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Ameriprise rips off member

By Bob Moeller
WEAC Member Benefits

April 2008

Financial Planning Seminars
Achieving Financial Independence

Don't buy investment products from life insurance companies

By Bob Moeller
It saddens me greatly to have to write an article like this one. It is absolutely disgusting to me that a huge company like Ameriprise (and a lot of other insurance companies) take advantage of elderly people who have no knowledge of these products and get no real education from the salespeople. One reason for this is that there is a conspicuous lack of life insurance company sales people who have any enforceable fiduciary responsibility.
Yet many people “trust” these people. I hear, “She used to teach in my school” or “Well, I know this guy from church.”

I have individual meetings with more than 600 members every year. I see these problems all the time. Those of you who have attended my seminar know that as a result of these meetings I have one simple rule that I recommend you follow. It is blunt. You shouldn’t buy any investment product (anything that builds a cash value) from any life insurance company. Period. Am I including TSAs here? Absolutely. Most advisers limit themselves to saying things like, “You should make sure you understand what you are buying before you agree to buy it.” This sounds great, but it is not what people do. I have met with more than 5,000 members individually over the past several years and almost never have I met with one who could explain his or her life insurance company product to me.

Readers: Please post this column on your school bulletin board.

By Bob Moeller
On October 23, 2007, the Wall Street Journal reported that the New Hampshire Bureau of Securities Regulation filed a complaint against Ameriprise accusing the company of forgery, document tampering, and failing to deliver nearly 500 financial plans that customers had already paid for. (The case is still pending.) The article went on to say that “regulators in Alabama and Massachusetts have also said they are investigating Ameriprise over similar allegations.”

My advice, after reviewing members’ investments for many years, is to simply to avoid investment products from life insurance companies, particularly a company like Ameriprise, unless the company’s agents acknowledge in writing a legally enforceable fiduciary responsibility.

Now let’s learn a little about a Wisconsin incident. A retired member who prefers to remain anonymous asked for my help. She already had a TSA with Ameriprise. She had a visit with her Ameriprise agent. While meeting with the agent, somehow she ended up buying a Variable Universal Life Insurance policy. Nothing was explained to her. She was handed a booklet by the agent as he left. She did not understand what she had done. Right away, $6,000 was removed from her TSA to pay for the first year’s premium. I suggested she talk to the agent to try to revoke the sale. I suggested also she contact the Wisconsin insurance commissioner. According to her formal complaint filed with the insurance commissioner, the agent “never mentioned that I would be expected to pay $6,000 each year, perhaps for my entire life. I cannot afford this.”

I personally called the agent on her behalf. His basic attitude would be best described by one comment he made acknowledging that yes, she did seem to be a little upset about the transaction. Did he offer to try to resolve it since she made it quite clear she did not realize what she had “purchased” and could not afford it? Absolutely not. I point blank asked if he had any official designations that required him to have a fiduciary responsibility to only sell her products that were in her best interests, not his. He freely acknowledged that he had no responsibility to sell her a product that was in her best interests. Recently, I spoke with him again. Now he is in the “it’s out of my hands” mode.

The member is now just about 65. I have a copy of the Ameriprise Universal Life policy details. It is a rip-off, and no salesperson interested in really serving a client would ever recommend this to someone nearly 65 year old. Was it carefully explained to her? NO! Her written note to me says, “I do know that I never would sign a paper agreeing to an insurance policy – that cost $6,000.” Only later did she realize that this deal would have cost her $6,000 PER YEAR, which she emphatically says was never mentioned to her. Did she write out a check for $6,000? No, that might have alerted her. She was convinced to sign several papers, one of which authorized Ameriprise to remove the money from one of her accounts.

Ameriprise has refused to let her out of this bad deal. The member will let the policy lapse, thereby losing the $6,000. IF she were to continue with the policy, she would be paying $6,000 per year. Let’s say, for example, she continued paying that for 16 years, or $96,000. IF the expenses charged are the “guaranteed” expenses, and IF the gross rate of return is 8% per year, the policy value beginning year 17 (when member will be 80) would be $0. The death benefit would be $0. The cash surrender value would be $0. So had the member continued with the policy, and had the audacity to live to be 80, she would have paid $96,000 and gotten $0 in return.

I will be happy to send a copy of this page to anyone who wishes to see how Universal Life Insurance rips most members off, particularly senior members who need to ensure they have money to live on rather pay for inappropriate life insurance.

I specifically told the agent that this article was being written and suggested he might want to talk to his supervisors about the fact that this was an inappropriate sale. I also suggested they might want to discuss it with me. I have heard nothing. The member has formally complained in writing to the Wisconsin insurance commissioner, who sent her a form letter and to my knowledge took no action. Why? Probably because Ameriprise did indeed deliver documents and got signatures from an elderly member and thus probably Ameriprise technically did not break the law. I don’t know what the Wisconsin insurance commissioners office does regarding consumer advocacy, but I’m not encouraged by what I’ve seen.

Posted April 9, 2008

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