So Much for Conflict Resolution

Congress is busy shaking fingers at oil-company executives while gouging future taxpayers with unaffordable pork.

Wall Street is making money hand over fist again, emerging sullied but apparently unhurt from scandals over biased research and mutual fund timing.

And I can name 155 reasons why investors should continue to view the financial services industry as sheep would view a pack of rabid wolves.

One hundred and fifty-five is the number of investment options our fund screener spits out when asked to locate funds with upfront loads of at least 5%, annual expense ratios of at least 1% and negative annualized returns since inception. And every time I run that screen I'm amazed the software doesn't choke.

The criteria are not arbitrary. A few years back, my uncle asked an American Express adviser to redeploy 401(k) funds he'd just rolled over. The adviser carefully considered a broad range of alternatives and recommended several American Express Advisors funds with sorry track records and 5.75% upfront loads. My uncle (an excellent software engineer but clearly no investing expert) thought the upfront loads bought him personalized portfolio management. He went away happy, insofar as the retirement fund headache went away.

He got "helped" by an outfit that has turned such help into an art form. Exasperated by years of underperformance, American Express (AXP) finally spun off its funds arm and advisory network as Ameriprise (AMP) earlier this year. And one of the first orders of business for the newly created company was to settle, for $100 million, a class-action lawsuit alleging that its advisers enterprisingly favored in-house mutual funds as well as those of especially generous outsiders. Naturally, Ameriprise admitted no wrongdoing. The company also admitted no wrongs in a recent $7.2 million settlement with New Hampshire's securities regulators, who were probing similar allegations.

And just as American Express Advisors became Ameriprise, most of the company's mutual funds got a sparkling new name of their own, RiverSource. Ameriprise's advisers talking clients into RiverSource funds need never again worry about the appearance of a conflict of interest.

After all, the firm freely admits it has one. It's right there in the middle of page 5 of the page-turner titled An Investor's Guide to Purchasing Mutual Funds at Ameriprise Financial: "Generally, we have a greater incentive to sell Select Group funds than other funds," the document reads. The Select Group includes in-house funds as well as those from outsiders who offer Ameriprise financial incentives to sell their products. "Conflicts... arise" from such incentives, the brochure acknowledges. What's more, Ameriprise employees are expected to "generally spend more of their time and resources promoting Ameriprise products, such as RiverSource."

What's more, they're willing to do it on your dime. The ideal Ameriprise client pays a modest planning fee for a financial blueprint tailored to her needs, forks over sales commissions on Ameriprise products and then covers some of the annual expenses of Ameriprise funds.

And these don't come cheap. The average RiverSource fund has a higher expense ratio than the costliest Vanguard offering, to say nothing of the additional drawbacks of the hefty upfront load and historically inferior performance.