Sep. 28, 2005 - Ameriprise: American Express Reprise

I've written a few posts about the difference between financial advisers who have a fiduciary responsibility to their clients and those who do not.  (See The Cost of Confusion and Whose Interests?)

The subject of The Cost of Confusion post, American Express Financial Advisors (AEFA), is about to be spun off from the American Express empire and reincarnated as Ameriprise Financial -- a stand-alone financial juggernaut with more than 2.5 million clients and $400 billion in assets under management.  You'll be hearing a lot about Ameriprise in the coming months with an onslaught of advertising as they seek to establish a new identity.

The underlying business, however, remains the same.

To recap, AEFA is the company that State of New Hampshire regulators found to be defrauding clients by providing its advisers with incentives to push in-house mutual funds, even when better performing alternatives were available. 

How did this happen?  The company offered clients a "financial plan" which basically amounted to a sales pitch for American Express financial products.  New Hampshire regulators referred to these financial plans as "cookie cutter."  To add insult to injury, clients actually paid for these financial plans believing they were getting objective advice from a trusted adviser. 

Here's the kicker.  AEFA's crime was not that it engaged in this behavior, but rather that the company didn't disclose these conflicts of interest to prospective clients in advance.

In other words, it's okay in the financial services industry for clients to be duped into less than desireable investments just as long as they are told about it in advance.  That's why companies put together nice little "disclosure" documents and brochures hoping that clients will not actually read all the fine print or ask meaningful questions.

Doesn't that make you feel all warm and fuzzy about seeking financial advice?

That is why fiduciary responsibility is so critical.  Advisers who sell investments or insurance products DO NOT have a fiduciary responsibility to act in your best interests.  Instead, they are free to act in THEIR best interests just as long as they tell you about it in advance.

So will things be any different with the new and improved Ameriprise?  In the words of their Chairman and CEO, James Cracchiolo, as reported in today's Wall Street Journal:

"By offering a combination of investment and insurance products, within the context of a comprehensive financial plan, we help our clients not only grow but protect their assets."

Sounds like the same old program to me.  The problem is you can't be sure whether he really means to "grow and protect" your assets or just Ameriprise's.  Buyer beware.

Oct. 25, 2005 - Thank you

Oct. 25, 2005 - You're Welcome

Feb. 2, 2006 - Untitled Comment

Feb. 5, 2006 - Reply to Anonymous