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txishome

Aig Valic Question

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Hi Txishome;

 

The AIG-VALIC offering for 403(b) Plans is not uniform; generalizations are of little use to you; the details of your arrangement are what matter. It sounds to me that your employer has an AIG-VALIC Product called the RSVP product which is a 403(b)(7) mutual fund custodial product, under which AIG-VALIC provides access to no-load mutual funds. The fixed return option (if you have that) may remain in the form of an annuity contract.

 

The American Fund shares and Dreyfus Funds need to be evaluated on their individual merits, and fees/expenses for these shares can range from high to low, depending upon the precise share class that is available to you. The Dreyfus Funds are likely to include several low-cost index funds.

 

If the plan is of the ERISA variety (typically it would be such if the Hospital is making contributions to the plan) you are probably constrained to use the plan that you are given. You might also inquire whether the Hospital has a Retirement Committee and find out how to influence the fund selections.

 

I am aware of situations where AIG-VALIC is offering Vanguard Funds within the RSVP Product. Fund offerings (and therefore fee structures) are subject to negotiation. Finally, the funds you have access to likely have no-loads (front or back) and have expenses that pay for managing the investments within the fund, administering the 403(b) Plan, and other non-investment management services/duties that AIG-VALIC provides to the Hospital. Without knowledge of the Hospital's aggregate plan size & per capita account balance, it is nonsensical to suggest what the plan's "OVERALL" expense ratios should be. If you are part of a very large system with very large per capita balances, your expense rations could even be lower than 0.20% for an index fund. (This is a scale business!)

 

I would advise you to examine your options, make an informed election regarding the value of contributions to this program versus alternatives, elect an asset allocation that appropriate for your risk tolerance & time horizon, and select funds to fulfill the allocation.

 

Deal with what you have and find out what could be done to make it better!

 

Cheers!

 

Danc

 

 

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TR,

 

"You should find out what the investment choices are and the expenses. I am certain that the company representative will be glad to provide that information to you."

 

I agree with the first statement. The second statement implies that it is up to the customer to ask about expenses. However, I believe that expenses should be included in the presentation made by the agent. Certainly consumers are ultimately responsible for looking out for their own best interests, and that includes finding out about costs. The problem is that so many folks don't know enough to ask the question about costs.

 

"Lastly, don't depend on the whine crowd here to tell you whether something is a poor choice. Decide for YOURSELF based on YOUR circumstances, not theirs'. After all, that is what "they" are promoting."

 

I'm very proud to be part of the whine crowd if that means whining about things like front end loads, back end loads, 12b-1 fees, surrender fees, A shares, B shares, C shares, and whatever else some of these companies can concoct. I do agree that folks should decide for themselves based upon their own unique circumstances. And they can come here to find another point of view than the one they are hearing from agents.

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ap,

I am guilty as charged about being part of the "whine crowd." Being a whiney has made me a heck of a lot richer than being part of the corrupt system of the TSA status quo.

 

Txishome,

There you have it. You have gotten some good advice, despite some “off the wall” shrills of path and TR. This may not help you in the short term, but making mistakes is part of learning and we have all made mistakes and gotten a little wiser for it. I too was sold two horrible TSAs years ago. Later when I was investing in only no load mutual funds, I had to painfully learn about proper diversification. Now, there is plenty of information available to you. This single discussion thread that you started will get you on the right path. You know who the sales people are and you have heard from us non professionals. As you can see, we are miles apart. The pros naturally want to keep their cash flow and we want to keep our money. But you have to learn more. This stuff is not going to come and bite you on the bottom. It’s up to you to learn from here on and become your own financial adviser or to listen and take the advice of the pros and subsequently pay thousands over the long term for a completely unnecessarily expensive TSA product.

Hope this helps,

Steve

 

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Guest TR1982

AP,

"I agree with the first statement. The second statement implies that it is up to the customer to ask about expenses. However, I believe that expenses should be included in the presentation made by the agent. Certainly consumers are ultimately responsible for looking out for their own best interests, and that includes finding out about costs. The problem is that so many folks don't know enough to ask the question about costs."

 

I wouldn't argue the point that many people don't know enough. But that logic applies everywhere on life. Does the fact that parents either don't care or don't know enough about the process of their kids' education excuse them from knowing? Are you as a teacher reponsible to communicate EVERY important issue to the parents of every child you teach? What if the parent does not care? Does that absolve you of responsibility? There is a point in life where people have to stop blaming somebody else for their ignorance and start taking responsibility themselves. I know teachers see this everyday! But blaming advisors, etc. for your ignorance is not going to make you better prepared for retirement, anymore than blaming all teachers for the state of education is going to make children better educated.

 

 

 

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TR,

 

I agree wholeheartedly that investors are responsible for their own financial well being, and that includes becoming educated enough to ask about expenses.

 

I also agree that agents do not have a responsibility to compare their company's costs with, say, Vanguard's.

 

Now, do you agree that agents, as part of their sales presentation, have a responsibility to disclose costs even if a potential client does not ask about costs?

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AP and TR,

Both of you seem to forget about third parties: unions and districts could provide all of this information, IF they gave a damn about their members and employees.

Steve

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Ah, yes, Steve, right you are. Unfortunately, districts often allow so many vendors that it would be difficult for them to keep up with the cost structure of all of them. That is yet another problem.

 

But I still want to hear from TR: do agents, as part of their sales presentations, have a responsibility to disclose costs even if a potential client does not ask about costs? Do you do so?

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But I still want to hear from TR: do agents, as part of their sales presentations, have a responsibility to disclose costs even if a potential client does not ask about costs? Do you do so?

 

 

 

AP: agents have the resposibilty under their contract with the insurance carrier, and under State and Federal law, to comply with all required disclosures. A prospectus is given to a client purchasing a VA and mutual funds and signed product disclosure forms are required for fixed products, in addition to replacement forms, and transfer forms.

 

Are you asking if the agent will go beyond what is required by company policy or law?

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Good question, Herbert. I am asking if TR (and any other agent) does more than simply provide a mountain of paper work for the client to sign and retain. I am asking if, during the sales presentation, TR/agent specifically points out the costs.

 

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Good question, Herbert. I am asking if TR (and any other agent) does more than simply provide a mountain of paper work for the client to sign and retain. I am asking if, during the sales presentation, TR/agent specifically points out the costs.

 

 

 

The disclosure isses include many things; cost being one of them, and all of them are important. If the agent is presenting the information in a manner that is consistent with company policy and insurance law, is he not doing his job?

 

 

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Guest TR1982

Sure I do. I do not speak for any other person, however. And even if I did not that doesn't excuse the customer from asking. Besides, in all my years of being in this business I can count on one hand the number of people who came back to me and complained that they didn't know about the costs. People understand that companies don't exist to give things away. I don't do what I do for free anymore than teachers work for free.

 

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"Sure I do."

 

That is good to hear. It speaks well for your honesty.

 

"And even if I did not that doesn't excuse the customer from asking."

 

But earlier, you compared buying an investment product to buying an automobile. You mentioned that an auto salesman for one dealer should not be expected to tout the advantages of his competition. I'll certainly accept that.

 

To continue with your auto buying analogy , though, wouldn't you expect an auto salesman to explicitly tell the customer the price of the automobile? You wouldn't expect the salesman to simply present a long, complicated contract without pointing out the price, would you? Granted, the customer would be foolish for not asking the price, but it's difficult to imagine the salesman at some point not explicitly stating the price.

 

"People understand that companies don't exist to give things away."

 

And yet, in my first investing experience, it never occurred to me that the agent was being compensated by me. Now, I know that this does not speak well for my intelligence or common sense, but I'll bet that there are plenty of others who are/were in my position.

 

So I would like to ask other agents on this forum:

 

Do you explicitly state the costs of your investment products?

 

And:

 

Do you know others who do not do so?

 

 

 

 

 

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Hi AP,

 

"So I would like to ask other agents on this forum:

 

Do you explicitly state the costs of your investment products?

 

And:

 

Do you know others who do not do so?"

 

 

I think that this question is good one. Also you might want to ask the question to the the INVESTOR. How many investors hear about the hidden costs associated with the invetment products in sales presentation by agents.

 

I know that I have heard a few sales presentations, and none of the agents that I spoke with let me know about all costs involved with the investment product. Maybe other investors at this board have had a different experience?

 

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Guest Sierra

Let's experiment by making an appointment with a commissioned agent. Let's see if he/she voluntarily discloses verbally what the fees/expenses are or just leaves the prospectus with the prospect upon exiting. Let's post our experiences. This should be an eye opener!

 

Peace and Hope,

Joel

Edited by Sierra

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With all of the recent AIG Valic talk, and all of your various replies, I have set up a meeting with the Valic guy for April 21st. I will pepper him with the questions all of you have formulated for me with your witty banter. Any suggestions for questions other then the obvious fees, management, investment options, etc.?

 

Txishome

 

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