did indeed bend over a bit too far, then the claims mentioned above in the block quote are true.

*  *  *

Now I’m not saying that Ameriprise did breach its fiduciary duty. I don’t know that to be the case. For all I know, the law suit could just be a bunch of jerk employee crybabies and a bunch of nasty greedy trial lawyers trying to make a quick, dirty buck.

But here’re a few things I do know:

   1. Ameriprise is actively fighting this lawsuit. If you were in its position, mightn’t you think about settling and/or sprucing up your 401k offering to have some funds in there that did not smack of being more about your interests than those of your employees? I mean, after all, it opens you up to people saying to NFs, “You know what Ameriprise is like? They are soooooooooo very much only looking out for Number 1 that their own employees are suing them for having too many crappy investments in the company’s own 401k! — crappy investments that happen to be part of Ameriprise’s business, either via ownership or some other arrangement that makes Ameriprise view those funds more favorably than it otherwise would. Clearly those employees do not want to eat their own dog food! (at which point the listener looks confused, and the conversation turns to an explanation of what dog-food-eating is all about).

   2. I have never seen a non-Ameriprise account that included an Ameriprise-branded investment (note that Ameriprise-branded mutual funds went the way of the dodo mid-decade last decade, at about the time Ameriprise was spun out from American Express, and that, back when they existed, Ameriprise and American Express funds were also a target of litigation).

   3. Most small Ameriprise-housed IRAs I’ve seen have suffered from the same malady of which the 401k litigants complain: they’ve been overly stuffed with Ameriprise-centric investments (which these days go by the names Columbia and Riversource and, reading between the lines, you can’t help but wonder if the Ameri*** branded mutual funds ended up too too tarnished to continue under their then-name).

  4. Ameriprise is a public company, which means, among other things, that it has to manage its day-to-day business in a way that makes it likely it’ll hit its quarterly reporting numbers. As best I can tell, financial services companies that are publicly held tend to do the wrong thing (because that’s where the money is) a bit more readily than companies that are not publicly held (Vanguard be thy name, though it’s ownership structure has its own demerits . . . ).

  5. I have never advised anyone to get-ye to Ameriprise. If someone wants to set up, say, an IRA and do it quickly and easily in downtown SF, I’d say get ye to the Fidelity branch at Market and Monty. And if someone wants to go with something that’s better but that doesn’t have a branch in SF (or anywhere else, for that matter), then I’d say get ye to your phone or browser and make your connection with Vanguard.

*  *  *

So, Tommy, just out of curiosity: do you have any of your own money invested with Ameriprise? Sure, you’re a UHNW (unless you’re also a UHS — an Ultra-High Spender), so it’s not a very good fit for you — the best money managers would be oh-so-happy to gather your assets — but there’s that thing about putting your money where your mouth is, you know? Right next to the dog food you would’a just ate?

And just to let you know: Tommy, every time I see one of your Ameriprise ads, I see your you devalued. Pretty soon you’ll look less like the wise-man in Missing and more like the lunatic in Under Siege, but now updated to have a whole lot more facial crag and crevice (soon to be crevasse?).

So, please, Tommy, won’t’c’h’ya please stop pitchin’ Ameriprise?

 

 

About 1800 words (about a 20-minute read sans linked-to items)

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  1. Posted by Joe Advisor on Tuesday, February 5, 2013 at 7am
    If Tommy knew about the SIV's Ameriprise held and the $350 million in unsecured debt they issued at 7.5% maybe he wouldn't hitch his wagon to such a corrupt company.
  2. Posted by John Joseph on Saturday, March 7, 2015 at 7pm
    Wow. I came across your article and must say you come off as a self aggrandizing, misinformed individual. I'm not associated with Ameriprise Financial but found your assessment of their firm unprofessional and arrogant, frankly, as an independent financial advisor myself, Im not sure why you would feel compelled to write an article with so many baseless claims and self admitted lack of exposure. Ameriprise, like many financial firms, has had issues in the past but are definitely heading in the right direction. Helping the "NF" as you label them is what this country needs. Your broad stroke assessment is clearly biased, pathetic and juvenile. I hope you think twice before you write another article bashing Ameriprise, or any other financial firm for that matter, because its not flattering. Having to bash another shows weakness in your character and that's not good for a financial advisor/planner. Perhaps it works with your clientele but maybe they're as narcissistic as you- I'm not going to judge because i don't know your clients and I wouldn't want to make an assumption with no facts (like your blog). If I were to change firms, I'd consider Ameriprise because of the values they represent and the benefits they provide for clients. You, sir, should consider writing about what you actually do to help rather than have to put down others to try to get ahead. One more thing- tommy lee jones still rocks!