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403b Annuity Salesman Perspective

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3 minutes ago, grw said:

I truly don't understand why the teacher segment of the population is left with so few choices. 

I believe the state of affairs is a direct result of teachers' quiet acceptance, which is ironic because I've seen teachers raise hell over incredibly trivial issues.

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Again, for me none of this is new info . I've seen and experienced everything the salesperson has mentioned.  Its pretty accurate info.This shows that teachers themselves are their own worse enemies and will trust others over making rationale decisions. The industry obviously has a pretty good feel on how to manipulate this population to their benefit.  

 

 

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I agree Tony, none of this is new. Unless I'm not considering all possibilities, I see only two ways somebody inside the industry can help with reform:

  1. Document all of the unethical behavior and ideally capture broken laws, broken regulations, and shocking behavior. Then present that information to the world in an effort to hurt the company and hold people accountable.
  2. Start an advocacy group to educate teachers and use your past indiscretions to add credibility to your new effort.

It is also worth noting that I don't believe K-12 employees are any "worse" than the general population. For example, our 401k automatically enrolls everybody in a high cost target date fund, something like 1.3% or so. When I was hired virtually every employee was invested in expensive funds and thought nothing of it even though we have access to index funds at 0.31% (still way too expensive I might add). These employees didn't even have to contend with sales reps pushing them into inferior, high cost investments.

I believe the degree to which K-12 plans are inferior to the rest of the population is a direct result of the school system allowing investment companies to construct a trap tailor made for K-12 employees, which I wrote about here. The rest of the population, as flawed as their employers and 401k may be, don't have to contend with such a well crafted, premeditated attack...

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the school district approves a select group of financial vendors and the principals invite them on campus. From the very beginning the process is designed to appear “official” and “above board”, conveying the false notion that these vendors can be trusted to act in your best interest. Inevitably, educators come face to face with a well dressed, important looking adviser who speaks in complicated financial lingo. This is designed to convey the false notion that investing is too complicated for you to understand, but luckily a “trusted professional” has been provided to handle everything for you. The entire system is a carefully and cleverly constructed trap that was specifically built with educators in mind.

 

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At this point, I would like to ask our guest salesperson some questions . We greatly appreciate your participation on this board. You have been the most open and honest Advisor I can ever remember frequenting this board and the least defensive.

How much does an annuity salesperson make a year? How are you paid. I have had salespeople tell me that they make very little selling annuities. Is that true. I've heard that said over and over.

What is discussed in your training meetings 

What do you  personally invest in ? What does your company retirement plan look like?

What level of training do you and your colleagues actually receive in investment principles

What is the corporate culture like where you work

What is the turnover rate in this industry

What can a salesperson get away with? Does your company promote any ethic standards when dealing with clients? Are those who violate these standards disciplined?

Who supervises you and what is their mindset concerning selling dubious products

Do you believe the administrators are complicit in what is going on with these 403b annuity sales?

How are investor complaints handled if someone raises concerns about how the sale was handled with perhaps mistruths and deceptions? 

How does your company feel about fiduciary responsibilities and rules

and one want to add to these questions?

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To answer the first part your questions:

How much does an annuity salesperson make a year? That depends on book of business you inherit and your assets under management (AUM).  It can be all over the board- as low as 36k to well over 100k.  I know some very successful agents that make over 500k a year or more.  It can be a huge money maker.   The trails on a huge book of business for some agents are 5k to 12k a month.  In certain states, you can roll some of your pension after you retire to an annuity, so salesmen in those states are hugely successful.

How are you paid. You can make over 3% on rollovers, so if prospect has 200k in a 403b, we can make about a 7k pay out if they roll it over, which takes about 30 minutes. That is why rollovers are so focused on.  We can make over 8% on new yearly 403b contributions started. So if a teacher puts in 2400 a year, the agent makes over $170 and 2.5% every year there after on monthly deposits.  They also get a trail for their AUM that is based on your total book of business, which I have seen range anywhere from $600 to 12k a month.  If a teacher maxes out on their 403b, they make over 8% on their first year contributions.

 I have had salespeople tell me that they make very little selling annuities. Is that true. I've heard that said over and over.  Annuities are a great money makers and agents build their pension off of them. Where else can you make 7k in 30 minutes.  It is a pyramid scheme.  The older agents at the top with the biggest books of business and newer agents at the bottom, trying to work their way up. I know many agents retire very wealthy. If you stick it out, you can be making well over 250k a year by the time you retire.

What is discussed in your training meetings:  How to get in front of teachers and district employees to market your 403b annuities. Going the pre-tax route is stressed in some companies regardless of whether it is best, because more money goes into the deposit and you make more money from it.   Also, how to protect your annuities from other annuity salesman.  There is always poaching going on between annuity companies, much to the teachers detriment.  Teachers most of the time have to pay at least 5% surrender charge every time an annuity is rolled over.

 

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What do you  personally invest in ?  I have a ROTH IRA  and 401k, along with ETFs and no-load nonqualified mutual funds. I am very fee and expense ratio conscience.  What does your company retirement plan look like?  It is a 401k for employees. 

What level of training do you and your colleagues actually receive in investment principles...you must have a series 6 and 63 to sell variable annuities.  Some agents have a series 66/65 and series 7, along with CFP. 

What is the corporate culture like where you work:  It is stressful as it is commissioned based and you are only as good as your last sale. 

What is the turnover rate in this industry:  there is a very high turnover rate in this business.

What can a salesperson get away with? A salesperson can get away with a lot, but if the client holds them accountable, there will be consequences.  Unfortunately, the client usually has no idea what he/she is being sold or what their rights are.  Does your company promote any ethic standards when dealing with clients? I would say this answer changes from company to company, but by and large, the companies do stress ethical standards for employees.  The problem is this is a commission-based work force, so there is always a moral dilemma in my opinion.  Do you do what's best for the client or best for my pocket book.  It is hard to turn town 7k day in and day out.

Who supervises you and what is their mindset concerning selling dubious products...we are supervised by a manager and  our broker/dealer gives us annual inspections and approves our solicited rollovers. I think most of them are ethical and do the right thing, but if the representatives gives misleading/deceptive info to them, they will approve the rollovers. They are only as good with decision to approve as the info the representative provides to them.  I think that is a problem as the rep can make up whatever fictitious number to make the rollover seem legitimate.  There is no database the broker dealer uses to see if the rep is telling the truth when they send the paperwork to justify rolling from annuity-to-annuity. Most rollovers are approved because of skewed numbers.

Do you believe the administrators are complicit in what is going on with these 403b annuity sales? I think the administrators are clueless and have no idea what is going on. They do not have the knowledge base to make informed decisions and are at the mercy of whatever we tell them. 

How are investor complaints handled if someone raises concerns about how the sale was handled with perhaps mistruths and deceptions? there is an investigation by broker dealer and they take it quite seriously.  The representative better have good notes.

How does your company feel about fiduciary responsibilities and rules.  Ours is on board.  I think some companies are moving away from annuities because of this and over to the 403b-7.  The problem is they will charge a wrap-fee and/or use loaded mutual funds.  So, other than no surrender charges, there will still be fee discrepancy in my opinion.

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Thanks for your candor. Now I know why they call you guys sharks . I've been bitten in my younger days and lied to over and over. In my final decade before retirement I helped bring Vanguard ( which was then later eliminated because of new IRS regulations, A very low cost state 457b plan, and  Aspire to the 403b landscape in my community. All great options. I also helped bring our annual benefit fair (what a joke) to a halt. I don't claim total credit for all this but I did push for change and I got it to some degree so it is possible. I still know three "financial advisors" that hate me for convincing several teachers to ditch their annuities.I even had a childhood friend who sells these things unfriend me on face book after posting some articles on his page about how corrupt the annuity industry is.  Some of these teacher folks had substantial amounts saved up.

Getting out of annuities saved my retirement. Had I not figured out the garbage that was being offered I would have a lot less money today. What irks me  thinking back, is how much more money I could now have in retirement if it wasn't for falling victim to this annuity nonsense. Still thanks to seeing the light early on  and sticking with Vanguard I have still accumulated a substantial amount of money and am sitting pretty.

I wish folks in education where a little more cynical . I dealt with resistance and disbelief from teachers when I attacked their annuities . They believe and  they trust what you guys tell them much to their determent. I guess they are by nature caring and trusting individuals. I again point to school districts. In my book they have a responsibility to understand investment products they are offering to their employees but it seems they could care less .

This has been a great exchange and I hope many teachers see it. Thanks again. We need to get you on 60 minutes with your face and voice disguised.

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You are correct.  We are sharks and are looking at our bottom line first and foremost. If we were not, more younger teachers would have ROTH IRAs or low-cost 403b-7 choices in their school.  I would be hesitant to trust an annuity salesman with my money. 

The problem is many administrators have not even heard of Vanguard.  I spoke to one today and he didn't even know what  a ROTH IRA was.  I told him about low cost retirement plans, but it is over their head at this point. 

 

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15 minutes ago, tony said:

I again point to school districts.

We've talked about a lot of the groups who've contributed to this failure: state legislatures, school boards, retirement services departments, unions, investment companies, advisers, administrators, and teachers who do nothing when they learn about the problem.

However, one of the groups that frustrates me is the subset of teachers who learn about the problem, get their accounts in order, and more or less silently move on with their lives. When I talk to some of these folks they basically say that they won't get involved in reform because they don't want to risk retribution from the "higher ups" who setup and endorsed this system. I believe their fears are unfounded, but I just don't know what to say to somebody who is committed to looking the other way. It's upsetting.

...if this small group were to get together it is possible they alone would be sufficiently large to affect change.

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When I try to inform them about getting a low-cost providers installed for choice, administrations look at me like a deer in the head lights...they do not want to make a mistake or seen as doing something incorrect, so they do nothing.  They would rather keep the status quo and not rock the boat. It is crazy that in the year 2018, districts with over 2k teachers in them have only annuities to choose from. 

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I believe their fears are unfounded, 

Yes the fears are unfounded because those same higher ups are also buying these products. If you can get them to stop and think they too  will realize that they can do better. Of course, there is no guarantee they will pass that enlightenment down to their underlings and most don't. Our school system is still littered with insurance products and vendor even though I know for fact that I influenced some in the central office to move to the state 457b low cost option which is cheaper than vanguard!!!!

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6 hours ago, EdLaFave said:

However, one of the groups that frustrates me is the subset of teachers who learn about the problem, get their accounts in order, and more or less silently move on with their lives. When I talk to some of these folks they basically say that they won't get involved in reform because they don't want to risk retribution from the "higher ups" who setup and endorsed this system. I believe their fears are unfounded, but I just don't know what to say to somebody who is committed to looking the other way. It's upsetting.

...if this small group were to get together it is possible they alone would be sufficiently large to affect change.

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Good point Ed. But what is it exactly you would expect a teacher to do, after they got their accounts in order? Rather, what effect do you think a teacher would have on fellow educators? The same educators who fall prey, who admit to not understanding the fees yet decide to go with the salesman because he is more fiscally credentialled (true or not) than their fellow teacher?

I am that teacher. I am frustrated, confused and baffled. And apparently, I am not influencing enough teachers, though I can count a handful of converts because of my zealousness. My union prez acts like he has too many other battles, and my principal admits to his failing plan and his wife's, yet moves on to the next problem at school. AND DOES NOTHING about it. If it frustrates you, how frustrating do you think it is for me to 'move on....'? I want to do more like you are doing and a few others here. I'm not making excuses for not, but what is it going to take?

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Let me start by acknowledging some nuance. I do not believe one person can reasonably go it alone, but at the same time I think people significantly overestimate the number of people necessary to affect meaningful change.

When I read about successful reform efforts from the past, I'm always struck by how few people make up the core engine behind the movement. Often times they eventually receive significant support, but it doesn't take many people to spark something bigger than themselves. I can't prove it and I may be overly hopeful, but I believe there are enough teachers who understand the issue to reach critical mass.

So what should these teachers do? The fact that I don't have definitive answers speaks to the value of working with a group rather than going it alone as I currently am. I need a wider perspective and I need other people's ideas. If I had a group of people these would be my initial thoughts:

1. It would be great to have somebody who could focus on documenting the remaining inferior OCPS (FL) plans that I haven't gotten to. That could help convince people who are currently in those plans.

2. It would be great to have somebody who could focus on developing relationships with the union and putting something in place to reach out to union members. I meet with the union when I can and I communicate when I can, but time is limited.

3. It would be great to have somebody who could focus on interfacing with low-cost vendors and the folks at retirement services so that the low-cost vendors submit to the unadvertised Request for Proposal and are therefore at least considered.

4. It would be great to have somebody who could focus on working with retirement services to make sure they understand the investing principles that would allow them to see how awful their plans are.

5. It would be great to have somebody who could focus on developing relationships with the school board so that when we speak at the school board meetings our message is taken to heart.

6. It would be great to have somebody who could focus on reaching out to local media, run social media accounts, and try to bring some publicity that would grow our group and perhaps apply shame/pressure that could lead to change.

7. It would be great to have somebody who could begin to explore how the state legislature might some day fix this issue with legislation. For instance, here in Florida we have an FRS Investment Option that is fantastic...why can't we have something like that for 403(b) and 457(b) plans?

8. It would be great to have somebody who could focus on teacher outreach to try to grow the group.

9. It would be great to have somebody who could focus on administrator outreach so we can reach more than the one school this all started in and so we can get "more important" people behind us.

10. It would be great to have somebody who could specialize in exactly what it takes to transfer accounts from bad vendors to good vendors so that hesitant teachers feel more comfortable moving forward.

11. If we had a solid group of people we could consistently show up at school board meetings, call into retirement services to request reforms, keep each other motivated, and hold meetings on financial topics to help each other and grow the group.

12. If there was a solid group of teachers spouting this message then I think other teachers would be more inclined to listen, change, and jump on board. When you're just one person it is easy to be dismissed as a crazy person who thinks they know more than the professionals. How many times on this board have teachers been referred to as a "herd?"

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I am so frustrated...there is so much deception in this 403b business.  You cannot trust most of us-many will lie straight to your face.  I don't know how some can sleep at night knowing what they are doing.  People are told to roll over their old 401k into a 2.2% annuity when they already have an annuity through TRS.  Why do they need another annuity at 35 years old with no kids, no spouse,  don't need a death benefit, not looking for an annuitization factor, and looking for growth in their portfolio. 

I think this job is one of the slimiest, greasiest, jobs in America.

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403bman, I do agree with you. However, I have to say that the financial services in general is pretty slimy. The average person doesn’t have enough education and can easily be taken advantage of.  Pretty sad. 

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