WEBVTT 00:00:00.000 --> 00:00:02.060 Welcome back to the Deep Dive. Our mission here 00:00:02.060 --> 00:00:05.080 is, well, it's pretty simple. We take a huge 00:00:05.080 --> 00:00:07.500 stack of source material, you know, articles, 00:00:07.700 --> 00:00:09.599 financial reports, all of it, and we just distill 00:00:09.599 --> 00:00:12.359 it down. Right down to the pure, actionable knowledge 00:00:12.359 --> 00:00:14.859 you need to be really well informed. And today, 00:00:15.000 --> 00:00:17.960 we are diving deep. I mean, really deep into 00:00:17.960 --> 00:00:19.980 the inner workings of a financial institution 00:00:19.980 --> 00:00:22.940 that is, I think it's fair to say, foundational 00:00:22.940 --> 00:00:25.579 to the American economic landscape. It absolutely 00:00:25.579 --> 00:00:27.539 is. We're talking about Ameriprise Financial. 00:00:27.899 --> 00:00:30.640 Exactly. And, you know, this is a company with 00:00:30.640 --> 00:00:34.259 roots that stretch back 131 years. It's a genuine 00:00:34.259 --> 00:00:36.679 American titan that started before the turn of 00:00:36.679 --> 00:00:40.439 the 20th century. We're talking 1894. Wow. And 00:00:40.439 --> 00:00:44.219 it's just a compelling story. It's one of relentless 00:00:44.219 --> 00:00:47.539 evolution, massive strategic acquisitions, and, 00:00:47.640 --> 00:00:50.259 well. the inherent conflicts that come with managing 00:00:50.259 --> 00:00:53.060 assets on a trillion dollar scale. Okay, let's 00:00:53.060 --> 00:00:54.960 unpack this then. Our goal today is to trace 00:00:54.960 --> 00:00:57.719 Ameriprise Financial, that's ticker AMP on the 00:00:57.719 --> 00:01:01.299 NYSE, from its very humble founding in Minneapolis. 00:01:01.700 --> 00:01:04.659 Then we'll analyze its... frankly, staggering 00:01:04.659 --> 00:01:07.519 current metrics and its global operating structure. 00:01:07.879 --> 00:01:10.920 And then, and this is a big part of it, we're 00:01:10.920 --> 00:01:13.799 going to spend significant time examining the 00:01:13.799 --> 00:01:16.579 extensive list of criticisms, controversies, 00:01:16.579 --> 00:01:18.959 regulatory headaches, the regulatory headaches 00:01:18.959 --> 00:01:21.159 that have followed it throughout the modern era. 00:01:21.200 --> 00:01:23.650 And to give you that initial snapshot. This is 00:01:23.650 --> 00:01:25.849 a Minneapolis -based giant. It's a component 00:01:25.849 --> 00:01:29.030 of the S &P 500, been public since 2005, and 00:01:29.030 --> 00:01:31.090 it's really defined by its core business lines. 00:01:31.230 --> 00:01:33.010 Which are? Wealth management, asset management, 00:01:33.230 --> 00:01:36.290 brokerage, and insurance. They really specialize 00:01:36.290 --> 00:01:39.310 in comprehensive financial planning. But not 00:01:39.310 --> 00:01:41.450 for everyone. No, not for everyone. It's primarily 00:01:41.450 --> 00:01:43.569 targeted at affluent clients who are looking 00:01:43.569 --> 00:01:46.129 for long -term strategies. And here's where it 00:01:46.129 --> 00:01:47.709 gets really interesting. This is where the scope 00:01:47.709 --> 00:01:50.269 of this deep dive just broadens instantly. We 00:01:50.269 --> 00:01:52.689 are talking about a company that... Based on 00:01:52.689 --> 00:01:57.150 recent 2024 data, commands U .S. $1 .171 trillion 00:01:57.150 --> 00:02:00.010 in total assets under management. It's a number 00:02:00.010 --> 00:02:03.189 that's almost hard to comprehend. It is. That 00:02:03.189 --> 00:02:05.890 figure isn't just large. It places them among 00:02:05.890 --> 00:02:08.590 the largest financial players on the entire planet. 00:02:09.099 --> 00:02:12.520 To put $1 .171 trillion in perspective for you, 00:02:12.599 --> 00:02:15.180 you're talking about a pool of capital that is 00:02:15.180 --> 00:02:18.039 larger than the entire annual gross domestic 00:02:18.039 --> 00:02:21.680 product of several mid -sized G20 nations. Like 00:02:21.680 --> 00:02:24.240 Indonesia or Mexico? Unlike Indonesia or Mexico, 00:02:24.360 --> 00:02:28.360 it's just... It is simply colossal. It's colossal. 00:02:28.360 --> 00:02:30.740 And to understand that sophisticated trillion 00:02:30.740 --> 00:02:33.539 dollar structure of the modern Ameriprise, you 00:02:33.539 --> 00:02:35.659 absolutely have to start at the beginning. Right. 00:02:35.759 --> 00:02:38.699 It's a journey that really takes us from Minnesota 00:02:38.699 --> 00:02:41.460 farmland dreams all the way to global financial 00:02:41.460 --> 00:02:43.539 dominance. So let's start that journey. Section 00:02:43.539 --> 00:02:45.680 one. From Investor Syndicate to the American 00:02:45.680 --> 00:02:49.219 Express spinoff. The narrative begins simply 00:02:49.219 --> 00:02:51.960 enough in Minneapolis, 1894. The company was 00:02:51.960 --> 00:02:53.919 founded, but not as Ameriprise. It was called 00:02:53.919 --> 00:02:56.319 Investor Syndicate. And the man behind it was 00:02:56.319 --> 00:02:58.840 John Elliott Tappan. Tappan's original concept 00:02:58.840 --> 00:03:01.180 was, well, it was focused on providing these 00:03:01.180 --> 00:03:03.400 certificates that accumulated value. So like 00:03:03.400 --> 00:03:05.759 early savings instruments. Essentially, yeah. 00:03:05.860 --> 00:03:08.520 Early savings instruments. It was a very modest 00:03:08.520 --> 00:03:11.199 start, you know, deeply rooted in the Midwest. 00:03:11.759 --> 00:03:14.020 But these early companies, they always seem to 00:03:14.020 --> 00:03:16.180 hit an inflection point, right? A moment where 00:03:16.180 --> 00:03:19.139 things really change. They do. And for investor 00:03:19.139 --> 00:03:22.240 syndicate, that came in the mid -1920s. The firm 00:03:22.240 --> 00:03:23.879 went through a pretty significant leadership 00:03:23.879 --> 00:03:27.560 change in 1925. This West Coast businessman, 00:03:27.960 --> 00:03:31.000 J .R. Ridgeway, he merged his investment firm 00:03:31.000 --> 00:03:33.759 into Tappan's operation. And he took over. He 00:03:33.759 --> 00:03:35.620 took over as president. And look, this wasn't 00:03:35.620 --> 00:03:37.599 just a simple merger. It was a real shift in 00:03:37.599 --> 00:03:40.379 dynamic. It brought a new operational focus, 00:03:40.539 --> 00:03:43.069 a new... growth mindset to what was at the time 00:03:43.069 --> 00:03:46.469 a pretty fledgling company and the Ridgeway family's 00:03:46.469 --> 00:03:49.830 influence it became both profound and I mean, 00:03:49.849 --> 00:03:51.689 frankly, pretty dramatic, especially for that 00:03:51.689 --> 00:03:54.030 time period. Very dramatic. J .R. Ridgeway Jr. 00:03:54.229 --> 00:03:57.889 was just thrust into the spotlight in 1937. This 00:03:57.889 --> 00:04:00.150 is the height of the Great Depression. The worst 00:04:00.150 --> 00:04:02.710 possible time, really. The worst time. He takes 00:04:02.710 --> 00:04:04.789 over as president when his father dies unexpectedly 00:04:04.789 --> 00:04:07.289 from leukemia. And you just have to imagine that 00:04:07.289 --> 00:04:10.090 responsibility. Taking the helm of this rapidly 00:04:10.090 --> 00:04:12.710 growing national financial institution at just 00:04:12.710 --> 00:04:16.430 23 years old. 23. That's just a massive display 00:04:16.430 --> 00:04:19.490 of... I guess, significant but premature leadership. 00:04:19.769 --> 00:04:22.930 And it defined the company's direction for decades. 00:04:23.029 --> 00:04:25.029 He moved it through the Depression and right 00:04:25.029 --> 00:04:27.990 into that post -war boom. And that youthful leadership, 00:04:28.089 --> 00:04:31.689 it really defined an era of product pioneering. 00:04:31.829 --> 00:04:35.329 In 1940, while the entire world is focused on 00:04:35.329 --> 00:04:38.310 global conflict, Investor Syndicate introduces 00:04:38.310 --> 00:04:41.120 something truly revolutionary. for the average 00:04:41.120 --> 00:04:43.560 american investor the mutual fund the investors 00:04:43.560 --> 00:04:45.720 mutual fund it sounds like ancient history now 00:04:45.720 --> 00:04:47.660 i know but it's so critical to just pause and 00:04:47.660 --> 00:04:50.660 contextualize this in 1940 direct investment 00:04:50.660 --> 00:04:54.079 was it was risky it was often completely inaccessible 00:04:54.079 --> 00:04:56.319 for most people completely so what did the mutual 00:04:56.319 --> 00:04:58.540 fund offer that was so groundbreaking for the 00:04:58.540 --> 00:05:01.339 client it offered two distinct and really powerful 00:05:01.339 --> 00:05:04.839 advantages that just democratized investing first 00:05:05.479 --> 00:05:07.680 Diversification. Spreading the risk. Exactly. 00:05:07.819 --> 00:05:10.319 Instead of putting all their eggs in one stock 00:05:10.319 --> 00:05:12.879 basket, you know, clients could pool their money. 00:05:12.939 --> 00:05:15.899 They could spread the risk across dozens, maybe 00:05:15.899 --> 00:05:18.379 even hundreds of different securities. OK, so 00:05:18.379 --> 00:05:20.439 that's one. What's the second? The second is 00:05:20.439 --> 00:05:23.079 professional management. The average person, 00:05:23.120 --> 00:05:25.860 they didn't have the time or, frankly, the expertise 00:05:25.860 --> 00:05:29.009 to study market movements. Of course not. But 00:05:29.009 --> 00:05:31.610 this fund, it put a team of experienced professionals 00:05:31.610 --> 00:05:34.750 in charge of those capital allocations. It fundamentally 00:05:34.750 --> 00:05:37.509 shifted the whole landscape from individual stock 00:05:37.509 --> 00:05:40.509 picking to, you know, managed savings programs. 00:05:40.810 --> 00:05:43.569 And that innovation, it just fueled this rapid 00:05:43.569 --> 00:05:45.490 expansion, which, of course, meant they needed 00:05:45.490 --> 00:05:47.970 a rebrand. You needed a major corporate rebrand 00:05:47.970 --> 00:05:51.730 to match their ambition. So by 1949, Investors 00:05:51.730 --> 00:05:55.370 Syndicate officially changes its name to Investors 00:05:55.370 --> 00:05:59.199 Diversified Services, Inc. Or IDS. IDS. That 00:05:59.199 --> 00:06:02.279 name change, it really reflects the shift away 00:06:02.279 --> 00:06:04.540 from just offering these simple saving certificates 00:06:04.540 --> 00:06:07.779 to providing a diversified suite of financial 00:06:07.779 --> 00:06:10.199 solutions. And their expansion, it didn't stop 00:06:10.199 --> 00:06:12.399 there. They seem to be focused on building a 00:06:12.399 --> 00:06:15.279 complete financial lifecycle offering. That's 00:06:15.279 --> 00:06:19.060 a perfect way to put it. In 1958, IDS founded 00:06:19.060 --> 00:06:21.860 its life insurance arm. That's the company we 00:06:21.860 --> 00:06:24.120 now know as River Source Life Insurance Company. 00:06:24.490 --> 00:06:26.410 And that was a crucial step, I'd imagine. Oh, 00:06:26.550 --> 00:06:28.829 it was critical. It cemented their footprint 00:06:28.829 --> 00:06:32.170 in protection products, in annuities, in comprehensive 00:06:32.170 --> 00:06:35.170 long -term planning. It ensured they could capture 00:06:35.170 --> 00:06:37.589 a client's wealth through every single stage 00:06:37.589 --> 00:06:40.230 of their life. So by the 1960s, the proof was 00:06:40.230 --> 00:06:43.209 in the numbers. I mean, the scale of that original 00:06:43.209 --> 00:06:46.709 product, the investors' mutual fund, was globally 00:06:46.709 --> 00:06:49.170 recognized. It had grown to become the largest 00:06:49.170 --> 00:06:52.269 balanced mutual fund. In the entire world. In 00:06:52.269 --> 00:06:54.110 the world. In the world. And this isn't just 00:06:54.110 --> 00:06:56.529 about American dominance. It really demonstrated 00:06:56.529 --> 00:07:00.410 IDS's powerful position in global retail investment 00:07:00.410 --> 00:07:02.810 management during that whole post -war economic 00:07:02.810 --> 00:07:05.889 boom. And the company became so synonymous with 00:07:05.889 --> 00:07:07.949 Minneapolis that its physical presence became 00:07:07.949 --> 00:07:11.370 iconic. The skyscraper. The skyscraper. In 1974, 00:07:11.509 --> 00:07:14.310 they constructed the monolithic IDS Center, now 00:07:14.310 --> 00:07:16.949 spelled Center in downtown Minneapolis. It was 00:07:16.949 --> 00:07:18.949 a signature building that became, and it still 00:07:18.949 --> 00:07:21.110 is, a physical testament. to the company's sheer 00:07:21.110 --> 00:07:23.730 size and influence at the time. Okay, so now 00:07:23.730 --> 00:07:26.170 we enter the phase I like to call the courtier 00:07:26.170 --> 00:07:29.550 ownership carousel. Because despite this immense 00:07:29.550 --> 00:07:32.750 physical and financial presence, the era of family 00:07:32.750 --> 00:07:35.629 ownership was coming to an end. It was. The Ridgway 00:07:35.629 --> 00:07:38.370 family sold its final ownership interest in 1979. 00:07:39.259 --> 00:07:42.800 And IDS became a wholly owned subsidiary of Allegheny 00:07:42.800 --> 00:07:44.939 Corporation. That was a big shift. But the real 00:07:44.939 --> 00:07:47.139 structural transformation that came just five 00:07:47.139 --> 00:07:49.939 years later in 1984. Right. When the global consumer 00:07:49.939 --> 00:07:53.600 behemoth. American Express acquired IDS Financial 00:07:53.600 --> 00:07:56.139 Services from Allegheny. And this was a marriage 00:07:56.139 --> 00:07:58.660 of two absolute titans. You have American Express, 00:07:59.000 --> 00:08:01.740 known for global brand recognition, credit cards. 00:08:01.959 --> 00:08:04.759 Travelers' checks back then. Exactly. And suddenly 00:08:04.759 --> 00:08:06.639 they have one of the nation's largest financial 00:08:06.639 --> 00:08:09.300 planning forces right under their umbrella. So 00:08:09.300 --> 00:08:11.120 what did American Express bring to the table 00:08:11.120 --> 00:08:13.899 for IDS? It wasn't just capital. No, not at all. 00:08:13.980 --> 00:08:16.360 It was global credibility. It was a massive marketing 00:08:16.360 --> 00:08:19.519 engine. For two decades, IDS operated under that 00:08:19.519 --> 00:08:21.730 Amex structure. And that led to another crucial 00:08:21.730 --> 00:08:25.949 name change. Effective January 1st, 1995, IDS 00:08:25.949 --> 00:08:28.490 was renamed American Express Financial Corporation. 00:08:28.790 --> 00:08:31.689 But it did business as American Express Financial 00:08:31.689 --> 00:08:35.629 Advisors. Or AEFA, as it was known. AEFA. That 00:08:35.629 --> 00:08:39.460 name change was just... It explicitly tied the 00:08:39.460 --> 00:08:43.399 organization to the global consumer facing prestige 00:08:43.399 --> 00:08:45.759 of the American Express brand. Which would have 00:08:45.759 --> 00:08:47.899 immediately enhanced their perceived stability, 00:08:48.159 --> 00:08:50.840 their trustworthiness with clients. Oh, instantly. 00:08:50.940 --> 00:08:53.440 It just facilitated this massive national expansion. 00:08:53.639 --> 00:08:56.019 Which ironically just set the stage for the final 00:08:56.019 --> 00:08:58.799 act of separation. Right. Because after two decades, 00:08:59.000 --> 00:09:01.419 the strategic focus of the two entities, they 00:09:01.419 --> 00:09:03.840 just began to diverge too dramatically. How so? 00:09:04.019 --> 00:09:06.259 Well, American Express was keenly focused on 00:09:06.259 --> 00:09:08.720 credit. on travel, on payment services. That 00:09:08.720 --> 00:09:11.899 was its core. But Aifa was focused squarely on 00:09:11.899 --> 00:09:14.299 long -term wealth and asset management. They 00:09:14.299 --> 00:09:15.960 were becoming two different animals under one 00:09:15.960 --> 00:09:18.139 roof. And that strategic divergence, it finally 00:09:18.139 --> 00:09:21.309 culminated in September 2005. Exactly. American 00:09:21.309 --> 00:09:23.610 Express completed the corporate spinoff of Aifa, 00:09:23.809 --> 00:09:26.269 creating the independent publicly traded entity 00:09:26.269 --> 00:09:29.549 we know today, Ameriprise Financial. And that 00:09:29.549 --> 00:09:32.789 move was so critical because it allowed Ameriprise 00:09:32.789 --> 00:09:36.549 to shed that consumer credit focus. And just 00:09:36.549 --> 00:09:39.429 aggressively pursue its own strategy in asset 00:09:39.429 --> 00:09:41.669 and wealth management. It led directly to the 00:09:41.669 --> 00:09:45.289 colossal size we see today. It was, in effect, 00:09:45.429 --> 00:09:48.269 a structural rebirth. And that structural rebirth 00:09:48.269 --> 00:09:51.809 set the company free. It could immediately pivot 00:09:51.809 --> 00:09:54.789 toward aggressive growth, unburdened by the, 00:09:54.830 --> 00:09:56.970 you know, sometimes conflicting objectives of 00:09:56.970 --> 00:09:59.169 a global consumer payments company. Which brings 00:09:59.169 --> 00:10:01.950 us to the modern era. Section two, the modern 00:10:01.950 --> 00:10:04.649 financial powerhouse. So we transition now from 00:10:04.649 --> 00:10:07.309 the history to the immediate present and the 00:10:07.309 --> 00:10:10.870 complexity of its structure. Ameriprise today, 00:10:10.990 --> 00:10:13.350 it's not just a brokerage. It's not just a mutual 00:10:13.350 --> 00:10:15.389 fund company. It's much more. It is a diversified 00:10:15.389 --> 00:10:18.350 financial services company and, critically, A 00:10:18.350 --> 00:10:20.029 bank holding company. OK, let's start there. 00:10:20.129 --> 00:10:22.129 What does that actually mean? Bank holding company? 00:10:22.269 --> 00:10:24.690 It means they operate under multiple regulatory 00:10:24.690 --> 00:10:27.649 umbrellas. It means they can offer services that 00:10:27.649 --> 00:10:30.450 cover the entire financial spectrum from advice 00:10:30.450 --> 00:10:33.190 to banking to insurance. It puts them under the 00:10:33.190 --> 00:10:35.330 purview of the Federal Reserve, not just the 00:10:35.330 --> 00:10:38.129 SEC. It's a much higher level of scrutiny. Got 00:10:38.129 --> 00:10:40.710 it. And despite that diversification, their primary 00:10:40.710 --> 00:10:43.529 focus is very, very specific. They specialize 00:10:43.529 --> 00:10:46.769 in retirement related financial planning. almost 00:10:46.769 --> 00:10:49.929 exclusively for affluent clients. This is not 00:10:49.929 --> 00:10:52.370 the mass market savings vehicle we saw back in 00:10:52.370 --> 00:10:55.549 the 1940s. No. This is targeted, comprehensive 00:10:55.549 --> 00:10:57.909 financial guidance. You're often dealing with 00:10:57.909 --> 00:11:00.970 multi -million dollar portfolios and really complex 00:11:00.970 --> 00:11:03.389 estate planning needs. And their product offering, 00:11:03.570 --> 00:11:06.649 it just confirms this high net worth focus. It 00:11:06.649 --> 00:11:09.049 does. Their core categories include wealth management, 00:11:09.269 --> 00:11:11.889 asset management, insurance, specifically life 00:11:11.889 --> 00:11:14.370 and disability protection duties, and estate 00:11:14.370 --> 00:11:16.940 planning services. And the internal data, it 00:11:16.940 --> 00:11:19.559 just dramatically reinforces the strategic focus. 00:11:19.759 --> 00:11:24.480 As of April 2022, a staggering 80 % of the company's 00:11:24.480 --> 00:11:26.679 total revenue was derived from wealth management. 00:11:26.940 --> 00:11:29.379 And that tells you everything you need to know. 00:11:29.559 --> 00:11:32.279 They prioritize the advisory, the fee -based 00:11:32.279 --> 00:11:35.019 relationship above all else. That is the engine 00:11:35.019 --> 00:11:36.820 of the modern company. All right, let's put the 00:11:36.820 --> 00:11:39.220 size into some hard numbers using the most recent 00:11:39.220 --> 00:11:42.059 2024 financial data we have. We've already mentioned 00:11:42.059 --> 00:11:43.799 the AUM, but the rest of the financial sheet 00:11:43.799 --> 00:11:46.700 is equally immense. Their reported annual revenue 00:11:46.700 --> 00:11:50.480 was U .S. $17 .26 billion. And those revenues, 00:11:50.500 --> 00:11:52.960 they translate directly to massive profitability. 00:11:53.039 --> 00:11:57.600 They reported operating income of... $5 .258 00:11:57.600 --> 00:12:00.200 billion, which yielded a net income of US $3 00:12:00.200 --> 00:12:03.580 .401 billion. And their physical and capital 00:12:03.580 --> 00:12:06.440 resources are just vast. They list total assets 00:12:06.440 --> 00:12:10.159 on the balance sheet at US $181 .4 billion. And 00:12:10.159 --> 00:12:12.259 this whole operation requires a global staff 00:12:12.259 --> 00:12:16.519 of 13 ,600 employees. This is a complex multinational 00:12:16.519 --> 00:12:18.379 corporation running on some serious infrastructure. 00:12:18.639 --> 00:12:20.120 And we have to return to that defining figure. 00:12:20.240 --> 00:12:23.639 Total assets under management AUM at US $1 .171 00:12:23.639 --> 00:12:26.220 trillion. This isn't just about... It's about 00:12:26.220 --> 00:12:29.580 global standing. Exactly. And their global recognition 00:12:29.580 --> 00:12:32.120 confirms this. I mean, within the U .S. corporate 00:12:32.120 --> 00:12:35.460 structure, Ameriprise is ranked 254th on the 00:12:35.460 --> 00:12:38.240 Fortune 500 list. That's the standard benchmark 00:12:38.240 --> 00:12:40.360 for corporate size in America. And when you break 00:12:40.360 --> 00:12:42.980 down their business lines, their dominance becomes 00:12:42.980 --> 00:12:46.679 even clearer. It does. They rank as the ninth 00:12:46.679 --> 00:12:49.500 largest independent broker dealer based on assets 00:12:49.500 --> 00:12:52.220 under management. The scope is really global. 00:12:52.320 --> 00:12:54.600 So we connect this to the bigger picture. Ameriprise 00:12:54.600 --> 00:12:57.379 is firmly ranked among the 25 largest asset managers 00:12:57.379 --> 00:13:00.320 globally. And some specific rankings give us 00:13:00.320 --> 00:13:02.919 even more color. They are eighth in long term 00:13:02.919 --> 00:13:05.120 mutual fund assets in the U .S. So the legacy 00:13:05.120 --> 00:13:07.419 business is still very strong. Still a powerhouse. 00:13:07.580 --> 00:13:10.409 And here's an interesting detail. They are fourth 00:13:10.409 --> 00:13:13.070 in retail funds in the U .K. The U .K. The U 00:13:13.070 --> 00:13:15.669 .K. That deep European footprint, which we'll 00:13:15.669 --> 00:13:17.190 touch on with their acquisitions in a minute, 00:13:17.350 --> 00:13:20.129 it is paying significant dividends. And overall, 00:13:20.289 --> 00:13:23.730 they rank 27th in global AUM. So let's delve 00:13:23.730 --> 00:13:25.830 into their brand and subsidiary architecture, 00:13:26.090 --> 00:13:28.210 because the name Ameriprise is really just the 00:13:28.210 --> 00:13:30.350 tip of the iceberg. It really is. They use three 00:13:30.350 --> 00:13:32.210 principal brands in the U .S. to segment their 00:13:32.210 --> 00:13:35.370 offerings. Ameriprise Financial is the overarching 00:13:35.370 --> 00:13:38.049 brand. That's for financial planning, retail 00:13:38.049 --> 00:13:41.169 distribution, brokerage services, banking. It's 00:13:41.169 --> 00:13:43.830 the customer -facing front door. Okay. What's 00:13:43.830 --> 00:13:45.730 under that umbrella? Well, you have Columbia 00:13:45.730 --> 00:13:48.070 Management, which, though it's often integrated, 00:13:48.210 --> 00:13:50.269 really focuses on the institutional asset management 00:13:50.269 --> 00:13:53.490 space. And crucially, you have RiverSource. And 00:13:53.490 --> 00:13:56.230 that's the old IDS insurance arm. Exactly. RiverSource 00:13:56.230 --> 00:13:59.509 is the brand explicitly dedicated to annuities 00:13:59.509 --> 00:14:02.529 and protection products, primarily life and disability 00:14:02.529 --> 00:14:05.529 income insurance. This segmentation is just crucial 00:14:05.529 --> 00:14:08.970 for maximizing regulatory compliance and targeting 00:14:08.970 --> 00:14:12.049 specific product demographics. And the complexity 00:14:12.049 --> 00:14:14.490 continues with the asset management arm. Since 00:14:14.490 --> 00:14:16.830 2015, this part of the business has operated 00:14:16.830 --> 00:14:20.090 under a unified global name. Columbia Threadneedle 00:14:20.090 --> 00:14:22.190 Investment. Columbia Threadneedle. So that name 00:14:22.190 --> 00:14:25.049 is a result of integrating two massive acquisitions. 00:14:25.100 --> 00:14:27.580 right? Combining the asset base and the distribution 00:14:27.580 --> 00:14:30.279 network. It is. And the Threadneedle part of 00:14:30.279 --> 00:14:32.179 the name comes from the London -based firm they 00:14:32.179 --> 00:14:34.720 acquired, which gave them that instant global 00:14:34.720 --> 00:14:37.220 reach and that big UK presence we just talked 00:14:37.220 --> 00:14:39.299 about. And let's not overlook their banking operations. 00:14:40.139 --> 00:14:43.159 Ameriprise Bank FSB was launched in September 00:14:43.159 --> 00:14:47.389 2006, so pretty soon after the spinoff. It offers 00:14:47.389 --> 00:14:49.769 consumer banking, lending products, personal 00:14:49.769 --> 00:14:52.429 trust, and related services. But they made a 00:14:52.429 --> 00:14:56.309 key change. By January 2013, they converted this 00:14:56.309 --> 00:14:59.110 federal savings bank to a limited powers national 00:14:59.110 --> 00:15:02.289 trust bank. Which is a very specific strategic 00:15:02.289 --> 00:15:05.070 move. A very strategic move. This conversion 00:15:05.070 --> 00:15:07.690 underscores their commitment to specialized wealth 00:15:07.690 --> 00:15:10.129 and trust advisory services. They were moving 00:15:10.129 --> 00:15:12.370 away from simple consumer banking and toward 00:15:12.370 --> 00:15:14.769 high net worth trust management. Okay, so to 00:15:14.769 --> 00:15:18.049 achieve this massive segmented global scale and 00:15:18.049 --> 00:15:20.309 this specialized structure, they had to have 00:15:20.309 --> 00:15:22.850 relied heavily on strategic mergers and acquisitions. 00:15:22.970 --> 00:15:25.289 M &A. Oh, absolutely. Especially right after 00:15:25.289 --> 00:15:28.169 the 2005 spinoff. They used their newfound independence 00:15:28.169 --> 00:15:31.120 as rocket fuel. And the M &A spree was crucial 00:15:31.120 --> 00:15:33.460 for building that global distribution power. 00:15:33.720 --> 00:15:36.220 It was. They actually started laying the groundwork 00:15:36.220 --> 00:15:39.159 pretty early, picking up London -based Threadneedle 00:15:39.159 --> 00:15:42.299 Asset Management in October 2003. Before the 00:15:42.299 --> 00:15:44.779 spinoff. Before the official spinoff. That move 00:15:44.779 --> 00:15:47.399 secured their European base before they were 00:15:47.399 --> 00:15:50.039 even their own company. Then came the opportunistic 00:15:50.039 --> 00:15:53.000 moves during a period of just absolute market 00:15:53.000 --> 00:15:56.490 chaos. In November 2008, right as the global 00:15:56.490 --> 00:15:58.730 financial crisis was hitting its peak. Right. 00:15:58.789 --> 00:16:01.549 Ameriprise made two key acquisitions. They bought 00:16:01.549 --> 00:16:04.529 H &R Block Financial Advisors for $315 million, 00:16:04.830 --> 00:16:07.730 which significantly expanded their retail footprint. 00:16:08.009 --> 00:16:10.889 Yeah. And the asset management firm J &W Seligman 00:16:10.889 --> 00:16:14.629 & Co. for $440 million, which really boosted 00:16:14.629 --> 00:16:16.649 their product offerings. Those acquisitions, 00:16:16.649 --> 00:16:18.570 they just showed a willingness to deploy capital 00:16:18.570 --> 00:16:20.350 when pretty much all of their competitors were 00:16:20.350 --> 00:16:22.809 completely paralyzed. They were. But the biggest 00:16:22.809 --> 00:16:24.909 consolidating move, that came two years later. 00:16:25.090 --> 00:16:28.490 In May 2010, Ameriprise Financial acquired Columbia 00:16:28.490 --> 00:16:31.289 Management, the long -term asset management business, 00:16:31.529 --> 00:16:34.669 from Bank of America for a whopping $1 billion. 00:16:35.309 --> 00:16:38.370 A billion dollars. A billion. And this single 00:16:38.370 --> 00:16:40.950 move just vaulted them into the top tier of asset 00:16:40.950 --> 00:16:43.250 managers. It consolidated their capabilities 00:16:43.250 --> 00:16:46.090 and added immense scale in institutional business. 00:16:46.450 --> 00:16:48.370 But it wasn't just about buying, though. It was 00:16:48.370 --> 00:16:52.090 also about pruning. It was. Alongside the acquisitions, 00:16:52.110 --> 00:16:54.529 they've executed some really significant divestitures. 00:16:54.929 --> 00:16:57.250 They've strategically streamlined their focus 00:16:57.250 --> 00:17:00.169 toward high margin, advisory -centric wealth 00:17:00.169 --> 00:17:02.570 management. The first major divestiture came 00:17:02.570 --> 00:17:05.269 in 2011 when they completed the sale of Securities 00:17:05.269 --> 00:17:08.390 America, or SAI. And that was a clear signal. 00:17:08.529 --> 00:17:11.710 After facing massive regulatory liabilities related 00:17:11.710 --> 00:17:14.990 to broker misconduct in that SAI subsidiary, 00:17:15.049 --> 00:17:17.490 which we will definitely get to shortly, they 00:17:17.490 --> 00:17:19.430 chose to shed that particular independent broker 00:17:19.430 --> 00:17:21.390 -dealer structure. And this allowed the core 00:17:21.390 --> 00:17:24.390 Ameriprise advisors to focus entirely on, I assume, 00:17:24.509 --> 00:17:27.470 core, often proprietary fee -based opportunities. 00:17:27.789 --> 00:17:29.890 That's right. And the second major move, much 00:17:29.890 --> 00:17:32.890 more recently in 2019, was the sale of Ameriprise 00:17:32.890 --> 00:17:35.630 auto and home insurance. They sold it to American 00:17:35.630 --> 00:17:38.890 Family Insurance for $1 .05 billion. And that 00:17:38.890 --> 00:17:40.890 sale was really the final nail in the coffin 00:17:40.890 --> 00:17:43.250 for their non -core, capital -intensive businesses. 00:17:43.750 --> 00:17:46.309 Absolutely. Auto and home insurance, it requires 00:17:46.309 --> 00:17:49.150 huge reserves, high administrative overhead. 00:17:49.990 --> 00:17:52.569 Selling it allowed Ameriprise to focus squarely 00:17:52.569 --> 00:17:54.970 on those higher margin, advisory -driven wealth 00:17:54.970 --> 00:17:57.210 and asset management segments. OK, before we 00:17:57.210 --> 00:17:59.750 move on, we have to briefly mention their ambitious 00:17:59.750 --> 00:18:03.250 but pretty short -lived foray into international 00:18:03.250 --> 00:18:05.589 retail advisory services. Right, in India. In 00:18:05.589 --> 00:18:07.769 January 2012, they launched a financial planning 00:18:07.769 --> 00:18:10.150 division there. They were targeting high net 00:18:10.150 --> 00:18:13.170 worth individuals, which they defined as anyone 00:18:13.170 --> 00:18:15.910 with an income equivalent to about U .S. $40 00:18:15.910 --> 00:18:18.819 ,000 or more. So they invested heavily. They 00:18:18.819 --> 00:18:20.759 set up licensed insurance brokerage entities. 00:18:20.779 --> 00:18:23.539 They established offices in Delhi, Gurgaon, Mumbai, 00:18:23.779 --> 00:18:27.000 Pune. It was a textbook expansion plan into an 00:18:27.000 --> 00:18:29.059 emerging market. So why did it fail so quickly? 00:18:29.380 --> 00:18:31.740 It was short -lived because of really a fundamental 00:18:31.740 --> 00:18:34.180 miscalculation about the market's readiness for 00:18:34.180 --> 00:18:36.240 their core business model. Fee -based advice. 00:18:36.519 --> 00:18:39.640 Fee -based advice. By May 2014, Ameriprise shut 00:18:39.640 --> 00:18:42.099 the whole thing down. They cited poor prospects 00:18:42.099 --> 00:18:44.900 for fee -based advisory services in that market 00:18:44.900 --> 00:18:47.000 at that time. So it was a culture clash. It was. 00:18:47.440 --> 00:18:49.700 In many emerging markets, consumers are just 00:18:49.700 --> 00:18:53.259 resistant to paying explicit fees just for advice. 00:18:53.539 --> 00:18:55.779 They're accustomed to commissions being embedded 00:18:55.779 --> 00:18:58.539 in the product cost. Ameriprise's sophisticated 00:18:58.539 --> 00:19:02.519 fee -based model was just incompatible with the 00:19:02.519 --> 00:19:04.970 prevailing... consumer culture. It just goes 00:19:04.970 --> 00:19:07.410 to show that even a trillion dollar company can 00:19:07.410 --> 00:19:10.309 fail when its core competencies clash with local 00:19:10.309 --> 00:19:13.329 market dynamics. OK, so we've charted the history. 00:19:13.509 --> 00:19:15.829 We've examined the strategic growth. We understand 00:19:15.829 --> 00:19:18.430 the sheer magnitude of the modern Ameriprise. 00:19:18.849 --> 00:19:21.529 Now we have to look at the inevitable side effect 00:19:21.529 --> 00:19:24.309 of that massive scale and that aggressive growth 00:19:24.309 --> 00:19:26.829 strategy. The criticism and controversy. The 00:19:26.829 --> 00:19:28.829 cost of doing business. This really raises an 00:19:28.829 --> 00:19:31.650 important question. What happens when a massive 00:19:31.650 --> 00:19:33.829 financial enterprise operating across all these 00:19:33.829 --> 00:19:35.970 complex areas, from mutual funds to insurance 00:19:35.970 --> 00:19:38.410 to wealth management, what happens when it faces 00:19:38.410 --> 00:19:41.170 intense multi -jurisdictional regulatory scrutiny? 00:19:41.369 --> 00:19:43.410 Right. The narrative for Ameriprise is defined 00:19:43.410 --> 00:19:46.349 by a consistent, high -cost history of significant 00:19:46.349 --> 00:19:48.490 financial penalties and required settlements, 00:19:48.730 --> 00:19:51.410 totaling hundreds of millions of dollars. And 00:19:51.410 --> 00:19:53.690 it's striking that almost immediately after the 00:19:53.690 --> 00:19:57.349 spinoff in 2005, a whole cluster of major settlements 00:19:57.349 --> 00:20:00.650 related to fund oversight began to surface. The 00:20:00.650 --> 00:20:03.289 timing is incredible. It suggests two things. 00:20:03.450 --> 00:20:06.069 Either Ameriprise's practices were immediately 00:20:06.069 --> 00:20:08.450 put under a microscope once they left the shadow 00:20:08.450 --> 00:20:11.769 of American Express. Or regulators had been building 00:20:11.769 --> 00:20:13.970 these cases for years while they were still a 00:20:13.970 --> 00:20:16.349 subsidiary. I think it's likely a bit of both. 00:20:16.490 --> 00:20:19.869 So consider the timing. In December 2005, just 00:20:19.869 --> 00:20:22.589 months after the spinoff, the SEC settled market 00:20:22.589 --> 00:20:25.869 timing charges. Ameriprise had to pay $15 million. 00:20:26.710 --> 00:20:29.279 And at the same time. The Minnesota Department 00:20:29.279 --> 00:20:31.940 of Commerce levied another $2 million for similar 00:20:31.940 --> 00:20:34.059 market timing violations. OK, for our listener, 00:20:34.160 --> 00:20:36.160 can we just clarify what market timing means 00:20:36.160 --> 00:20:38.180 in this context and why it's such a problem? 00:20:38.279 --> 00:20:41.079 Yeah, certainly. So market timing generally involves 00:20:41.079 --> 00:20:43.700 the rapid, you know, in and out trading of mutual 00:20:43.700 --> 00:20:46.579 fund shares to capitalize on price discrepancies. 00:20:47.099 --> 00:20:49.579 It often exploits the stale pricing of funds 00:20:49.579 --> 00:20:51.660 that hold international securities. And while 00:20:51.660 --> 00:20:53.779 that's not strictly illegal in all its forms. 00:20:53.980 --> 00:20:56.640 Right. When the fund company allows this activity 00:20:56.640 --> 00:20:58.900 for certain privileged institutional investors, 00:20:59.319 --> 00:21:01.819 often at the expense of long -term retail shareholders, 00:21:02.160 --> 00:21:04.720 that's when it becomes a violation of fiduciary 00:21:04.720 --> 00:21:08.089 duty and market fairness. So the SEC ruling was 00:21:08.089 --> 00:21:10.029 implying that Ameriprise was either enabling 00:21:10.029 --> 00:21:12.970 this or just not controlling this behavior, which 00:21:12.970 --> 00:21:15.430 was diluting the value for their everyday investors. 00:21:15.710 --> 00:21:18.190 Exactly. And the regulatory pressure continued 00:21:18.190 --> 00:21:22.150 intently that same month that NASD, which is 00:21:22.150 --> 00:21:26.470 now Finara, hit them with a massive $12 .3 million 00:21:26.470 --> 00:21:28.700 settlement. And this is for something different. 00:21:28.799 --> 00:21:31.039 This was related to allegations of giving favorable 00:21:31.039 --> 00:21:32.960 treatment to certain mutual funds, presumably 00:21:32.960 --> 00:21:36.299 their own proprietary ones, in exchange for brokerage 00:21:36.299 --> 00:21:38.359 business. But wait, there's more from the NSD 00:21:38.359 --> 00:21:41.640 in December 2005. They levied an additional $12 00:21:41.640 --> 00:21:45.420 .3 million fine specifically for unsuitable share 00:21:45.420 --> 00:21:47.640 sales. So you have a firm getting tantalized 00:21:47.640 --> 00:21:49.579 for conflicts of interest for favoring certain 00:21:49.579 --> 00:21:52.019 funds. And it's the same time for putting clients 00:21:52.019 --> 00:21:54.519 in inappropriate products. This was just a clear 00:21:54.519 --> 00:21:57.140 signal that the regulatory environment post -spinoff 00:21:57.140 --> 00:21:59.680 was going to be extremely tough. And the state 00:21:59.680 --> 00:22:02.000 regulators were just as focused. New Hampshire 00:22:02.000 --> 00:22:05.859 reached a $7 .4 million settlement in July 2005. 00:22:06.670 --> 00:22:08.910 And the allegation here was perhaps the most 00:22:08.910 --> 00:22:11.730 damaging in terms of trust. Which was? That the 00:22:11.730 --> 00:22:14.349 company violated the law by actively rewarding 00:22:14.349 --> 00:22:17.690 its financial advisors for recommending underperforming 00:22:17.690 --> 00:22:20.509 in -house mutual funds to clients. And this is 00:22:20.509 --> 00:22:22.349 just critical because it strikes right at the 00:22:22.349 --> 00:22:24.990 heart of the wire house model dilemma. It does. 00:22:25.150 --> 00:22:27.849 When a firm both manufactures investment products 00:22:27.849 --> 00:22:30.730 like Ameriprise does and distributes them through 00:22:30.730 --> 00:22:32.529 its own sales force, the Ameriprise advisors, 00:22:32.950 --> 00:22:35.890 there is an inherent conflict. The ideal for 00:22:35.890 --> 00:22:37.829 the... the client is the best possible product 00:22:37.829 --> 00:22:40.099 on the market. But the ideal for the firm is 00:22:40.099 --> 00:22:42.880 selling the most profitable proprietary product. 00:22:43.099 --> 00:22:45.460 In allegations like this, they suggest the firm 00:22:45.460 --> 00:22:48.319 was prioritizing corporate profit by using incentives 00:22:48.319 --> 00:22:50.660 to steer clients into funds that were not necessarily 00:22:50.660 --> 00:22:53.099 the best available choice. And this alleged practice 00:22:53.099 --> 00:22:56.420 of undisclosed revenue sharing or selling shelf 00:22:56.420 --> 00:22:59.619 space, it continued to be a focus. In July 2009, 00:22:59.940 --> 00:23:02.099 the SEC announced an enforcement action that 00:23:02.099 --> 00:23:05.160 resulted in a $17 .3 million settlement. And 00:23:05.160 --> 00:23:07.960 this charge was specifically for receiving millions. 00:23:07.980 --> 00:23:10.299 Billions of dollars in undisclosed revenue sharing 00:23:10.299 --> 00:23:13.680 as a condition for selling specific real estate 00:23:13.680 --> 00:23:17.019 investment trusts or REITs to their brokerage 00:23:17.019 --> 00:23:19.259 customers. This is just another example of a 00:23:19.259 --> 00:23:21.599 classic conflict of interest. They were alleged 00:23:21.599 --> 00:23:23.579 to be taking hidden payments from the product 00:23:23.579 --> 00:23:26.460 provider, the REIT issuer. In exchange for pushing 00:23:26.460 --> 00:23:28.180 that product through the Ameriprise network. 00:23:28.519 --> 00:23:31.279 And here's a key detail. This conduct primarily 00:23:31.279 --> 00:23:34.170 happened before the spinoff. But Ameriprise was 00:23:34.170 --> 00:23:36.789 the successor entity that had to pay the fine. 00:23:36.950 --> 00:23:40.150 They had to pay the $17 .3 million fine to resolve 00:23:40.150 --> 00:23:42.549 the matter. The financial liabilities from the 00:23:42.549 --> 00:23:45.150 American Express era clearly followed the new 00:23:45.150 --> 00:23:47.630 independent company. Okay, moving beyond internal 00:23:47.630 --> 00:23:50.029 fund practices, let's focus on the failures in 00:23:50.029 --> 00:23:52.829 Bricker Oversight. These led directly to massive 00:23:52.829 --> 00:23:55.269 investor harm and substantial settlements involving 00:23:55.269 --> 00:23:57.470 their former subsidiary, Securities America. 00:23:57.829 --> 00:24:00.089 Right, SAI. And this is where the numbers become 00:24:00.089 --> 00:24:02.980 deeply personal for the investors involved. In 00:24:02.980 --> 00:24:05.299 September 2006, Securities America settled for 00:24:05.299 --> 00:24:09.119 a significant $16 .3 million with a group of 00:24:09.119 --> 00:24:12.140 ExxonMobil retirees. And their claim was that 00:24:12.140 --> 00:24:14.680 they suffered losses due to the company's failure 00:24:14.680 --> 00:24:17.940 to properly supervise an associated broker. Yes. 00:24:18.059 --> 00:24:20.940 When supervision fails, the company bears the 00:24:20.940 --> 00:24:24.599 liability for millions in losses. And a similar 00:24:24.599 --> 00:24:26.940 situation occurred just a few months later, December 00:24:26.940 --> 00:24:31.339 2006. An NSD arbitration panel awarded $9 .3 00:24:31.339 --> 00:24:34.519 million to three retired American Airlines pilots. 00:24:35.369 --> 00:24:37.190 And they brought a case against Securities America 00:24:37.190 --> 00:24:40.049 and an associated broker, alleging the gross 00:24:40.049 --> 00:24:42.589 mishandling of their savings and their retirement 00:24:42.589 --> 00:24:45.509 funds. These cases just underscore that the failure 00:24:45.509 --> 00:24:48.650 to oversee breakers who handle sensitive, irreplaceable 00:24:48.650 --> 00:24:51.349 retirement funds can result in enormous life 00:24:51.349 --> 00:24:53.309 -altering losses. And the complexity and the 00:24:53.309 --> 00:24:55.450 cost of these failures, it became brutally apparent 00:24:55.450 --> 00:24:58.109 when they involved high -risk, illiquid products. 00:24:58.170 --> 00:25:00.690 Like private placement securities. Right. These 00:25:00.690 --> 00:25:03.230 are unregistered investments, often debt or equity, 00:25:03.329 --> 00:25:05.400 in non -public companies. And they're sold only 00:25:05.400 --> 00:25:07.940 to sophisticated investors. And Securities America 00:25:07.940 --> 00:25:10.700 faced massive pre -tax charges related to the 00:25:10.700 --> 00:25:13.119 sale of private placements issued by these troubled 00:25:13.119 --> 00:25:15.619 entities like Medical Capital and Provident Royalties. 00:25:15.819 --> 00:25:18.240 Can you just elaborate on why private placement 00:25:18.240 --> 00:25:20.700 securities are so risky, especially when they're 00:25:20.700 --> 00:25:23.079 sold through a major broker -dealer network like 00:25:23.079 --> 00:25:26.619 this? Of course. They're risky because they lack 00:25:26.619 --> 00:25:28.740 the transparency and the regulatory oversight 00:25:28.740 --> 00:25:33.339 of, say, a publicly traded stock. or an SEC registered 00:25:33.339 --> 00:25:36.640 mutual fund, they're illiquid, which means you 00:25:36.640 --> 00:25:38.740 can't easily sell them. So you're stuck. You're 00:25:38.740 --> 00:25:41.299 stuck. And when the underlying company fails, 00:25:41.500 --> 00:25:44.359 as was the case here, the investor loses everything. 00:25:44.859 --> 00:25:48.059 And the broker -dealer often faces huge regulatory 00:25:48.059 --> 00:25:51.299 and civil liability for failing to adequately 00:25:51.299 --> 00:25:54.099 vet the product or for selling it to unsuitable 00:25:54.099 --> 00:25:56.099 clients. Meaning clients who weren't sophisticated 00:25:56.099 --> 00:25:58.680 or wealthy enough to handle a total loss. Precisely. 00:25:58.720 --> 00:26:00.700 And the financial consequences for Ameriprise 00:26:00.700 --> 00:26:03.720 were massive. They took a $40 million pre -tax 00:26:03.720 --> 00:26:06.339 charge in the fourth quarter of 2010. Followed 00:26:06.339 --> 00:26:10.299 by an even larger $118 million pre -tax charge 00:26:10.299 --> 00:26:13.019 in the first quarter of 2011. just to cover related 00:26:13.019 --> 00:26:15.940 settlement agreements. That's $158 million in 00:26:15.940 --> 00:26:18.180 charges for failures related to one specific 00:26:18.180 --> 00:26:21.480 highly concentrated area of sales. And it's really 00:26:21.480 --> 00:26:23.740 no coincidence that Ameriprise decided to sell 00:26:23.740 --> 00:26:26.480 Securities America later that very same year. 00:26:26.640 --> 00:26:29.079 They likely viewed the independent broker -dealer 00:26:29.079 --> 00:26:32.359 model as just too high -risk and too liability 00:26:32.359 --> 00:26:35.609 -ridden. Moving beyond systemic failure, we then 00:26:35.609 --> 00:26:38.670 encounter explicit internal misconduct. In April 00:26:38.670 --> 00:26:41.170 2008, the company agreed to pay New Hampshire 00:26:41.170 --> 00:26:44.990 $3 .8 million to resolve allegations that agents 00:26:44.990 --> 00:26:47.430 at its Portsmouth office committed outright fraud. 00:26:47.710 --> 00:26:50.329 And not just any fraud. They were forging clients' 00:26:50.509 --> 00:26:52.950 signatures on documents to cut corners and increase 00:26:52.950 --> 00:26:55.589 their income. I mean, when you hear about agents 00:26:55.589 --> 00:26:57.609 forging client signatures, that's not a mere 00:26:57.609 --> 00:27:00.109 compliance error. That is a fundamental breakdown 00:27:00.109 --> 00:27:02.829 of trust. It's criminal activity occurring inside 00:27:02.829 --> 00:27:05.509 a branch office of a major financial firm. It 00:27:05.509 --> 00:27:07.329 raises some very serious questions about the 00:27:07.329 --> 00:27:09.049 culture and the internal auditing mechanisms 00:27:09.049 --> 00:27:11.190 that were in place at the time. And this problem 00:27:11.190 --> 00:27:14.170 of failing to safeguard assets, it persisted 00:27:14.170 --> 00:27:16.910 well into the late 2010s, which shows these ongoing 00:27:16.910 --> 00:27:19.369 challenges in internal controls and monitoring 00:27:19.369 --> 00:27:22.589 of their representatives. Right. In August 2018, 00:27:22.950 --> 00:27:25.529 the SEC... charged Ameriprise with failing to 00:27:25.529 --> 00:27:28.789 safeguard retail investor assets from theft by 00:27:28.789 --> 00:27:31.349 its own representatives. What were the specifics 00:27:31.349 --> 00:27:34.509 of that theft? The settlement was for $4 .5 million, 00:27:34.730 --> 00:27:37.509 and the facts were pretty disturbing. The SEC 00:27:37.509 --> 00:27:40.170 found that five Ameriprise representatives committed 00:27:40.170 --> 00:27:42.650 fraudulent acts over a four -year period. Four 00:27:42.650 --> 00:27:45.150 years. And they systematically stole more than 00:27:45.150 --> 00:27:48.150 $1 million in client funds by forging client 00:27:48.150 --> 00:27:51.250 documents and devoting payments. And the regulatory 00:27:51.250 --> 00:27:53.650 finding, it focused not just on the fraud itself, 00:27:53.829 --> 00:27:56.210 but on companies' failure to establish adequate 00:27:56.210 --> 00:27:58.569 policies and procedures. So they were ignoring 00:27:58.569 --> 00:28:00.650 red flag. They were ignoring internal red flags 00:28:00.650 --> 00:28:02.769 that should have detected and stopped the theft 00:28:02.769 --> 00:28:05.109 much earlier. Now let's turn to internal and 00:28:05.109 --> 00:28:07.250 employment disputes, which show these conflicts 00:28:07.250 --> 00:28:09.589 extending even to their own staff's retirement 00:28:09.589 --> 00:28:12.349 savings. Yeah. In 2015, Ameriprise settled a 00:28:12.349 --> 00:28:15.970 class action lawsuit for $27 .5 million. And 00:28:15.970 --> 00:28:17.809 this lawsuit alleged that the company charged 00:28:17.809 --> 00:28:20.920 its own employees excessive... high fees for 00:28:20.920 --> 00:28:22.720 the funds offered within its own proprietary 00:28:22.720 --> 00:28:25.420 401k retirement program. This is what's often 00:28:25.420 --> 00:28:27.660 described as a self -dealing allegation, right? 00:28:27.720 --> 00:28:30.660 Exactly. Companies that manage their 401k plan 00:28:30.660 --> 00:28:33.680 for employees, they have a fiduciary duty to 00:28:33.680 --> 00:28:36.400 those employees. The allegation here was that 00:28:36.400 --> 00:28:39.500 Ameriprise prioritized its own profit maximization 00:28:39.500 --> 00:28:42.759 by using its own higher fee products in the retirement 00:28:42.759 --> 00:28:45.240 plan over the financial best interest of its 00:28:45.240 --> 00:28:47.539 own employees. It just suggests a constant tension 00:28:47.539 --> 00:28:50.180 between acting as a fiduciary and acting as a 00:28:50.180 --> 00:28:52.740 product manufacturer. Always. And in the employment 00:28:52.740 --> 00:28:54.779 realm, they face some very serious discrimination 00:28:54.779 --> 00:28:58.480 charges. In December 2016, the company settled 00:28:58.480 --> 00:29:00.799 with the U .S. Department of Labor. They agreed 00:29:00.799 --> 00:29:05.630 to pay $128 ,200 in back... wages for discriminating 00:29:05.630 --> 00:29:07.789 against 20 black employees by paying them less 00:29:07.789 --> 00:29:10.849 than similarly situated white workers. It confirmed 00:29:10.849 --> 00:29:13.670 a very serious charge of pay discrimination right 00:29:13.670 --> 00:29:15.849 within the corporate structure. We also see the 00:29:15.849 --> 00:29:18.250 continuation of this theme of fund fees, which 00:29:18.250 --> 00:29:20.849 confirms that earlier regulatory focus from back 00:29:20.849 --> 00:29:24.829 in 2005. We do. In February 2018, Ameriprise 00:29:24.829 --> 00:29:28.849 paid $230 ,000 to settle allocations from the 00:29:28.849 --> 00:29:32.470 SEC that had placed customers into higher fee 00:29:32.470 --> 00:29:35.150 share classes of mutual funds when lower cost 00:29:35.150 --> 00:29:37.490 options for the exact same fund were available. 00:29:37.670 --> 00:29:39.950 And this is a common regulatory target. You steer 00:29:39.950 --> 00:29:42.289 clients into products that generate marginally 00:29:42.289 --> 00:29:45.430 higher fees for the firm. seems small to the 00:29:45.430 --> 00:29:48.450 individual, but over a trillion dollars in assets, 00:29:48.690 --> 00:29:50.970 those small differences add up dramatically. 00:29:51.329 --> 00:29:53.269 And we also have to touch on cybersecurity challenges. 00:29:53.549 --> 00:29:56.130 These just underscore the risks of holding massive 00:29:56.130 --> 00:29:58.549 quantities of sensitive client data. Back in 00:29:58.549 --> 00:30:01.950 December 2006, so early in the digital age, the 00:30:01.950 --> 00:30:04.609 company settled charges related to a stolen laptop. 00:30:04.829 --> 00:30:07.579 Just one laptop. And this single physical theft 00:30:07.579 --> 00:30:10.119 incident compromised sensitive data on approximately 00:30:10.119 --> 00:30:13.960 230 ,000 customers. That event was a really early 00:30:13.960 --> 00:30:16.339 cautionary tale for the entire financial services 00:30:16.339 --> 00:30:18.759 industry. It highlighted the growing vulnerability 00:30:18.759 --> 00:30:21.319 of client data stored digitally. And the immense 00:30:21.319 --> 00:30:23.579 reputational and financial cost associated with 00:30:23.579 --> 00:30:26.619 even a single compromised device. Finally, let's 00:30:26.619 --> 00:30:28.759 look at their response during the 2008 Great 00:30:28.759 --> 00:30:31.819 Recession, because it provided a strategic insight 00:30:31.819 --> 00:30:35.660 into their balance sheet strength. It did. Despite 00:30:35.660 --> 00:30:38.279 being this huge financial entity, they made a 00:30:38.279 --> 00:30:41.940 very public and a very distinct decision. They 00:30:41.940 --> 00:30:44.059 declined an investment by the U .S. Department 00:30:44.059 --> 00:30:46.599 of the Treasury under the Troubled Asset Relief 00:30:46.599 --> 00:30:50.140 Program. TURP. TURP. And that decision to abstain 00:30:50.140 --> 00:30:52.839 from the government bailout, it contrasted sharply 00:30:52.839 --> 00:30:55.920 with many of their peers who eagerly took federal 00:30:55.920 --> 00:30:58.140 funds to shore up their balance sheets. It showed 00:30:58.140 --> 00:30:59.839 a certain confidence in their capital position 00:30:59.839 --> 00:31:02.549 right after the spinoff. It did. However, that 00:31:02.549 --> 00:31:05.289 self -sufficiency, it didn't mean they were immune 00:31:05.289 --> 00:31:08.690 from market fallout or the need to restore client 00:31:08.690 --> 00:31:10.809 trust. So how do they manage the client trust 00:31:10.809 --> 00:31:13.529 crisis then? Well, in September 2008, when the 00:31:13.529 --> 00:31:16.769 panic peaked and the reserve primary fund, a 00:31:16.769 --> 00:31:19.529 major money market fund. broke the buck. Meaning 00:31:19.529 --> 00:31:22.730 its share price fell below $1. Right. Ameriprise 00:31:22.730 --> 00:31:26.069 voluntarily agreed to pay up to $33 million to 00:31:26.069 --> 00:31:28.470 cover investor losses incurred in that specific 00:31:28.470 --> 00:31:30.849 fund. Now, they may not have been legally required 00:31:30.849 --> 00:31:33.490 to cover all those losses. But it was a massive 00:31:33.490 --> 00:31:36.289 strategic decision. It was. It was made to protect 00:31:36.289 --> 00:31:38.670 client confidence in their firm during a near 00:31:38.670 --> 00:31:41.859 systemic panic. It was a tradeoff. avoid the 00:31:41.859 --> 00:31:44.339 TARP stigma, but pay significantly to maintain 00:31:44.339 --> 00:31:46.740 those client relationships. It's a fascinating 00:31:46.740 --> 00:31:49.480 contrast, isn't it? The company willing to sacrifice 00:31:49.480 --> 00:31:53.240 $33 million to preserve trust, yet repeatedly 00:31:53.240 --> 00:31:56.079 running afoul of regulators over these smaller 00:31:56.079 --> 00:31:59.160 systemic conflicts, like undisclosed fees and 00:31:59.160 --> 00:32:02.079 unsuitable sales. It's a huge contrast. So if 00:32:02.079 --> 00:32:04.680 we synthesize this complex history, we are left 00:32:04.680 --> 00:32:07.559 with this massive duality that defines Ameriprise 00:32:07.559 --> 00:32:11.740 Financial. Right. 131 -year -old financial planning 00:32:11.740 --> 00:32:15.220 pioneer, the firm that started the first balanced 00:32:15.220 --> 00:32:17.700 mutual fund and really helped democratize investing 00:32:17.700 --> 00:32:20.000 for a whole generation of Americans. And on the 00:32:20.000 --> 00:32:22.099 other hand, you have the modern trillion dollar 00:32:22.099 --> 00:32:24.940 conglomerate. It's defined by constant, ambitious 00:32:24.940 --> 00:32:28.000 strategic acquisitions and a laser focus on high 00:32:28.000 --> 00:32:29.940 margin wealth management. But it's also a company 00:32:29.940 --> 00:32:32.319 that is persistently defined by regulatory engagement. 00:32:32.859 --> 00:32:35.859 We have seen a long, long record of settlements, 00:32:36.119 --> 00:32:40.019 often large, multimillion dollar penalties involving 00:32:40.019 --> 00:32:42.880 systemic issues like market timing, undisclosed 00:32:42.880 --> 00:32:46.059 revenue sharing, unsuitable high risk sales and 00:32:46.059 --> 00:32:48.599 fundamental breakdowns in internal controls leading 00:32:48.599 --> 00:32:51.319 to theft and forgery. and the sheer volume and 00:32:51.319 --> 00:32:53.279 the consistency of these regulatory actions, 00:32:53.460 --> 00:32:55.680 it really paints a picture of a company that's 00:32:55.680 --> 00:32:58.519 struggling to reconcile its massive scale and 00:32:58.519 --> 00:33:01.240 its profit -driven distribution network with 00:33:01.240 --> 00:33:04.000 the fundamental fiduciary expectation of always 00:33:04.000 --> 00:33:06.640 prioritizing the client's best interest. So what 00:33:06.640 --> 00:33:08.819 does this all mean? We've seen that the company 00:33:08.819 --> 00:33:11.799 built its entire empire on the promise of comprehensive 00:33:11.799 --> 00:33:14.099 and personalized financial planning for affluent 00:33:14.099 --> 00:33:17.019 clients. Given this detailed history of compliance 00:33:17.019 --> 00:33:19.829 issues relating to advisor oversight, unsuitable 00:33:19.829 --> 00:33:22.109 sales, fund fee conflicts. We all have to consider. 00:33:22.309 --> 00:33:23.930 We are left to consider whether the complexity 00:33:23.930 --> 00:33:27.210 and the sheer scale required to manage $1 .171 00:33:27.210 --> 00:33:30.250 trillion in assets inherently creates a system 00:33:30.250 --> 00:33:32.430 where client suitability is constantly battling 00:33:32.430 --> 00:33:35.009 corporate profit maximization. And as repeated, 00:33:35.150 --> 00:33:37.890 high cost compliance failure in the form of, 00:33:37.930 --> 00:33:40.950 you know, over $200 million in penalties. Is 00:33:40.950 --> 00:33:43.470 that merely the unavoidable price of being a 00:33:43.470 --> 00:33:46.319 modern financial titan? Or does this history 00:33:46.319 --> 00:33:49.359 suggest a deeper, persistent organizational challenge 00:33:49.359 --> 00:33:52.000 in ensuring every single one of those 13 ,600 00:33:52.000 --> 00:33:55.039 employees acts in perfect adherence to suitability 00:33:55.039 --> 00:33:57.700 standards across such a vast network? It's a 00:33:57.700 --> 00:34:00.900 huge question. That tension between the imperative 00:34:00.900 --> 00:34:03.460 for growth and the adherence to fiduciary duty, 00:34:03.619 --> 00:34:06.579 that is the ongoing story of Ameriprise Financial. 00:34:06.880 --> 00:34:09.480 And it is something for you, the learner, to 00:34:09.480 --> 00:34:11.440 analyze the next time you look at a diversified 00:34:11.440 --> 00:34:14.269 financial behemoth. A truly provocative and insightful 00:34:14.269 --> 00:34:17.190 conclusion. That was the deep dive into Ameriprise 00:34:17.190 --> 00:34:19.289 Financial. We hope you feel thoroughly informed 00:34:19.289 --> 00:34:21.309 and ready to analyze the next earnings report. 00:34:21.489 --> 00:34:22.269 We'll see you next time.