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you’ve decided to work with a company that has actually done real harm to public k-12 teachers (Security Benefit)

We both agree that was the only rational choice because they were by far my lowest cost option. I've highlighted their deceptive practices on my website. On this site I've repeatedly categorized them as an unethical company who can't be trusted.

 

If TIAA happened to be offering the best product for something, then I'd encourage people to buy it. However, they're so far away from offering the best 403b/457b product in OCPS (FL).

 

believe it or not, I’ve also recommended the NEA Direct Invest

Of course I believe it, I'd have difficulty not believing it.

 

I can’t say with any certainty that NEA Direct is available because of Dan and I (more so Dan)

Then let me take this time to applaud you and Dan. Your efforts have helped to significantly improve my wife's financial future and we are deeply appreciative.

 

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

You don't have to tell me that; I posted about this the moment the news broke. I also predicted this fact would be largely ignored because it affects the least of us. The ethical route would have been to spread the cost around by adding a basis point to the ERs, exactly what Security Benefit NEA DirectInvest has done.

 

I can't remember the exact number, maybe $68,000, but the lower ERs from admiral shares means you don't need much of an account balance to pay for the higher fixed fees. While I find it generally appalling that low balance investors are asked to pay more, their biggest problem isn't paying tens of extra dollars per year. Their biggest problem is that they are going to have to work until they die or spend their final years in poverty because they aren't able to save any money...what we have here is a social and economic problem that is out of control and well beyond the scope of retirement plan fees.

 

Vanguard also offers a fund that charges 1.60%...but so what?

The point is, in our 403b/457b, TIAA doesn't let anybody invest for less than 0.63%. Assuming 6% returns and 3% inflation, that consumes 26.2% of real investment returns over 30 years. They literally give you nothing in return for that cost. The only way to describe that is exploìtative.

 

they also offer a fixed account that can’t be beat (in many, but certainly not all cases).

As I've said before, I have no issue with anybody buying any product that is an excellent choice. My problem is when people believe "Company XYZ has done wonderfully ethical things" and then they invest with them, or encourage others to invest with them, which leads to people being needlessly exploìted.

 

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 making the case that TIAA is off limits. I'm making the case that no financial company should be regarded as "trusted good guys" and no financial company should get our money using inferior products. As I said in an earlier post about sacred cows...we can only love low fees and ethical behavior (which are really one in the same in this case) and we cannot love a company.

 

The natural conclusion of this logic is that nobody should invest in the OCPS (FL) 403b/457b run by TIAA because it is a garbage deal and given that they offer such a garbage deal, nobody should be shocked that TIAA got themselves into this latest bit of trouble.

 

...also I did not know that Vanguard opposed the fiduciary rule (I'll google but please link resources). That infuriates me and strengthens my resolve that no financial company should be trusted. As I've said before...maybe Jack was a saint (maybe he wasn't), but especially without him I expect anything can happen with Vanguard.

 

We’re on the same team

I don't view people as opponents and I certainly don't view you as an opponent.

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This is a great discussion. I can't say much about TIAA because I have never invested with them and I don't think its fair to judge them by one article, scathing as it may be . I do know as Ed states that they are simply not the TIAA of the past . Perhaps in the past they stood out but today their fees are above average compared to Vanguard, Fidelity and even others who have entered the 457B/403B arena. Seems like their fee future trend is up. Also,TIAA does have an obligation to come forward and answer these allegations. Keeping quiet is not helping them. I am sure they must be preparing a statement. I hope its honest and recommends an internal review of their internal culture. If its not all about the investor than the company is heading in the wrong direction.

I worry about Vanguard. Vanguard is no longer Jack Bogle's baby and it has grown in popularity to the tune that it manages trillions of investor dollars. New folks are in charge now. There is only one Jack Bogle and if I have my facts right he was subtly pushed out years ago. So far the company has done right by its investors but this could change at any moment. Will their growth corrupt them? Will the focus shift from the investor to growing the salaries of its management? Bogle himself a few days ago stated that he did not think Vanguard could continue to grow and still be the company it was and still is today. ( I didn't post the article because I promised Steve I would not post any more Bogle articles:)

I kind of wish Vanguard was still our little secret to success.

Ed though is right. We need to not make any financial company our sacred cow. If they start changing, investors must speak up and demand a return to the principles the company was founded on or exit the company in droves to send a message.

Scott too has a point. If we tear down our better choices it only leaves us with even worse choices. We should focus our ire against those insurance companies that are only worried about lining their own pockets at teacher expense.

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Ed,

 

I'll trust your recommendation in Florida and I'm not arguing for TIAA in Florida K-12. In fact, the last product they had there was beyond bad (though that was a function of the IBC Model Plan).

 

Looking forward to continuing the fight and yes, we shouldn't put any company into cult status. No sacred cows. That said...I still have a pretty big crush on Vanguard (which is why their opposition to the Fiduciary Rule burns me so much, they know my position).

 

Let's keep on reforming!

 

ScottyD

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Hey fellows,

Nothing wrong with a couple of absolutes and 100% love for particular companies. Yeah, I know things can change in the future, but for now, I will be invested in one or both Vanguard and TIAA for the rest of my days, which is a lot shorter than you fellows. I have so much history good history with them. TIAA really understood the 403b California problem, and yeah they made mistakes but when you are in a relationship, it comes down to people. I have liked all of the good people I met personally at TIAA and Vanguard.

 

Compare these great companies with my last annuity agent: I merely asked her what she thought of mutual funds for my 403b, she sh-ot back and said: "I will never recommend MF to teachers." When I asked why she said: "Mutual Funds are too risky for teachers!" That was 25 years ago and I NEVER EVER spoke to another annuity agent again. Today I think you call that "financial profiling" based on profession.

 

Even with all of the resources, news reports, and comradery of us here on this forum and Bogleheads, the 403b K12 system was, and still is, very, very, very corrupted and wrong. But back in the early 1990s, NOBODY questioned the annuity monopoly on the 403b.

 

We are making progress and perhaps auto enroll might be the game changer. In LAUSD, 800 people were auto-enrolled in the Target Date funds and 400 opted out.

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Steve, you may be our elder statesman here but I am hoping you have many more years ahead of you contributing to this website. Your contributions through the years helped me see the light. I am expecting to be reading your posts for the next 30 years at very least. So take good care of yourself.

 

Ed,

 

You mentioned you did not know Vanguard opposed the fiduciary rule. Perhaps this will catch you up to speed.

 

http://www.etf.com/sections/features-and-news/vanguard-why-proposed-fiduciary-rule-unfit?nopaging=1

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Ed,

 

You mentioned you did not know Vanguard opposed the fiduciary rule. Perhaps this will catch you up to speed.

 

http://www.etf.com/sections/features-and-news/vanguard-why-proposed-fiduciary-rule-unfit?nopaging=1

 

Vanguard's arguments were awful and they've completely destroyed any trust or goodwill they may have built up with me. Disgusting.

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Hey Ed,

 

I think "disgusting" is a bit harsh. I too am disappointed they are not loudly championing the fiduciary rule. These companies are not perfect and there are issues and challenges behind the scenes that we may not always be privy to. I am with Steve in proudly stating that I will keep my money with TIAA, and Vanguard (and Fidelity) for the rest of my days baring some reason to change. Steve also rightly points out TIAA's multiple efforts to change truly ridiculous California legislation that directly hurts teachers. I documented my issues moving money from Vanguard and they actually tweeted an apology to me. Let's not make the perfect the enemy of the damn good. :) - Dan

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I think "disgusting" is a bit harsh...Let's not make the perfect the enemy of the damn good. :) - Dan

 

Allow me to express my sentiments without emotion.

  • I found their arguments to be disingenuous and ineffective.
  • I found their arguments to be similar to those I've heard from folks like "The Mooch".
  • When a company claims the circumstances where they'd be required to act as a fiduciary are "too broad", what I hear is that they want to protect a subset, or entirety, of their business that relies on NOT acting in the client's best interest. In my view, there is absolutely no circumstance where a financial firm shouldn't be required to act in their clients' best interest.
  • If I understand it correctly, Vanguard is arguing that only advice that is "individualized" should be held to the fiduciary standard. That is a loophole you could drive a truck through. Under those rules if I preface my "advice" with some kind of general statement like "these types of things are great for teachers" or "this is what I do for all of my most important clients"...well now I have no ethical requirement to act in your interest.
  • Vanguard wants to exempt their marketing material and investment "education" from the fiduciary standard. Again, another massive loophole. That would allow firms to pump out material that is against clients' best interests.

Ever since being repeatedly ripped off, I've always felt the need to verify any advice I was given. However, up until now I assumed Vanguard was "innocent until proven guilty". From now on, I'll have to start with the presumption of guilt just as I would with any other financial company.

 

I suppose I'll stay with Vanguard until I start hearing concrete instances of unethical behavior that exceed their competitors, but any sense of brand loyalty is 100% gone.

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I herby nominate Ed for head of The Securities and Exchange Commission. I think he would clean things up in a hurry!! :)

 

Personally, I still think Vanguard is the best we got so I prefer not to throw stones at them unless things radically change. They have been good to me .As Dan stated, we don't always fully understand or are privy to the inner workings of running a huge investment company. I am sure these folks have a balancing act between ensuring their existence and survival and serving the customer.

 

Tony

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Ed

 

You are so Idealistic. I love that about you.

 

I am sure Jack probably doesn't agree with everything Vanguard now does. He is very much a financial purist at heart.Bogle argues for an approach to investing defined by simplicity and common sense. Below are his eight basic rules for investors:

  1. Select low-cost funds
  2. Consider carefully the added costs of advice
  3. Do not overrate past fund performance
  4. Use past performance to determine consistency and risk
  5. Beware of stars (as in, star mutual fund managers)
  6. Beware of asset size
  7. Don't own too many funds
  8. Buy your fund portfolio - and hold it

 

Vanguard is no longer Bogle's Vanguard.He is no longer a CEO and a decision maker. Still even at 87 he gets more requests for interviews than the current leadership team at Vanguard. People trust him and he has no problem giving his honest opinion. I admire him greatly. How can you not? He stands for the little guy and for truth.

 

 

Vanguard still is as good as it gets for the average investor. Most other financial institutions have a long way to go before they even come close to matching Vanguard IMHO. Watch them but don't over analyze them. Just my two cents.

 

Tony

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Vanguard still is as good as it gets for the average investor. Most other financial institutions have a long way to go before they even come close to matching Vanguard. Watch them but don't over analyze them. Just my two cents.

 

Don't worry, I'm not leaving Vanguard for Merrill Lynch. My idealism is paired with cold logic. Despite this reality that I'm newly aware of...I still can't name a company that is better than Vanguard (for now).

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Maybe I am wrong but Vanguard is influencing the industry for the better. I believe Fidelity added its index funds to focus in on Vanguard Index Investors and maybe grab a few of them. . Most of Fidelity's other funds are active funds with higher expense ratios. Vanguard becoming the biggest company now has made other fund companies take notice, lowering their fees some and upping there competitive game. Sort of like what Amazon.com has done with customer service in retail. Apple computer's design and innovation has pushed other technology companies to up their game too especially in terms of design.

 

Regardless of not being perfect, Vanguard leads the industry and is confounding mutual fund companies who sell higher fee active funds to the point that many are seeing massive outflows. I still read sour grapes articles by these institutions who hurl insults at Vanguard's success especially their index funds trying to find fault.. They hate Vanguard!! So Vanguard must be doing something right!!

 

This leads me to ask why is the 403b stuck in mediocre in so many cases? Probably because the mediocre high fee insurance companies feel safe here.They won't change. Less competition and innovation keeps them in business ripping people off. If more folks had access to better choices things would change more quickly for the better even among insurance companies. Sure we live in a profit oriented economic system but competition and choice lowers prices and improves offerings.

 

Just my two cents.

 

Tony

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Maybe I am wrong but Vanguard is influencing the industry for the better.

 

You're 100% right. Bogle is a hero to investors.

 

This leads me to ask why is the 403b stuck in mediocre in so many cases?

I think it is the confluence of 3 things...

 

1. Investor ignorance (which exists everywhere).

2. School districts prefer not to take on any responsibility so they outscource it.

3. As a result of #2, vendors are allowed on campus but low cost vendors can't afford to do that. So it sets up a space where only unethical vendors can really participate and they do so with the authority of being "district/state approved".

 

Regular companies face similar circumstances with their 401ks. Two thirds of the companies that I've worked for have had horrible/suboptimal 401ks because at the end of the day the company is ignorant about investing and they allocate their resources to bringing in revenue, not taking care of employees' retirements.

 

...heck my wife's 403b is just as good or better than any 401k I've ever had.

 

If more folks had access to better choices things would change more quickly for the better even among insurance companies.

I hope you're right but I fear you're wrong.

 

If I am able to get Vanguard/Fidelity into OCPS (FL) I suspect almost nobody will enroll with them and the sales reps preying on teachers on campus will continue to get all of the business.

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Hey Ed,

 

I think "disgusting" is a bit harsh. I too am disappointed they are not loudly championing the fiduciary rule. These companies are not perfect and there are issues and challenges behind the scenes that we may not always be privy to. I am with Steve in proudly stating that I will keep my money with TIAA, and Vanguard (and Fidelity) for the rest of my days baring some reason to change. Steve also rightly points out TIAA's multiple efforts to change truly ridiculous California legislation that directly hurts teachers. I documented my issues moving money from Vanguard and they actually tweeted an apology to me. Let's not make the perfect the enemy of the damn good. :) - Dan

 

Hi Dan,

Yep, I did the same thing. Except I do not have Fidelity, two is enough, and TIAA and Vanguard are the best.

Steve

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