Ameriprise Financial, Inc. (NYSE: AMP) is the successor to American Express Financial Advisors (AEFA), which was a subsidiary of American Express Company. In 2005, American Express launched a spin-off of AEFA as an independent company, which became effective in 2006. The company’s headquarters are in Minneapolis, Minnesota.
The firm began in 1894 Investors’ Syndicate but did not start marketing mutual funds until 1940. In 1949, it was renamed Investors Diversified Services, Inc., perhaps better known as “IDS”. In 1984, it was purchased by and operated thereafter as a subsidiary of American Express Corporation. The company thrived on the well-respected American Express identity and changed its name to American Express Financial Services in 1994. Yet, the company endured some embarrassing press which perhaps led to a name change and spin-off from American Express in 2006.
In 2007, Ameriprise Financial states it has 2.8 million individual, business and institutional clients and more than $474 billion in assets “owned, managed and administered by the firm”. It claims over 12,000 representatives, ranking it third largest in sales force in the U.S. securities industry. It also claims to have the largest number of Certified Financial Planners, is one of the fastest-growing annuity providers and that its insurance subsidiaries combine to make it the nation’s 18th largest life insurance company.
The company charges its clients a flat fee for personal financial plans, which typically range from $500 – $5,000. Its advisors also receive commissions when they sell their clients mutual funds, annuities, insurance and various other investment products. The status of fee-based investment advisory services is now uncertain because of eminent changes in regulations regarding such services.
Our law firm represents institutional and individual investors nationwide with significant losses in their portfolios, retirement plans or investment accounts. Our attorneys and staff have more than 100 years of combined experience in the securities industry and in securities law. Several of our lawyers served for years as Vice President or Compliance Officer of brokerage firms.
Each lawyer and staff member of our firm is devoted to assisting investors to recover losses caused by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent. We have handled over a thousand cases against hundreds of large and small investment firms, including claims against IDS, American Express Financial Services and Ameriprise Financial.
Call us at (800) 259-9010 or contact us through our website to arrange a free confidential consultation with an attorney to discuss your experiences with an investment advisor or financial firm which resulted in losses.
The National Association of Securities, Inc. fined Ameriprise Financial Services $12.3 million in connection with its receipt of directed brokerage in return for providing preferential treatment to certain mutual fund companies. The conduct occurred when the firm was known as American Express Financial Advisors.
The Securities and Exchange Commission also sanctioned the firm for related conduct. Ameriprise agreed to these fines and sanctions without either admitting or denying the claims.
NASD found that from January 2001 through December 2003, Ameriprise operated two “shelf space” or revenue sharing programs in which participating mutual fund companies paid a fee for preferential treatment by Ameriprise. That treatment included enhanced access to Ameriprise’s sales force, including participation in conferences and meetings, distribution and display of marketing materials at Ameriprise branches, and in-office visits with Ameriprise registered representatives.
The NASD further stated that Ameriprise promoted the funds on its internal website, identifying the mutual funds as “Preferred Providers,” and posted sales literature for the funds as well as information about the funds and their fund managers. Ameriprise also charged its advisors reduced sales ticket charges for the sale of Preferred Provider funds. None of these benefits were available to non-participating mutual funds. Although Ameriprise sold funds offered by at least 32 fund companies during the period at issue, 24 were Preferred Providers.
According to the NASD Seven of the 24 fund complexes directed approximately $41 million in mutual fund portfolio brokerage commissions to Ameriprise. This was accomplished by directing such to the trading desks of clearing firms designated by Ameriprise, and the clearing firms then remitted a portion of the trading commissions — generally 75 to 86 percent — to Ameriprise.
An arbitration panel for the NASD ordered an Ameriprise subsidiary to pay up to $9.3 million to three retired American Airlines pilots for investing their retirement savings into high risk and high fee mutual funds.
The NASD Arbitration Award states the broker initially purchased products from the American mutual funds group, then liquidated the funds between 1998 and 2003, and then directed the pilots’ money into more aggressive Rydex funds that he traded on a nearly daily basis.
This ruling was the second significant payment to Ameriprise clients who claimed that company’s brokers negatively spent their clients’ retirement funds on inappropriate investments. Just last September, Ameriprise agreed to settle a case by 32 former Exxon Mobile Corp. employees for $16.3 million—$13.8 million in restitution and $2.5 million for failing to properly supervise the broker involved.
In its ruling, the NASD said the broker persuaded Exxon employees to retire early by cashing out company-sponsored investment plans and reinvesting the funds with Securities America. Even though there were investment losses, the broker said he could win the retired investors returns between 11.5% and 18%. Ameriprise also agreed to hire a consultant to review the way the company marketed investment recommendations to retired workers.
Ameriprise Financial Inc. (AMP) will pay $27.5 million to settle a fiduciary breach case filed by its retirement plan participants. The plaintiffs contend that the financial firm cost them millions of dollars in excessive fees. The agreement was reached just weeks before the 401k lawsuits were set to go to trial. Even though Ameriprise is settling, the firm is not denying or admitting to the alleged breaches.
The plan participants filed their case in 2011 against the firm and the committes tasked with supervising Ameriprise's employee benefits administration and 401(k) investments. The plaintiffs said that the investments in the 401(k) plan included money from the firm’s RiverSource Investments subsidiary and that both companies were paid fee revenues from the plan dollars of employees.
Under the deal, Ameriprise will not have to modify its plan but it will perform a request-for-proposal bidding process for investment consulting services and recordkeeping services, as well as other modifications. Aside from direct expense reimbursements from the plan, the firm cannot get paid for the administrative services it provides to the plan. Ameriprise also must continue to pay a recordkeeper, offer participants the required plan fee disclosures, and consider using separately managed accounts and collective investment trusts.
Recently, experts at the National Association of Plan Advisors 401(k) Summit gathered to talk about the developing legal risks that are starting to impact advisers and retirement plans. Among the areas ripe for 401(k) cases are the failure to swiftly abide by fee disclosure regulations and deals involving plan providers having discretion over employee stock ownership plans and fund menus. The number of 401K lawsuits has been growing over the last few years.
Aside from the Ameriprise case, Lockheed Martin Corp. recently settled a 401(k) lawsuit for $62 million to resolve employee allegations that it mismanaged its retirement plan. Over 108,000 participants were represented in the case, which alleged excessive fees that were imposed and concealed, hurting investment returns.
Underperformance of its “stable value” fund option was blamed on portfolio managers who were too conservative with their investment choices. The defense contractor, however, maintains that it did nothing wrong.
In 2013, International Paper Co. paid $30 million to settle current and ex-employees claims alleging that its 401(k) plans violated the Employee Retirement Income Security Act. The plaintiffs alleged that International Paper kept up its own publicly traded stock as an investment choice, paid excessive investment management and recordkeeping fees, and fraudulently reported performance histories for the funds of the plans. It too denied the allegations.
And there are other cases, including Tibble v. Edison. That class action case has participants in the Edison International-sponsored plan contending that they also were charged excessive fees.
While the lower courts sided with the plaintiffs, finding that the company failed to act in participants’ best interests when selecting mutual fund retail-class shares (rather than the less expensive institutional class ones), a district court and an appeals court sided with the defendant.
Edison said that because of the statute of limitations under ERISA, participants are only allowed to sue based on funds that had been in the plan for six years or less. Because of this, argued the company, it isn’t possible to hold it liable for all of the funds under dispute. Now, it’s up the U.S. Supreme Court to issue a ruling.
Ameriprise to pay $27.5 million settlement in 401(k) fiduciary breach suit, Investment News, March 26, 2015
Lockheed Martin to pay $62 mln to settle 401(k) lawsuit, Reuters, February 20, 2015
International Paper Pays $30 Million Over 401(k) Claims, The Wall Street Journal, October 1, 2013
More Blog Posts:
Ex-Ameriprise Adviser Pleads Guilty To Nearly $1M Fraud, Stockbroker Fraud Blog, October 16, 2014
Fidelity Investments Settles Class Action Lawsuits Over 401(K) Plan for $12 million, Stockbroker Fraud Blog, September 5, 2014
Investor Files Securities Case Against Fidelity Over Float Income Investments Involving 401(K)s, Institutional Investor Securities Blog, May 6, 2013