Ameriprise Employees Filed A Suit Over Expensive 401K Plan Fund Choices
10/13/2011 0 comments
Reuters recently reported the following:
Analysis: Latest 401(k) lawsuit highlights ongoing fee concerns | Reuters
(Reuters) - While workers can't do much when a stock market sell-off hits their 401(k) balances, they can speak up about poor investment choices and unreasonable plan fees. Now, more are taking those complaints to the courts as they bring lawsuits against employers they believe have allowed poorly-performing and overly-expensive funds into their retirement plans.
"They put people into their products, and they were not vetted and were excessively expensive," Jerome Schlichter, who is representing the Ameriprise employees, told Reuters in an interview. He says the company was "self dealing."
Based on MyPlanIQ's rating, Ameriprise Financial 401(k) Plan has an overall score 19% out 100%. Here are the more detailed analysis:
Diversification -- Rated as average (44%)
Fund Quality -- Rated as poor (3%)
Portfolio Building -- Rated as below average (12%)
Overall Rating: below average (19%)
The 401K plan consists of 25 funds. These funds cover only 3 major assets: US Equity, Foreign Equity, Fixed Income.
The actual fund lineups and their ratings:
Asset Class | Ticker | Name | Description | Rating |
---|---|---|---|---|
INTERNATIONAL EQUITY | ||||
Foreign Large Blend | AIZAX | AllianceBernstein International A | AllianceBernstein International | 23% |
US EQUITY | ||||
LARGE BLEND | ALEIX | RiverSource Disciplined Equity I | RiverSource Disciplined Equity Fund | 59% |
LARGE GROWTH | VIGIX | Vanguard Growth Index Instl | Wellington Trust Large Cap Growth Portfolio | 81% |
LARGE VALUE | RSEDX | RiverSource Diversified Equity Income R5 | RiverSource Diversified Equity Income Fund | 35% |
LARGE VALUE | RSEYX | RiverSource Equity Value R5 | RiverSource Trust Equity Index Fund III | 35% |
Mid-Cap Growth | VMGIX | Vanguard Mid-Cap Growth Index Inv | Wellington Trust Mid Cap Growth Portfolio | 57% |
MID-CAP VALUE | RMCVX | RiverSource Mid Cap Value R4 | RiverSource Mid Cap Value Fund | 36% |
MID-CAP VALUE | RMCVX | RiverSource Mid Cap Value R4 | RiverSource Mid Cap Value Fund | 36% |
Small Growth | ALSRX | Alger SmallCap Growth Institutional I | Alger Small Cap Fund | 67% |
SMALL VALUE | JASCX | James Small Cap | James Small Cap Fund | 77% |
US EQUITY | AMP | Ameriprise Financial Inc | Ameriprise Financial, Inc. Common Shares | |
FIXED INCOME | ||||
Intermediate Government | VFIUX | Vanguard Interm-Term Treasury Adm | RiverSource Government Income Fund | 59% |
Intermediate-Term Bond | RDBIX | RiverSource Diversified Bond I | RiverSource Diversified Bond Fund | 45% |
Other | ||||
Moderate Allocation | IDMYX | RiverSource Balanced R4 | RiverSource Balanced Fund | 26% |
ROOT | CASH | CASH | Evergreen Money Market Fund | |
ROOT | CASH | CASH | RiverSource Trust Money Market Fund I | |
ROOT | CASH | CASH | RiverSource Trust Stable Capital Fund I | |
Target Date 2000-2010 | RSSPX | RiverSource Retirement Plus 2010 Y | RiverSource Retirement Plus 2010 | 11% |
Target Date 2011-2015 | RSFNX | RiverSource Retirement Plus 2015 Y | RiverSource Retirement Plus 2015 | 26% |
Target Date 2016-2020 | RSNFX | RiverSource Retirement Plus 2020 Y | RiverSource Retirement Plus 2020 | 11% |
Target Date 2021-2025 | RSMEX | RiverSource Retirement Plus 2025 Y | RiverSource Retirement Plus 2025 | 7% |
Target Date 2026-2030 | RPTYX | RiverSource Retirement Plus 2030 Y | RiverSource Retirement Plus 2030 | 14% |
Target Date 2031-2035 | RPOYX | RiverSource Retirement Plus 2035 Y | RiverSource Retirement Plus 2035 | 22% |
Target Date 2036-2040 | RPFYX | RiverSource Retirement Plus 2040 Y | RiverSource Retirement Plus 2040 | 21% |
Target Date 2041-2045 | RRPYX | RiverSource Retirement Plus 2045 Y | RiverSource Retirement Plus 2045 | 30% |
From the above, one can see that RiverSource funds have very low ratings. These funds are expensive. For example, RiverSource Diversified Bond I (RDBIX) has 0.49% expense ratio, compared with Vanguard Total Bond Market Index Adm (VBTLX).
Here is the performance between RDBIX and VBTLX:
Portfolio Performance Comparison (as of 10/13/2011)
Portfolio/Fund Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
---|---|---|---|---|---|---|
RDBIX | 2% | 54% | 9% | 164% | 5% | 79% |
VBTLX | 3% | 121% | 8% | 163% | 6% | 118% |
See RDBIX vs. VBTLX for more detailed comparison.
Interested readers can compare other funds using MyPlanIQ comparison tool.
The following are the model portfolio performance, compared with Simple Is Better (SIB) 3 Core Asset ETF portfolios.
Performance chart (as of Oct 12, 2011)
Performance table (as of Oct 12, 2011)
Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
---|---|---|---|---|---|---|
Ameriprise Financial 401(k) Plan Tactical Asset Allocation Moderate | -3% | -17% | 5% | 58% | 5% | 47% |
Ameriprise Financial 401(k) Plan Strategic Asset Allocation Moderate | -1% | -20% | 6% | 32% | 0% | -10% |
Three Core Asset ETF Benchmark Tactical Asset Allocation Moderate | 7% | 96% | 4% | 41% | 4% | 41% |
Three Core Asset ETF Benchmark Strategic Asset Allocation Moderate | -1% | -20% | 7% | 33% | 2% | 2% |
So not only the plan provides minimum diversification (only three major asset US stocks, International Stocks and Bonds), it also has many low quality and expensive funds. No wonder the plan participants rebeled.
Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols: AMP, SPX, COMP, SPY, VTI, EFA, AGG, 401K Investments, Portfolio Management
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