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Tiaa Ny Times Article

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Gretchen Morgenson has a long article in the NY Times today on TIAA:

https://www.nytimes.com/2017/10/21/business/the-finger-pointing-at-the-finance-firm-tiaa.html?_r=0

Maybe the article is not all that relevant to the K-12 403b world, in which TIAA isn't a big player. It is very relevant to the university 403b world.

My wife has kept her 403b at TIAA, Traditional and CREF Stock Fund, although I’ve long thought that she should move it to Vanguard with the rest of our portfolio. It’s her decision of course. The Traditional is the kind that has restrictions on withdrawal and the CREF Stock fund has an ER of 0.43% (class R2). I find the TIAA statements very frustrating—I’ve been spoiled by Vanguard and Fidelity I guess. Insurance companies have challenges I guess.

It looks like her Traditional is paying 3.6%/yr based on the last quarter. I don’t think she has ever talked to a rep, although there have been a number of offers as you’d expect. We’ve thought about making an appointment, but never got around to it. Since she’s set on TIAA, and those 2 funds, what’s the point? It’s less than 10% of our portfolio. So the NYTimes article isn’t all that relevant to her experience, other than the discussion of ERs.

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TIAA are crooks just like the rest of Wall Street. People should go to jail over this, but they won't.

 

As I've said from day one, you shouldn't invest in TIAA. This was my bottom line on them for OCPS (Fl), "Over 30 years the 0.63% annual fee costs you 26.2% of your real profits." The numbers don't lie, people who charge fees that high aren't operating in your best interest. It is in black and white, pure unemotional math. So I am not at all surprised to read about TIAA's latest troubles.

 

I think some in the education field were blinded by TIAA's reputation. I had the advantage of knowing nothing about their reputation. I think we should all take this as a lesson, nobody in the financial industry is your friend.

 

Take my sacred cow, Vanguard. We can't love Vanguard, we can only love low fees and ethical behavior. The moment Vanguard doesn't represent that then we must turn on them, quickly and dramatically. Jack has been gone for a while now, anything can happen. Blind loyalty and money shouldn't mix.

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Take my sacred cow, Vanguard. We can't love Vanguard, we can only love low fees and ethical behavior. The moment Vanguard doesn't represent that then we must turn on them, quickly and dramatically. Jack has been gone for a while now, anything can happen. Blind loyalty and money shouldn't mix.

 

 

 

 

 

But if we turn on our sacred cows even if they are flawed, what are our alternatives when the alternatives are even worse?

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Well you've got to go with the best option available. Hopefully enough competition and customer knowledge exists to guarantee we have at least one solid option.

 

If for some reason Vanguard became evil overnight then I'd probably transfer my assets to Fidelity the next morning.

 

I'm just arguing for open eyes not perfection in an imperfect world.

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Steve

 

I would like to hear how you feel about this article sometime when you get a chance. You probably have more experience with TIAA than most on this board.

 

To be fair , disgruntled employees are not always the best source of truthful information as they are disgruntled for a reason and are apt to expand negativities. The truth is usually somewhere in the middle .Vanguard has been criticized too.

 

http://vanguardindependentnews.com/?p=548

 

 

Tony

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Steve

 

I would like to hear how you feel about this article sometime when you get a chance. You probably have more experience with TIAA than most on this board.

 

To be fair , disgruntled employees are not always the best source of truthful information as they are disgruntled for a reason and are apt to expand negativities. The truth is usually somewhere in the middle .Vanguard has been criticized too.

 

http://vanguardindependentnews.com/?p=548

 

 

Tony

 

Here is the primary TIAA fund I invested in from 2002 to 2008 before I rolled over my money into Vanguard: https://www.tiaa.org/public/investment-performance/crefvariableannuity/profile?ticker=41082540 after I retired in 2008.

 

.61% is high by today's standards but it was very reasonable when compared to Invesco which increased their costs over 1.5%. I don't forget the past. I vividly remember the era when I only had a horrible 403b plan with terrible choices in LAUSD a public K12 school district. I was very grateful, and still am, that TIAA was available and finally signed those hideous hold harmless agreements in 2002. I remember having numerous phone conversations with them about signing up. They were reluctant because of the HHA. Thankfully those terrible agreements are history.

 

Share class 2 and 3 actually lowered the costs of this fund to .34 and .23%!

 

I still love you TIAA!

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I still love you TIAA!

 

A hero of mine once said, "A man's head will not long remain wrong, when his heart is right."

 

...and so I'll patiently wait for your head to catch up to your heart.

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Ed,

You have earned a lot of respect on this forum and the Bogleheads. You and I will NEVER agree about TIAA, so let it go. It took me a lifetime to learn what you learned in a few years, and I am very happy so many young people follow MMM and are discovering investing. I am speaking of a different era, the dark ages when NOBODY talked about the 403b, except a few of us at LAUSD, and Scott and Dan, that's it. No one talked about retiring in their 30s.

 

You have plenty of company with the unions, and the large company insurance annuity agents. All of them, every union and every annuity agent hated TIAA too, and are laughing all the way to the bank over this NY Times article and your hatred of TIAA.

 

The context of why I will always love TIAA is very important. I paid .61% for my equity index fund which was very good deal back in the dark ages, way before ETFs, before broadly diversified indexed funds worldwide, before target date funds, before 401k Roths, and before the internet provide all of the information anybody needs these days. They also funded two attempts to reform our hideous insurance code here in California and took a lot of heat for that effort, but TIAA knew way back in 2002, that teachers were getting the shaft. The Western Regional Director Brian Cressey is one of my heroes. He came here from Maryland and recognized the 403b horror with k12 here in California in about 1.5 days and came on so strong that the palm trees along sunset blvd in Hollywood are still waving.

 

Setting aside all of the above, my fight is not and will never be with TIAA or with you, it's with the 403b system that allows and protects the annuity monopoly. I was grateful that TIAA was there when I needed them, and they're here again with my 3.0% traditional annuity with 0% fee (except for the spread). I transferred a couple hundred thousand from Vanguard back into their great traditional annuity. That fund is 100% liquid, no investment cost and protects principle while earning 3.0%.

 

I have a positive history with TIAA and the primary reason why I still love them.

 

Steve

 

PS

Share class 2 is only .43% and Share class 3 is a staggering even lower cost at .23%. Did the article publish these data? That TIAA is lowering costs too?

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I’m very disappointed in the article and so far, even more disappointed in the response, rather the lack of one. With that said, to say that TIAA is “crooks” and to compare them to the worst players in the industry is simply not in evidence.

 

TIAA is not perfect and the allegations are disturbing, but as Steve Schullo said, they’ve got a long history of doing good. This is not a defense of TIAA’s purported actions, of which we are still trying to understand the exact details, but I certainly wouldn’t throw them to the curb. They have some real explaining to do and quite likely some reform.

 

Would I choose Vanguard over TIAA? For mutual funds, in a second. But the TIAA Traditional has many benefits that I’ve found incredibly valuable for myself and my clients.

 

K-12 employees could do (and they do) much worse than TIAA. The acts committed against k-12 employees by other companies are criminal compared to TIAA. This doesn’t mean that we shouldn’t hold TIAA (and Vanguard) to the highest standards and that’s why this article hurts so much. The lack of a response by TIAA is also making it worse.

 

TIAA is not a criminal organization, but they have a lot to answer for. Of course, most of the 403(b) industry is criminal and they never have to answer for it...even when the NYTimes exposes them (last year).

 

The $18.5 million comp package of Roger Ferguson is outrageous, but the Vanguard CEO makes nearly as much. I’m disappointed in both.

 

ScottyD

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Here in OCPS FL, TIAA charges 0.58% for a 403b/457b and they offer funds as high as 2.5%. Those are facts. I don't need to wait for a response or an investigation or anything else, it's in black and white.

 

Anybody willing to charge such high fees for literally nothing, is acting criminally in spirit. That is obviously unethical behavior. End of story in my book...but it looks like their story just gets uglier and uglier. I'm very surprised you're not condemning them more harshly.

 

I couldn't care less what they've done in the past. It is entirely irrelevant, especially when a good chunk of their past was as a non-profit, which they aren't anymore. I don't get to rob my entire neighborhood's retirement accounts and then point to all those years I wasnt robbing people, or to all the thieves who stole more than I did, as evidence that I'm a nice guy, and neither should they.

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Ed,

 

I’ve supported and admired everything you’ve been doing and will continue to do so, but I don’t feel your position is balanced or completely informed. I don’t feel any need to convince you otherwise as it appears there’s no point and I’ve got better things to do than to defend TIAA.

 

With that said, we all have to make decisions and you’ve decided to work with a company that has actually done real harm to public k-12 teachers (Security Benefit) and yet...I agree with you. Sometimes you work with the lesser of two evils and believe it or not, I’ve also recommended the NEA Direct Invest product even though I can’t stand what the NEA and Security Benefit has done to teachers over the years.

 

I can’t say with any certainty that NEA Direct is available because of Dan and I (more so Dan), but the effect 403bWise had on the NEA Valuebuilder conversation (and my Secrets of the NEA post) certainly caused concern over there (according to the people who ran it at the time). It was that concern that led the NEA to come out with Direct Invest.

 

Vanguard now charges $60 per year for their 403(b), making it one of the most expensive of the low cost providers for smaller account balance participants, meaning the actual costs are way more than a TIAA account and one would not have access to the TIAA Traditional or TIAA Real Estate option. Vanguard also offers a fund that charges 1.60%...but so what?

 

We can find aspects of any good company and try to tear them down. TIAA has been a “good” company in the past and there are good people working there now. They have some plans that look great and others that look terrible. But they also offer a fixed account that can’t be beat (in many, but certainly not all cases). I’ve been incredibly vocal about my disappointment with the TIAA article and have been taking it seriously, but I also know that I have to live and invest in the real world and if I say TIAA is off limits then I have to say Vanguard is as well (they opposed fiduciary rule). I’m not willing to do that.

 

The past is not irrelevant, the past matters.

 

Let’s simply agree to disagree on TIAA and focus on what we do agree on - which is reform needs to happen. You shouldn’t have to put your wife’s money in Security Benefit. We need real reform, not just in 403(b), but in financial services. We need good leaders with real ethics...that are not paid $15+ million per year.

 

We’re on the same team Ed and I admire your work, let’s keep the focus on what we are trying to do. Punch TIAA when the up and keep pressing their ethics, I’ll do the same.

 

ScottyD

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