What are you thoughts on telling people about Self Directed 403b plans? I feel like when I tell people I choose my own funds they instantly decide this is something they are not capable of. I think a lot of people need, or think they need, that "financial" person that will come to their house and tell them their money is safe and sound. I suppose when telling people about choosing the three fund or one fund approach it's important to deliver the message in a way that says, "this is the way I did it, this is what I was comfortable with, here is some information on three fund portfolios and index funds," versus "you should pick these funds here".
I don't know what the perfect solution is but I'll share my thoughts. At a high level here are the three main points I like to cover right off the bat:
1. Did you know that virtually all of our vendors charge fees so high that they consume the majority and sometimes all of our real investment returns?
2. If they show interest then I'd suggest that advisers are able to do this because we all assume investing is too complicated to understand but all we need is a single all-in-one fund or 3 individual funds (US stock, international stock, and bonds), which is in fact what most advisers own themselves!
3. If there is still interest then I'd explain I use Security Benefit's NEA DirectInvest to implement the 3 Fund approach and the fees are so low that after 30 years they're expected to cost me roughly 3% of my real returns.
From there I'm prepared and enjoy getting into all of the dirty details if they push it in that direction. Otherwise we can keep it high level (fees = bad, 1-3 funds = fully diversified, index > active). Either way I volunteer to walk them through anything and everything. I'll go to people's houses, call, text, email, facebook, walk them through the steps to enroll, make 3-way calls to vendors with them, whatever they want, whenever they want.
I do make a point to tell them that I don't fully understand the law and I have a vague impression it is illegal for a "normal" person to provide financial advice. So I can't advise anybody but I can tell you exactly what I did, why I think it was the best choice, and what I'd do in hypothetical situations.
I just felt like an idiot
You don't sound like you suffer from this the way a lot of people do but I'm pretty adamant about shutting down that emotion/thought process. Nobody is an idiot for getting taken advantage of when it comes to investments. Only a very small minority weren't taken advantage of and they probably had somebody more experienced to guide them. We're not idiots, they're immoral financial predators.
There are only seven vendors offered by my district. It might be worth it to take the time to call through that list and see what is being offered.
7 vendors will take a while to work through, but I encourage you to do it. Start with the ones your coworkers use the most and work your way down the list.
Here is some advice, when they explain all of the details ask to see the official documents to verify what they've said is 100% accurate. Don't accept their requests to call you back or to email it to you. Tell them you've got all day and want to work through it right now with them. Otherwise that official information will probably never find its way to you. Remember when you're dealing with reps, it isn't just about honest vs dishonest, it is also about knowledgeable vs poorly trained and ill-informed. It is easy to want to attribute everything to malevolence but incompetence is a highly probable reason for their behavior too.
This was a great way to break down the cost of each plan. I know there was at least some interest from the union and the B. A. about Security Benefit. I'll have to talk with my union leader again and see if she can get an open discussion started with the B. A. about adding this vendor.
You'll find there are mixed views on Security Benefit. NEA DirectInvest is objectively awesome, no grey area there. However, adding security benefit means you're adding a vendor that will viciously go after employees and try their best to put them into other explo¡tative plans. I spent countless hours on the phone with Security Benefit transferring from one person to the next and nobody would confirm that NEA DirectInvest was a valid option for me to enroll in. I believe only 3 or 4 people in the entire state of Florida are enrolled (include my wife).
If I had to pick the single best vendor for a generic school district with generic employees, it would be Vanguard because:
1. They offer the cheapest 1 fund portfolio (and who knows, some day they might offer admiral variants of those funds), which is probably what is best for the vast majority of educators. People like me who prefer the 3 fund portfolio will wind up paying an extra 0.10% than we'd have to pay at Fidelity or Security Benefit's NEA DirectInvest but it is a sacrifice for the common good.
2. Every time I or anybody I've known has spoken to Vanguard they've gotten EXCELLENT financial advice. I know that wouldn't be the case at Security Benefit and I'm not sure about Fidelity but they worry me because they offer a ton of really awful funds in addition to their excellent low cost, total market index funds.
3. I believe in rewarding THE company who has fought for investors. I think that company culture is more likely to take care of educators than not.