FINRA investigation and Hines/Ameriprise

$10 million a month in commissions, fees and transaction expenses

FINRA investigation and Hines/Ameriprise

Postby Dorothy » Fri Mar 18, 2011 12:26 pm

I have recently become aware that the value on my Amerprise statement for the Hines REIT bears no relation at all to reality. I'm rather stunned since it does not give an accurate depiction of what's in my portfolio. Am wondering how it can be legal, but it must be. In digging further I've discovered that Ameriprise was fined $17.3 million by the SEC in 2009 for not disclosing incentives it received in the sale of REITs; this was the same year that Hines suspended buyback. I was within a few years of retirement when I was sold this and at no point was I told it was risky or illiquid. I was also paying Ameriprise $500/year for objective, unbiased financial advice -- ha!! They have made far more than I have on any of my so-called investments with them. I found an article Bloomberg did last summer on FINRA opening an investigation into nontraded REITS but have been able to find no results. Of course, my rep wants no part in selling this REIT (he made his big commission selling it to me so why bother?)& has given me a list of secondary markets which seem to be offering about 65% less than I paid for it. I understand losing money on investments but I don't understand why that doesn't have to be reflected on one's statements. I want out of this REIT and away from Ameriprise but realize there will be even more fees involved. Is there any recourse? I don't want them selling this "investment" to widows.

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Re: FINRA investigation and Hines/Ameriprise

Postby GeorgiaGulf » Tue Mar 22, 2011 3:33 pm

Is your Ameriprise agent an advisor or a broker?

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Re: FINRA investigation and Hines/Ameriprise

Postby Dorothy » Tue Mar 29, 2011 11:44 am

He is a financial advisor. (It says my reply has to be 40 characters so I added this.)

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Re: FINRA investigation and Hines/Ameriprise

Postby REIT Wrecks » Tue Mar 29, 2011 8:56 pm

Dorothy, I'll leave it to GeorgiaGulf to elaborate on the question more fully, but I think the question is whether your advisor is a broker or a fiduciary. Next to qualifying a broker's experience, I think this is one of the most important questions an investor can ask, and investors should understand the answer. Fiduciaries are bound by law to act in a client's best interest only - period - and they embrace the provision of advice over products. Fiduciary's are not paid on commission, so they do not pitch products. Brokers are only required to determine an investors' "suitability" for whatever product they happen to be selling, not to provide clients with best possible products and service on the market. Brokers are generally paid on commission, and they are NOT required to act in the best interests of clients. The fiduciary standard is a much, much higher standard of care for investors than the suitability standard. Not all brokers are bad, but you should know difference, and if you hire another broker, make sure that they know you know the difference.

I'm sure you won't want to hear it at this point, but Ameriprise brokers are not fiduciaries. They are product pitchmen and women They are not, in general, required to disclose conflicts of interest. They focus mostly on representing the features and benefits of the products they are licensed to sell, not on providing advice. I will go out on a limb and guess that your account also contains a "Riversource" annuity or two. This is the in-house Ameriprise annuity product, and the Ameriprise brokers pitch the Ameriprise annuity product over other annuities because they are paid more to sell it. If you beg, they will show you annuities from other firms, but only if you beg (this ignores the fact that annuities in general are one of the highest commissioned financial products on the market. I would be very, very careful of anyone who gives you an unsolicited sales pitch involving an annuity).

As for your recourse to anyone, sadly there isn't much. If an investor can fog a mirror, it's difficult to prove that a broker has breached the suitability standard. The risks with the Hines REIT are all carefully disclosed in the prospectus, and the language is blessed by the SEC. Significantly, this does not mean that the SEC has approved of the investment, it means only that the has SEC determined that the risks are adequately disclosed. If your Ameriprise broker sold you the Hines REIT without providing you with a prospectus - which YOU SHOULD ALWAYS READ AND UNDERSTAND NO MATTER WHAT- then you may have some recourse. My guess is that this is unlikely, as they are nothing if not well trained.

The moral of this story is that investors must look out for their own financial interests, do not rely on someone else to do it for you - even if that someone else is the SEC. Hines has a word-class operating platform, but the non-traded REIT structure does an incredibly poor job of aligning their long term interests with yours. Unless you decide to sell on the secondary market at a loss, you may be stuck with this REIT for a long, long time....You are not stuck with Ameriprise though; you CAN transfer these assets into the custody of another advisor/broker.

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Re: FINRA investigation and Hines/Ameriprise

Postby Dorothy » Mon Apr 04, 2011 7:53 am

Thank you for your thorough reply. I was not sure non-traded REITs were regulated by the SEC. And yes that disclaimer that you're likely never to make money is there in their fancy brochure. Though the broker represented it as a "conservative" investment and told us to TRUST him. (We had questioned his objectivity.) We are transferring funds as you suggested. Lesson learned the hard way. Just afraid of who else they're selling this to in our community.

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Re: FINRA investigation and Hines/Ameriprise

Postby Lurker » Tue Apr 05, 2011 3:21 pm

Hi Dorothy. I have seen your posts and the reply of Reitwrecks.

I experienced a very similar situation to you. Briefly an Ameriprise adviser got me into two tranches of Inland Western and Inland American non traded REIT . (2004 $5x,000 and then in 2007 $1x,000) Oh and I have the threefer because I also have a Riversource Annuity.

In late 2009 I wanted to liquidate them to put a deposit down on a house. "No can do because they are illiquid" was the reply from my adviser. The share purchase schemes had been suspended months previously.

I went into battle with Ameriprise because I was very angry indeed. Unfortunately the recent outcome of that battle is subject to a confidentiality agreement so any advice I can give you is based on hypotheticals and is no way based on any settlements, negotiations or discussions that I may have had, or not had, at any time, via any medium, with any Ameriprise employee or representative.

Firstly I would get into touch with the Compliance division of Ameriprise head office.
Allege: 1. The purchases you made were not suitable for your financial position, risk tolerances, future plans, age etc and were motivated by the desire of your adviser to collect higher than normal , excessive commissions.
2. The risks of your REIT purchases were never explained to you and you were not made aware of them.
3. Ameriprise is overstating the values of your REIT in their client statements. Why is this ?
4. Ameriprise are reflecting dividends on yr statements that are not being generating by operations . This is essentially turning a blind eye to, and tacitly condoning, a Ponzi scheme.

Check to see if your purchases of REIT's were advised when the adviser knew previous purchases had gone illiquid.

It is likely that Ameriprise will state. 1. "your purchases were suitable" 2. "commissions paid are set out in numerous documents and on our web site client agreement etc etc and you should have known about them" 3. "We only show values told to us by the REIT themselves. What more can we do?" 4. "The risks and characteristics of REIT are clearly stated in the purchase documents you signed/initialled at time of purchase and were fully explained to you by your adviser".

BUT the important thing to do is to ask Ameriprise to send you copies of ALL the purchase documentation for ALL your REIT purchases. Not just the documents that you took away from your adviser but all the documents that were used by the adviser and the Ameriprise back office to complete the purchase transaction(s). It MAY just be, I emphasize MAY, that your adviser "assisted" in completing your paperwork in parts where your initials or signature should have appeared. You know in all those hidden away places that show that you understood the risks and acknowledged being explained them by your adviser. It might be that you can then identify a number of what Ameriprise might cutely term " clerical errors" by the adviser.
It may be you only saw page 7 of a 7 page document when you should have seen and signed off on the previous 6 pages and the adviser helpfully made sure the paperwork was complete before it was presented to the Ameriprise back office for final execution.

You should also examine the documents to see if any extremely overstated "net worth" figures appear in the documents that are completely to foreign either to your knowledge or experience. The calculation of such spurious net worth figures allows the adviser (and you as the buyer)to be in accordance with the REIT "rule" (guidance) that the purchase cannot be in "excess of x% of my net worth". (this certainly was part of the Inland documentation.)

Of course this action advice in no way implies on my part that any professional Ameriprise adviser would forge initials, complete documents with bogus figures, not fully explain risks or sign his or her initials in places where the real purchaser's initials should normally go. I would imagine that if Ameriprise was presented with a collection of such highly unlikely clerical errors and oversights they might offer your money back at full value of your original purchase price but of course I have no experience of Ameriprise offering any such solution.

Be prepared for such a process to take 12-18 months. Best of luck.

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Re: FINRA investigation and Hines/Ameriprise

Postby Albyihat » Sat Apr 30, 2011 5:22 pm

Dorthy and Lurker I am sorry to hear about your troubles with Ameriprise. I have dealt with them through my advisor for years and have nothing but good things to say. I guess it is luck of the draw. My advisor made very clear the illiquid nature of these investments, he bluntly stated that a 20yr time horizon was a must for any of these investments. As Lurker stated your net assets needed to be figured and you must have a minimum amount in order to be able to invest in a REIT. This varies from state to state it might be worth checking into. At the time I was looking into these investments (2006) I did not qualify due to my net worth. Again just luck, I wish you both the best with your portfolios and advisor troubles.

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Re: FINRA investigation and Hines/Ameriprise

Postby hhands » Wed Sep 07, 2011 6:08 pm

Dorothy, have you had any luck? I feel like we're in similar situations. Between 2009 and 2010, I was a customer of Ameriprise's Charlestown, MA office. I was and still am a novice investor and had never sought professional management before. I decided to give it a try for a year and here's what happened. My Ameriprise advisor sold me on a Hines REIT. I voiced some initial hesitations after reading the literature, but decided to sign on after she told me that I could give it a try and if I wasn't happy, sell it after 15 months (she said you take an initial hit, but can more-or-less break-even after that time). That was a few months longer than my plan for this a try for a year, but I signed on. A year later, I wasn't happy with Ameriprise's service, so I transferred my assets elsewhere and began reinvesting. I waited a few months on the REIT, then came to find out that it wasn't saleable. Apparently, it had been doing so poorly that the REIT closed all sales back in 2009, a few months after my advisor had signed me on. I was shocked. My advisor never informed me of this, and on several meetings reconfirmed that it would be no problem to sell in about 15 months. Now the REIT has closed all sales indefinitely and lost a significant portion of its value. I feel duped. Perhaps my advisor wasn't doing her job and paying attention to my portfolio enough to inform me of this very important information. But what's more likely is that she was withholding this information until I was out of her hair. At our year-end meeting, it was pretty clear that I wasn't going to be continuing with Ameriprise and her final advise on the REIT was that "I should hold on to it for the long-term." Duh! I later found out from my new brokerage that that was my only choice! This has got to be one of the most unprofessional dealings I've ever had with any company. Thank you for any advice you can offer!

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Re: FINRA investigation and Hines/Ameriprise

Postby williamblake621 » Thu Jan 19, 2012 9:18 am

I don't think, there is any luck still available in my side !

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Re: FINRA investigation and Hines/Ameriprise

Postby WillvisitUinPrison » Tue Jan 24, 2012 6:40 pm

Dorothy - do yourself a favor. Sue the broker/crackseller/commissionHO immediately. Sue now, ask questions later. You cannot lose. More importantly, you will remove one more rat from the sewer. THe sooner you get out of this junk, the sooner you can put money in a better place.

These guys are similar to First Jersey penny stock boiler room brokers . The only way that these products will move is to dangle a huge commission in front of them. Any advisor with a fraction of an ethical unit would not touch this crap. I have owned Simon Prop Group for eight years.
It cost me $12 commission to buy the stock. Cost basis is $41 - stock now at $120. Non traded reits have lost 60% while SPG is up 210%.

When their attorney's present them with the potential length of jail time, they will settle out of court and accept lesser sentence.
Only way to recoup your money.

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