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403bannuitysalesman

403b Annuity Salesman Perspective

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Hello,

I think some do know what we are doing.  During vendor fairs we discuss among ourselves different topics, such as investing in index funds and using lower cost products to fund  retirement.  It would never be advertised though, because that would be self defeating. You are told to not over educate or to not tell too much.   Others will not share this knowledge with educators because they feel it is not their job to educate on things like that and if they can't take 5 minutes to google "investing101" or "how the 403b" works, it's on them.  It is a moral dilemma for me.  I do talk to my peers about what I discussed on this board, but many say that if it was not for us, they would not be investing at all and it is better to invest in a sub-par product, than no product at all. 

I do know that some insurance companies are worse than others when it comes to suspect practices. I agree it has to do with how they are trained to sell the 403b.  Some of the trainers and supervisors of these younger salesman have multiple disclosures on broker check for different issues.  I don' t understand how someone with multiple disclosures in the financial industry should be in charge of training the salesforce in how to sell 403b annuities. It is very coincidental that those with a disclosure or two seem to get promoted the quickest.

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55 minutes ago, 403bannuitysalesman said:

During vendor fairs we discuss among ourselves different topics, such as investing in index funds and using lower cost products to fund  retirement.  It would never be advertised though, because that would be self defeating. You are told to not over educate or to not tell too much.   Others will not share this knowledge with educators because they feel it is not their job to educate on things like that and if they can't take 5 minutes to google "investing101" or "how the 403b" works, it's on them.  It is a moral dilemma for me.  I do talk to my peers about what I discussed on this board, but many say that if it was not for us, they would not be investing at all and it is better to invest in a sub-par product, than no product at all. 

Again, what is it exactly that you sell to teachers?

It is nothing new that "advisers" put their money into index funds while they direct their clients' money into high cost "investments".

Clearly, we all have an obligation to not take advantage of people. To conclude that it isn't your "job" to disabuse somebody of the very ignorance you're exploìting is a weak attempt to relieve a guilty conscience.

The more vulnerable somebody is, the more obligated we are to protect them. To imagine people as being so flawed that they're incapable of initiating or understanding a 5 minute google search (I'd argue passionately that it takes much more than that) and then to conclude that those people deserve to be exploìted...well that's just plain backwards. This is the same kind of thinking that goes into any ideology of supremacy, the claim that a group is inferior and therefore worthy of awful treatment.

The idea that they wouldn't be investing at all if it weren't for a 403b adviser is at best debatable (for instance I know plenty of folks who don't trust financial people and just plow all of their money into their mortgage, not what I'd do, but they may be coming out ahead of their peers). However, even if that were true this is just another weak attempt at a rationalization. How far can we take that logic? Am I doing them a favor by taking 50% of their real returns? Am I doing them a favor by taking 100% of their real returns? Am I doing them a favor by taking 50% of their total balance? What if I cleaned out their account and left a penny behind? After all that would be a penny they otherwise wouldn't have had because I guess in this hypothetical world they blow all their cash on frivolous purchases?

...it is also a false choice. It isn't a sub-par product or no product at all. You could simply open your mouth and tell them about the good options.

How is it that you're personally addressing this moral issue? If it were me I'd feel obligated to spend the rest of my life trying to educate K-12 employees on how they're being exploìted.

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Ed

 We need to stop and realize that we live a capitalistic society. No one should be surprised or shocked that companies operate on a profit motivation and that some deception is often involved. Vanguard is the antithesis in that it is a not for profit company. It doesn't matter what you buy, it does come down to the consumer being a smart consumer. You have heard of caveat emptor ? (Latin for "let the buyer beware")The phrase caveat emptor and its use as a disclaimer of warranties arise from the fact that buyers typically have less information about the good or service they are purchasing, while the seller has more information. Defects in the good or service may be hidden from the buyer, and only known to the seller unless the buyer does his research. Outside of a legal binding contract of satisfaction between seller and buyer the buyer is at his own risk and the buyer should thus beware. If we would be smart enough to stop buying these damn annuities and high cost items they would cease to be sold. Unfortunately a sucker is born every minute. I was that sucker at one time. We ALL  in the education arena need to be more  financially literate. While I disagree with the sales tactics and i would definitely consider it a moral dilemma if I were a salesman of these products, the teacher can reject the product which most don't do. I do regret that salesperson is not financially rewarded for doing the right thing by suggesting the right products for the investor.

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There is something I forgot to mention.  Many times buying an annuity is based on feeling and emotion.  I hear It "feels" like the right thing to do.  It is an emotional, not logical sale.  If you can connect with your prospect, you can get the sale.  I can tell a teacher all about the negatives of the product, but if they "feel" like it is a good thing to get, they will buy it regardless of what I say.  Also, when I speak to young teachers about retirement, and I recommend for them to go to a ROTH IRA mutual fund via Vanguard, Fidelity, T.R. Price, etc. in place of investing in the district's 403b-1 pre-tax plan, the teacher does NOTHING. They have no confidence at all in investing and want someone to do it for them and they would rather pay for the annuity than do it on their own.  If I don't sign them up, another annuity company will.  I cannot go online and sign them up in a target fund...they have to do it themselves. 

This is a more difficult problem than just saying "no" to annuities.

 

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Do the districts you work with have a low-cost mutual fund based provider on their list, as well as annuity selling vendors? Does your insurance company offer a MF based 403b plan? What do you think of 403bcompare.com?

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Holy cow. I agree wholeheartedly with krow36's comment: how can we use this is an educational piece? And I'm curious to know what prompted 403bannuitysalesman to even post. What are his motives?

He didn't like he was mocking, but he didn't give us tools to work with either. We know how they get into schools, and we know what they sell, and we know how teachers respond. 

Hummm, thanks for sharing your thoughts and experiences, poster.

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There is something I forgot to mention.  Many times buying an annuity is based on feeling and emotion.  I hear It "feels" like the right thing to do.  It is an emotional, not logical sale.  If you can connect with your prospect, you can get the sale.  I can tell a teacher all about the negatives of the product, but if they "feel" like it is a good thing to get, they will buy it regardless of what I say

Your insights are so accurate. Thanks for your participation on this board. I know for fact that this is true (above quote). When we finally got Vanguard on board in the district, teachers would have had to sign up for the paperwork on their own with no face to face interaction with a sales person. Many failed to follow through on enrolling even though they said they were initially very interested. Even when the facts were given to them  in terms of costs and fees, and model index fund portfolios given them in a presentation many still decided on a face to face connection with a human even when they knew they were not getting the better deal. Teachers increased their participation in retirement plans after Vanguard and our state 457b plans were added  but most of that increase went to sales reps selling insurance annuities and not to Vanguard!! or a great state 457b plan we have now. I even had some teachers say they didn't want to stop their contributions to their current plan because they didn't want to hurt their advisors feelings!!!  So yes there is a human emotional element to teacher decision making. I think the annuity salespeople have figured out that when candy bars, free pizza coupons, and cake in the teachers lounge doesn't sway teachers, a warm face to face encounter works. Most of the better choices available did not have sales reps roaming the halls making the process easy. I think laziness plays a role in this too on the part of the teacher.

 

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The solution is simple: a functioning HR department. Every job I’ve ever had begins day 1 by sitting with somebody from HR where they explain the 401k and hold my hand through the enrollment process. This isn’t rocket science.

School districts need a legit HR department just like every other large employer.

None of the 403b/457b problems require innovative or complicated solutions. 

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Or a more authoritarian approach: everyone gets pre-enrolled in a 403plan like Vanguard or fidelity like it or not with no other choices given.  Teachers are given too many choices. Sales reps should not be allowed in the school building.

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If I were in charge of a school district we’d have exactly one vendor (Vanguard, Fidelity, etc) and the fund choices would be limited to the three fund portfolio, target date funds, and fixed allocation funds. No fund would exceed roughly 0.16% ER and any other fee would be minimal (say a $35/year maintenance fee or whatever).

When an employee is hired they’re automatically signed up for the plan and unless they specify otherwise some reasonable percentage of their salary is directed to the target date fund based on their age.

There would always be somebody available to help change an employee’s account or to answer basic questions about diversification and asset allocation (which does not constitute financial advice since it is just repeating well established academic information about the stock market).

Private companies implement retirement procedures like these and they work.

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I agree 403b annuity salesman should not be in the schools...all they cause is confusion with their deceptive sales practices. I deal with this everyday as one of them. What you are working against is the heard mentality....one of the teachers swears by this annuity salesman and is very influential, and all the teachers respect him/her, so listen to that person over common sense. Case in point:  I spoke to a teacher a little while back about starting a ROTH IRA via a low cost provider in lieu of using the districts 403b-1 annuity plan, which I am a part of.  She had promised her peer though to meet with this 403b annuity rep before doing anything (her peers' son was best friends with this young rep and wanted to do him a favor).  I told her to not to sign anything until after reviewing all the details.  

Well, she signed up for it after the rep told her the total fees were only 1.2%, the admin charge went away after 6-years, and that he only partly works on commission.  After reviewing the contract, I find out the total fees were at least 2.2%, and the $30 admin fee didn't go away until the pot reached 25k and he was in a broker role in this situation.  In addition, the contract used retail shares, instead of institutional and had 12b-1 fees..  She was going to sock $200 a month into this crappy product.  I asked her why she signed up for it after our conversation and she said she couldn't remember all the details about what to look for, her husband got along great with the kid,  and she said the rep was staring at her and she didn't want to make him feel bad, so she signed up for it. It was an sale based clearly on emotion and feelings and not logic and common sense. 

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I would like to see mandatory enrollments via a low-cost provider implemented, similar to what they do in the private sector.  Most teachers will not sign up something on their own.  They need someone to hold their hand and tell them they are doing the right thing.  That is why the annuity rep is so successful. They are face-to-face with the client, reassuring them, making them feel good..  Until they have mandatory enrollments or these low cost providers send someone into the schools to do the face-to-face thing, the 403b annuity will continue to thrive.

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So glad you have taken the time to give some insight from your perspective. I also wish enrollment was mandatory but only to a low cost provider. I truly don't understand why the teacher segment of the population is left with so few choices. 

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