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“Ameriprise sets aside $40M for private placement claims.  Amount equals about 10% of total client losses on Reg D notes later deemed fraudulent by the SEC”

This quote, taken from today’s issue of Investment News essentially means that Ameriprise (American Express Financial Advisors) estimates that they lost their clients $400 MILLION.  Now, you may think, $400 Mil is not that much when compared to the total amount of investment dollars Ameriprise manages for clients, however, I’m thinking of the philosophical implications of these losses…not so much the dollar amounts.

Ameriprise is a company who, like so many other financial services firms, advertises that they’re on the client’s side, 100% of the time.  Not true.  I worked for AMEX Financial Advisors and their business runs the same today as it did when I was there in the late 1990′s.  Internally, the side you don’t see unless you work there, is a meritocracy based on your “production numbers”.  That is, the more revenue you earn from your client’s accounts, the better an advisor you are in the eyes of management.  And the pay can be very lucrative for big producers through innumerable bonuses and payouts.

Guess what products have a great payout when sold?  That’s right!  Privately placed products such as the one’s sold by AMEX financial advisors.

So, as I’ve stated before, investing is not rocket science.  You don’t need private investment vehicles that are expensive, and often times unregulated to make a lot of money in the markets!!  You DO need discipline, common sense, and some decent, non-sales driven financial advice.

Just be aware of the risks involved when dealing with big, multi-million dollar firms who push “products” with commissions, kick-backs, tie-ins, any sort of payout trail, and generally seemingly expensive “financial hooks”.  You can’t go too wrong by remembering that the bigger the cost for an investment generally means that the performance is inferior.

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