Jump to content
403bannuitysalesman

403b Annuity Salesman Perspective

Recommended Posts

Went to a vendor fair recently and every teacher ran to the young, good looking 403b-annuity salesmen and their 2.2% VA, 12-year surrender charge.  What is so sad is there was someone offering the NEA Value Builders DIRECT investment platform two tables down...I think it around 35 basis points.  Not one teacher went to the table to fill out an interest card. We older brokers know what is the best investment, when talking among ourselves, but most say nothing to teachers when asked by them what distinguishes the different products.  

The districts need an auto enrollment, single provider, low-cost 403b-7 platform.  It has to be auto enrollment or the most teachers will not sign up because there wont be a commissioned sales agent prodding them to sign up. Stick everyone in a target date fund based on their projected retirement date. If they want to go in and change it later, they can.   It is not rocket science. 

Share this post


Link to post
Share on other sites
9 hours ago, Ken F said:

That's an aggressive plan to take on, but useful.

This form is daunting, no wonder districts don't want to take it on. In your opinion, would the district try to pass that on to the TPA's , like OMNI to fill out? And more importantly, do you think the districts can be 'encouraged" to complete the form? 

Here is one of few districts that have  the form completed

https://www.isd622.org/cms/lib/MN01001375/Centricity/Domain/36/North_St._Paul_Checkup_Final_2014.pdf

 

 

1

I believe teachers can make it full time job to 1) get districts educated on the pitfalls 2) bring in vendors like Aspire where self-direct is an option or low fee structure to choose funds 3) be the liaison between teachers and fair vendors/advisors. A FA who can't get in the door whether they are good or not, is of no value. Neither is a teacher, though either. 

Share this post


Link to post
Share on other sites
1 hour ago, 403bannuitysalesman said:

If they want to go in and change it later, they can.

What other options besides a target retirement plan might be available in such a plan ?  Do you have a sample of a auto enrollment, single provider, low-cost 403b-7 platform. If a school system adopted this would this apply to new employees only? Or would all employees have to stop whatever plan they are in and start over in the single payer plan?

Share this post


Link to post
Share on other sites
On 2/2/2018 at 8:16 PM, MoeMoney said:

Ed, to your comment. You would fit right into our Choose FI group. Jonathon and Brad started less than 12 months ago with the podcast, website and now a facebook group... www.choosefi.com

I'm exhausted at the moment, but I'll have to check out the site.

Share this post


Link to post
Share on other sites
On 2/3/2018 at 4:46 PM, 403bannuitysalesman said:

Went to a vendor fair recently and every teacher ran to the young, good looking 403b-annuity salesmen and their 2.2% VA, 12-year surrender charge.  What is so sad is there was someone offering the NEA Value Builders DIRECT investment platform two tables down...I think it around 35 basis points.  Not one teacher went to the table to fill out an interest card. We older brokers know what is the best investment, when talking among ourselves, but most say nothing to teachers when asked by them what distinguishes the different products.  

The Security Benefit NEA Direct Invest has an administration fee of $35 if the balance is <$50k, $0>$50k. There is no AUM fee. I wonder if the rep wasn't selling other expensive SB products? 

Quote

The districts need an auto enrollment, single provider, low-cost 403b-7 platform.  It has to be auto enrollment or the most teachers will not sign up because there wont be a commissioned sales agent prodding them to sign up. Stick everyone in a target date fund based on their projected retirement date. If they want to go in and change it later, they can.   It is not rocket science.

YES! All great ideas, but. . . .Because the employer is not required to be a fiduciary, we're stuck with the current K-14 non-ERISA multi-providor 403b mess. If the district is VERY large, or districts combine for 403b/457 purposes, or the state takes on the job, it seems to be possible to implement the single provider, low-cost 403b-7 platform. And IF there is no state law requiring a multi-vendor 403b. Otherwise, I think we are dreaming. 

Share this post


Link to post
Share on other sites
On 2/3/2018 at 7:24 AM, 403bannuitysalesman said:

Couple more points:  I overheard there was study done and that Iowa 403b participation is down 50% since they went to the lower-cost state sponsored plans and replaced the 403b-1 annuity insurance companies.  Now some are claiming this is a failure and yearning for the 403b-1 to make a comeback.  It doesn't take a genius to figure out why participation is down.  They don't have insurance agents knocking on teacher's doors selling them high-cost products now and the salaried or non-commissioned agents that replaced them are not as pushy since commission is not involved.  

I think the Iowa state run 403b is not a good model for solving the multi-vendor, annuity-based K-14 403b problems. The state of Iowa organized a 403b-7 but ended up with 4 vendors (Horace Mann, MetLife, VALIC and Voya), competing with each other. They all include Vanguard low-cost index funds with about 0.20% AUM added. prod_fees.pdf

Who payed for the Iowa study? Did it include the districts with Optional Providers? Can you give us a link to the study?

 

On 2/3/2018 at 7:24 AM, 403bannuitysalesman said:

Also, I spoke with a couple of agents in different states with self-directed state sponsored 403b plans and they love them, because they can pick them apart saying they are not actively managed and that there is no face-to-face contact and that they have no problem in rolling them over to higher cost products.  I think this is a problem too.

 

Agreed! Unless we can get rid of the commission-based reps, there will be problems, as you have mentioned, and as this website has been advocating for decades.

Share this post


Link to post
Share on other sites

I know we talk about how great Aspire is on this board and rightfully so.  However, many independent brokers sell Aspire in the schools, but charge a 1% to 1.25% wrap fee on it.  So make sure the product you sign up for is direct and not through a broker.

Share this post


Link to post
Share on other sites
On ‎2‎/‎4‎/‎2018 at 7:13 PM, krow36 said:

The Security Benefit NEA Direct Invest has an administration fee of $35 if the balance is <$50k, $0>$50k. There is no AUM fee. I wonder if the rep wasn't selling other expensive SB products? 

Yes.  He most of been selling the broker product as it was not direct.  However, he said he was only charging 35 basis points.  Compared to the other products, this was a slam dunk, in my humble opinion.

 

Share this post


Link to post
Share on other sites
On 2/5/2018 at 5:55 PM, 403bannuitysalesman said:

Yes. He must of been selling the broker product as it was not direct. However, he said he was only charging 35 basis points. Compared to the other products, this was a slam dunk, in my humble opinion.

The Security Benefit rep must have been selling the NEA “Valuebuilder” MF plan with Option 1? 
https://securitybenefit.se2.com/#53&RID=46&prodID=127&prodOpt=1&prodCat=RP

Quote

 

NEA VALUEBUILDER MUTUAL FUND
Account Charges


Option 1: 5.25% up-front sales charge; custodial account fee: 0.35% per year.


Option 2: Contingent Deferred Sales Charge (CDSC) ranges from 5% in year 1 to 0% in the seventh and following years; custodial account fee of 1.05% per year. 


Option 3: CDSC is 1% in the first year; custodial account fee of 1.00% per year. 
Administration Fee (for all applicable options) 
$35 a year for accounts less than $50,000. No administration fee for accounts over $50,000.

 

The funds in this plan have ERs mostly between 1.0% and 1.5%. No thanks!
https://securitybenefit.se2.com/#53&RID=46&prodID=127&prodOpt=1&prodCat=RP
 

Share this post


Link to post
Share on other sites

If you’re not in Security Benefit’s NEA DirectInvest then you shouldn’t be in Security Benefit.

More generally, if you’re not in a self-directed plan (and even sometimes if you are) then you’re being ripped off. 

Share this post


Link to post
Share on other sites

Hawaii is having its Teacher Institute days cross the state this week.  At our break out sessions, there was  a pre-retirement workshop with folks from our retirement system to overview the how the state coordinates retirement; the NEA guys were running a "financial wellness" one that was to cover money mangement, debt control, credit scores and reports, identity theft, retirement planning, and discussion on types and features of different 403b; and the AXA guy was running his own separate session titled "how to maximize your retirement benefits" and his was about coordinating pension, social security, and 403b plan "for the best possible retirement". 

There were only a few vendors this year... couple of credit unions, the university...   I don't think I've seen any other 403b vendors come.

Share this post


Link to post
Share on other sites

I agree.  You should be in a self directed plan and stick yourself in a low-cost target fund if you don't know what you are doing...otherwise you are being ripped off.  The problem is 403b annuity salesman bash that approach and say they can do better and the teachers have no clue, so move out of them over to the high cost commissioned product annuity.   I see it all the time.

Share this post


Link to post
Share on other sites

Administrators don't know the difference and think everything is the same.  The don't even know about custodial accounts.  Most teachers are just confused and don't want to bother about the differences between products.  They just want to know they will be able to retire on time with a nest egg.

Share this post


Link to post
Share on other sites
5 minutes ago, 403bannuitysalesman said:

You should be in a self directed plan and stick yourself in a low-cost target fund if you don't know what you are doing

To anybody reading this...

It is always in your best interest to be in a self-directed plan (meaning you make the decisions, not a so called "adviser"). Also, target date funds aren't just for people who don't know what they're doing, they're for everybody! Don't walk away with the impression that you're settling for an inferior product by using a target date fund or that investing is complicated.

A target date fund is just a fund-of-funds that contains a Total US Market index fund, a Total US Bond Index Fund, a Total International Market index fund, and a Total International Bond Fund. It isn't rocket science, the target date fund automatically does the work necessary to keep the 4 funds in the right proportions to each other (one fund may fall while another rises and therefore they need to be brought back in balance). The target date fund also does the necessary work to automatically increase your bond percentage as you approach the retirement date so your portfolio becomes more safe.

Target date funds are for people who know exactly what they're doing but want to pay an extra 0.08% per year so they don't have to do the management work that the target date fund does for you.

Share this post


Link to post
Share on other sites

I love target funds and place myself in target funds.  However, every client I stick in target funds get rolled out because the annuity agent claims he can do better.  I have to defend target funds everyday, because annuity agents say they are for people that don't know what they are doing.  I am in the field everyday and this is what I run up against.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×