Tuesday, 2 June 2020

Review of Ameriprise Financial Services

Review of Ameriprise Financial Services
16 May
1:10

Update on Friday, May 15, 2020

Ameriprise Financial Services is a global institution that specializes in financial planning, investments and insurance. The firm is headquartered in Minneapolis but has locations throughout the United States, as well in Europe and Asia.

Ameriprise is one of the largest investment firms in the country. The firm’s investment management business in the U.S. currently has over $313 billion in assets under management (AUM), overseen by more than 12,000 employees working in an advisory capacity.

All information included in this profile is accurate as of May 15, 2020. For more information, please consult Ameriprise Financial Services’ website.

Assets under management: $313,282,403,322
Minimum investment: Depends on program, lowest is typically $25,000
Fee structure: A percentage of AUM, up to 2.00%; hourly charges; fixed fees
Headquarters: 707 2nd Avenue South
Minneapolis, MN 55402
ameriprise.com
(612) 671-3131

Overview of Ameriprise Financial Services

Ameriprise Financial Services launched in 1894 when its founder, John Tappan, started the company by getting 1,000 people to invest $5 each. Since the firm opened over 125 years ago, it has expanded into a global financial institution with locations across the U.S., as well as in Europe and in Asia. Ameriprise is a publicly traded company on the New York Stock Exchange (NYSE) and is owned by outside investors.

In the U.S., Ameriprise Financial Services has 13,556 employees, of which 12,044 work in investment advisory positions. These advisors oversee over $313 billion in assets under management. Searching through the firm’s website, it appears many of the advisors on staff have professional designations, such as the certified financial planner (CFP), chartered financial consultant (ChFC), chartered retirement planning counselor (CRPC) and accredited wealth management advisor (AWMA) designations.

What types of clients does Ameriprise Financial Services serve?

Ameriprise Financial Services primarily works with individual investors, who make up just under 1 million of the firm’s clients. The vast majority of these are non-high net worth (905,608), as defined by the SEC. With that being said, Ameriprise Financial Services also works with thousands of high net worth individuals, who make up close to a third of the firm’s total AUM. (For reference, the SEC defines a high net worth individual as someone with at least $750,000 under management or a net worth of over $1.5 million.)

Besides individuals, Ameriprise Financial Services also works many pension and profit-sharing plans, charitable organizations, state and municipal government entities, corporations and other businesses, along with a few insurance companies and trusts/estates.

The minimum investment needed to open an account with Ameriprise Financial Services depends on the program, starting at $25,000 for some and going up to $500,000 for another. Some of these program minimums are based on the total amount invested by your entire household. If you have a family member or roommate already investing with Ameriprise Financial Services and they are past the household minimum, you could open an account with as little as $2,000.

Each program also has a  maintenance minimum. After you sign up, you must have at least this much in your account to keep it open. If your investments cause the balance to fall below the required threshold, you’d need to replace the funds up to the maintenance minimum. The maintenance minimum is usually lower than the minimum investment. For example, it takes $25,000 to open an Active Portfolios® account, but the maintenance minimum is $20,000.

Minimum Investment Requirements By Program
Program Minimum to Open an Account
SPS Advantage $25,000 within a household; $2,000 per account
SPS Advisor $100,000 within a household; $2,000 per account
Active Portfolios® $25,000
Select Separate Account $100,000 to $500,000, depending on the strategy and portfolio selected
Vista Separate Account $100,000
Investor Unified Account $250,000
Access Account $25,000 to $50,000, depending on the portfolio

Services offered by Ameriprise Financial Services

The advisors at Ameriprise Financial Services offer two main services: portfolio management and financial planning. For portfolio management, the firm offers discretionary programs, where the advisor can make trades on your behalf, and non-discretionary programs, where you must approve all trading decisions. The firm’s total assets under management is pretty evenly split between discretionary and non-discretionary accounts.

Additionally, advisors at Ameriprise Financial Services can build a financial plan for clients that covers topics like retirement, budgeting and charitable planning, on top of investment management. The firm also sells a wide range of financial products including insurance, annuities, credit cards, college savings plans and retirement plans.

If you don’t need advice, Ameriprise Financial Services is a stand-alone broker so you can make investments on your own, without an advisor.

Here is a full list of services that you may have access to through Ameriprise Financial Services:

  • Investment advisory services and portfolio management (wrap fee accounts; discretionary and non-discretionary)
  • Financial planning
    • Retirement planning
    • Trust and estate planning
    • Legacy planning
    • Education planning
    • Business planning
    • Tax planning and management
    • Spending analysis and budgeting
    • Long-term care planning
    • Debt management
    • IRA and 401(k) rollovers
    • Divorce planning
  • Insurance and annuities
  • Workshops and seminars
  • Newsletters and publications
  • Brokerage services
  • Credit cards

How Ameriprise Financial Services invests your money

Ameriprise Financial Services does not just follow one investment strategy. The firm offers a wide range of different programs and investment products so that clients can decide how they want their money handled.

When you meet with an Ameriprise investment manager, they will get to know your financial goals, risk tolerance and portfolio size. It is also up to the client whether you want the manager to have more authority in managing your portfolio (i.e., discretionary management) or whether you’d like to make the trading decisions yourself (non-discretionary).

From there, the advisor will suggest the program that is the best fit for your goals and portfolio size. Not all programs offer all investments. For example, Active Portfolios focuses on mutual funds and ETFs, while SPS Advantage can also include stocks, bonds, REITs, hedge fund offerings and other products.

Once your portfolio is in place, you will meet with your advisor regularly — at least once a year —  to adjust your strategy as needed.

Fees Ameriprise Financial Services charges for its services

For its investment programs, Ameriprise Financial Services charges clients a percentage of assets under management. You negotiate your rate with your advisor when you first sign up. To determine a client’s rate, the firm will consider factors like the size of your portfolio, your desired investing strategy and level of service needed.

The asset-based fee is made up of several parts. First, there is an advisory fee that can go up to 2% to cover the cost of designing and managing your portfolio. In some programs, the investment advisor can also charge a manager fee ranging from 0.10% to 0.80% to handle more complicated strategies. You could also owe a platform fee of up to 0.17% to cover trading costs and the support structure. Finally, in the SPS Advisor program, the firm can charge a small 0.03% Investments and Infrastructure Support fee.

Besides the aforementioned asset-based fee, you may also be responsible for trading costs that come up with your portfolio.

Investment Management Programs Fee Schedule
Fee Applicable Programs
Advisory fee: Up to 2.00% All Managed Investment Programs
Platform fee: Up to 0.17% Select Separate Account, Vista Separate Account, Investor Unified Account and Access Account Programs
Manager fee: Generally ranges from 0.10% to 0.80% Select Separate Account, Vista Separate Account, Investor Unified Account and Access Account Programs
Investments and Infrastructure Support fee: 0.03% SPS Advisor Program

If you sign up for financial planning, your advisor will charge a minimum fee of $500 per year, or $50 per month, to set up and oversee your plan. This is just the minimum amount and you could need to pay more, depending on the advisor and the complexity of your financial needs. The financial planner could also earn commissions from selling Ameriprise Financial Services insurance and investment products.

Ameriprise Financial Services’ highlights

  • Large selection of programs and investments: Ameriprise Financial Services offers a range of different investment programs and products. The firm is also a full-service broker-dealer, so you can make investments on your own. This gives investors plenty of options to create something that fits their unique situation, as they aren’t limited to one fund or portfolio.
  • Many advisors with high-end credentials: Searching through the firm’s records, we found many advisors with professional designations like the CFP, ChFC, AWMA and CRPC.
  • Low account minimums: Some of the Ameriprise Financial Services programs let you get started with a household account minimum of just $25,000. If others in your household are already clients and past this point, you could open your own account for just $2,000.
  • Affordable financial planning: The financial plan fees at Ameriprise Financial services start at $500 per year, or $50 per month. In comparison, the median cost of a financial plan is $2,450 per year, according to Kitces, a blog for financial advisors.
  • Awards for service and advice: More than 300 advisors at Ameriprise Financial Services have been recognized as top performers from publications like Barron’s, Financial Times and Forbes. Ameriprise Financial Services also won awards for being a top fee-based advisor and for its customer service from the Temkin Group.

Ameriprise Financial Services’ downsides

  • Investment fees can potentially be very high: For portfolio management, Ameriprise Financial Services can charge an advisory fee up to 2.00%. Some of their programs also include an additional manager fee, platform fee and an investments and infrastructure support fee. In comparison, the industry average total advisor fee is 1.17%, according to a 2019 study by RIA in a Box.
  • Range in experience of advisors: While many Ameriprise Financial Services advisors have advanced certifications, such as the CFP and ChFC designations, some on the platform look like they are just starting out. Since you are depending on the individual advisor to design your portfolio, as opposed to an investment committee, as is the case at some other firms, you will want to thoroughly vet the advisor you’re paired with to make sure you are comfortable with their level of experience.
  • Incentive to recommend products with commissions: Advisors can make commissions by recommending insurance and investment products from Ameriprise Financial Services. This creates a potential conflict of interest, as advisors may be financially incentivized to make certain recommendations.

Ameriprise Financial Services disciplinary disclosures

If an investment firm or its employees or affiliate have any disclosures on record, the firm needs to report the incident on its SEC Form ADV filing as well as its official brochure. This could include criminal activities, regulatory fines or civil suits. Over the past four years, Ameriprise Financial Services had four incidents to report.

  • In August 2018, Ameriprise Financial Services paid a $4.5 million civil penalty to the SEC. The SEC determined that from 2011 through 2014 Ameriprise Financial Services did not have the right procedures in place to protect client funds from appropriation (embezzlement) and that the firm also failed to supervise five representatives who were violating certain securities laws.
  • The SEC also fined Ameriprise Financial Services in 2017 due to its involvement with F-Squared Investments, which made false statements about its ETFs. From 2010 to 2013, Ameriprise Financial Services included these false statements in its advertising while selling these ETFs. The SEC determined that Ameriprise Financial Services did not have the right procedures in place to catch this false information, so Ameriprise had to pay close to $8 million in fines.
  • From 2011 to 2013, a representative improperly handled wire transfers of $375,000 from five customers, who were also family members of the representative. Still, FINRA found that Ameriprise Financial Services should have had procedures to avoid this issue and fined them $850,000.
  • Finally, FINRA fined Ameriprise Financial Services $50,000 in March 2011 because one of the firm’s representatives forged client signatures on documents from 2003 to 2007. Ameriprise Financial Services learned about the issue in 2005 but didn’t complete its investigation until 2008, which is why they were fined.

Ameriprise Financial Services onboarding process

To get started with Ameriprise Financial Services, you first schedule a meeting with one of the firm’s advisors. One way to do so is by filling out the online meeting request form provided on Ameriprise’s website. You enter your contact information and suggest times that work for your schedule. Ameriprise Financial Services then will have a local advisor reach out to you.

Another option is to browse nearby advisors. You can enter your zip code and get a list of nearby advisors, along with their specialties, designations (if any), website and contact information. You can try scheduling with someone who seems like a good fit.

During the first meeting, the advisor will discuss your financial goals, risk tolerance and investment priorities. From there, the advisor will put together your investment recommendation and/or financial plan, depending on what you request. If you are happy with the recommendation, they will then set their fee and launch your plan.

From there, you’ll schedule regular check-ins at least annually to discuss your progress and update your plan as needed.

Is Ameriprise Financial Service right for you?

If you have a smaller budget but still want a professionally managed portfolio, Ameriprise Financial Services could be a good choice. You can use some of the firm’s programs with a minimum investment of just $25,000 and access a wide selection of products and programs. Additionally, you can find a local advisor in nearly any part of the country. Just pay attention to your rate before signing up because the firm’s fees can be on the high side, depending on what you negotiate.

On the other hand, if you have a larger portfolio and more complicated needs, you need to be careful about which advisor you’re matched with. The firm’s advisors have a wide range of experience. While some Ameriprise Financial Service advisors are highly credentialed, others are not.

The quality of your advisor is especially important because they design your investing plan as opposed to an investment committee, as is the case at some firms. Like selecting any financial service, you’ll want to make sure to do your research and ask any questions you may have to ensure you get the right fit for your situation.

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Source: https://www.magnifymoney.com/blog/investing/ameriprise-financial-services-review-ria/

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