Ameriprise Financial Services has agreed to pay a $450,000 fine to the Financial Industry Regulatory Authority and $993,950.47 in restitution for failing to supervise recommendations of certain variable annuity exchanges involving contracts with guaranteed lifetime withdrawal benefit, or GLWB, riders.
Between January 2015 and December 2018, Ameriprise failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to supervise these annuity exchanges, according to FINRA's order.
The firm, headquartered in Minneapolis, consented to FINRA's findings without admitting or denying them. Ameriprise has almost 15,000 registered reps and over 4,000 branches.
"Specifically, Ameriprise did not provide sufficient guidance to registered principals for determining whether certain customers would benefit sufficiently from the rider's growth credit feature before commencing withdrawals to justify the higher fees, which applied for the duration of the contract," FINRA's order states.
During the time period, Ameriprise failed to establish and maintain a supervisory system reasonably designed to supervise recommendations of certain variability annuity exchanges "where both the original and replacement variable annuities included optional GLWB riders," the order continues.
Before 2010, Ameriprise sold certain variability annuities, which offered an optional GLWB rider for an additional fee.
"These riders provided customers who attained a certain age with guaranteed annual withdrawals for the customer's lifetime, with the guaranteed withdrawal amount determined using a guaranteed income base that reflected premiums and account value growth," according to the order.
During the relevant period, Ameriprise reps recommended "that certain customers replace their existing annuities and the linked GLWB rider with a variable annuity which featured a newer GLWB rider that included an annual growth credit feature," the order explains.
"This feature provided that, if the customer had not commenced withdrawals, the customers' benefit base (but not the contract value) would increase by a minimum guaranteed percentage, typically 6% per year, irrespective of subaccount performance," FINRA states.
However, with this additional feature, the newer GLWB riders were generally more expensive than their predecessors.
Ameriprise failed to supervise recommendations of certain variability annuity exchanges involving "contracts with the newer GLWB riders that included an annual growth credit," the order states.
"Specifically, Ameriprise did not provide sufficient guidance to registered principals for determining whether certain customers would benefit sufficiently from the growth credit before commencing withdrawals to justify the higher fees, which applied for the duration of the contract," the order states.
"Ameriprise recommended and sold these exchanges to 114 customers who were eligible to commence lifetime withdrawals from their original annuity and either intended to commence or did actually commence an income stream on the new annuity shortly after the exchange," according to the order. "On average, the incremental cost of these exchanges was $8,718.86 per customer."
Ameriprise said Friday in a statement shared with ThinkAdvisor: "We are pleased to have resolved this matter, which involved a very small number of variable annuity transactions from many years ago. Importantly, the settlement did not identify any transactions as unsuitable for clients. We remain confident in the strength and effectiveness of our current supervisory program."
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