Ameriprise has consistently recommended its own RiverSource (now renamed Columbia – fund companies love to change names when the old name is associated with unpleasantry) funds to its clients despite their high expense ratios and often poor performance while ignoring better alternatives. This is what happens when an advisor eschews fiduciary duty and operates under the FINRA suitability rule. Stuffing accounts full of their own proprietary mutual funds is a very effective way of transferring clients’ wealth to the owners/shareholders of the firm.
However, ERISA law requires that the sponsor of an employee retirement plan must act as a fiduciary. Ameriprise tried to do the same thing with its plan participants and offered them its own funds as investment choices within their 401(k) plan. The result is a lawsuit by their own employees/plan participants. Apparently, they resent having to invest in the same funds that Ameriprise recommends to its clients! According to Barron’s “surely thousands of articles have been written on how to pick the best mutual funds and spot the worst. But here’s a tip that doesn’t often come up: If a fund company’s employees are suing for being forced to invest in their own firm’s mutual funds, you probably want to steer clear”. We agree.
Perhaps Tommy Lee Jones, the new Ameriprise spokesperson, can address this in his next commercial. The expensive high-profile ad campaign has been running during award shows and major sporting events. Jones is seen leaning on a fence describing how Ameriprise has “worked hard for its customers since 1894″. However, as the New York Times points out, Ameriprise has only existed since 2005 when it was spun off from American Express. In the end, who pays for these expensive commercials? Apparently, it’s Ameriprise clients and their 401(k) plan participants. At least one of those groups has realized that it’s not a good deal.
Originally Posted at Talis Advisors on February 29, 2012 by Brent Everett.