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TR,

 

1) "Nowhere on this site is there any reference to any firm other than TC or a no load mutual fund company as being an acceptable choice for a 403b plan."

 

Response: You continue to be surprised that this site favors no load companies. I'm surprised by that.

 

2) "I know thousands of people who are willing to pay for that under the current system and THEY KNOW WHAT THEY ARE PAYING. How can it be a rip off if THEY KNOW WHAT THEY ARE PAYING AND CHOSE THAT ARRANGEMENT?"

 

Response: I know lots of people who had no idea what they are/were paying because it was not disclosed to them. Plenty of folks don't even know IF they are paying anything. They don't know enough to even ask the question.

 

3) "Some of the folks here need a dose of reality about what a lot of people in the general public want."

 

Response: Plenty of folks come to this site and find that there are alternatives to the products they currently have. Then they want something quite different.

 

4) "I am under no obligation (moral, ethical, or legal) to suggest to someone that they should go do their investing on their own. "

 

Response: I agree.

 

5) "Finally, please tell me what possible difference it would make if you knew my name or the firm I work for?"

 

Response: I agree again, but I would love to know anyway.

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I know lots of people who had no idea what they are/were paying because it was not disclosed to them. Plenty of folks don't even know IF they are paying anything. They don't know enough to even ask the question.

 

 

I go back and forth when I see responses like this one.

 

On the one hand, I want to say, How can anyone be that ignorant? Does anyone think that agents work for free? How could it NOT occur to someone to ask how the agent is being compensated, or what the cost of the investment is? My mind reels, in much the same way it would if it became a common practice to walk into a car dealership, purchase a car, hand over your credit card and accept whatever price got rung up on it. And finally, it's simply not possible that costs were not disclosed to an investor: that would be a violation of securities laws, as I understand them.

 

On the other hand, of course, reality is that the ways in which costs are usually disclosed (a prospectus that is, to put it politely, not easily readable) is borderline criminal in and of itself. This isn't the agents' fault, of course, but the fault of the people at the SEC who are allegedly looking out for investors' best interests. Costs should be disclosed on a one-page, simple-English sheet of paper that is signed by the investor when he/she invests. That would solve a multitude of problems. Moreover, the ways in which those costs are PAID are utterly ridiculous. Ridiculous, as in invisible. You can find out that you're paying 2% a year, but since that 2% doesn't come out as a line-item on your statement, like it would if you charged something on your credit card, it's virtually impossible for even the most savvy investors to know to the penny how much they paid for an investment in a mutual fund or an annuity in any given year. And that's another bad joke that the SEC should be taking care of.

 

At the end of the day, everybody needs to accept personal responsibility for their self-directed investments (the very name, "self-directed investments," is a big enough tip-off to that). But it'd be nice if the SEC were on the side of investors instead of the firms running the show.

 

 

 

 

Go back to my early post about a Valuebuilder money market fund charging between 2.07% and 3.62%. Again, I'll be happy to criticize TC for the reasons noted in the WSJ article; however, those problems do not rise to the level of the abuses committed by some (not all, to be sure) 403b providers. I ask you French Teacher, fair minded person that you certainly are, is there any excuse at all for an agent selling a money market fund charging those fees?

 

 

Nope. No excuse at all.

 

Taking it a step further, I don't see much of a defense for the NEA's endorsement of such a lame product to begin with. Virtually any of the options that are mentioned in this space would be infinitely preferable to THAT boondoggle. "Valuebuilder," indeed.

 

(In short, if my choices were limited to the NEA-endorsed annuity and TIAA-CREF, then TIAA-CREF would be my selection, without hesitation. I do agree with you that whatever problems are plaguing them now aren't nearly as harmful to an investor's health as being a Valuebuilder investor.)

Edited by FrenchTeacher

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"

I know lots of people who had no idea what they are/were paying because it was not disclosed to them. Plenty of folks don't even know IF they are paying anything. They don't know enough to even ask the question.

 

 

 

I go back and forth when I see responses like this one.

 

On the one hand, I want to say, How can anyone be that ignorant? Does anyone think that agents work for free? How could it NOT occur to someone to ask how the agent is being compensated, or what the cost of the investment is? My mind reels, in much the same way it would if it became a common practice to walk into a car dealership, purchase a car, hand over your credit card and accept whatever price got rung up on it. And finally, it's simply not possible that costs were not disclosed to an investor: that would be a violation of securities laws, as I understand them. "

 

I agree, it seems to me that now a days in the USA where there is a lot of wealth, there is a lot of wastage. People "give" away a lot of money for products without being aware. For example in the car dealership example that FT gave, the pricing structure is set so that there is no set price, and there is a wide variance of what is paid for any car, with a good many overpaying for the product, buying extra unneeded warantees, and using very high car sponsored credit (without even knowing or caring ) what they are spending. The just see the shinny new car.

 

 

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Hi,

Here is a list of questions for Kathy Kristof as a response to the "Union Advice Failing Teachers." Click Here. Not citing the 403bCompare.com website in the article was disappointing, Kathy does mention here it to answer a question.

Steve

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"At the end of the day, everybody needs to accept personal responsibility for their self-directed investments "

 

You are absolutely correct about personal responsibility, FT. I would add, though, that agents should disclose costs whether or not clients ask. I like your idea of disclosing costs on a simple, one sheet piece of paper that clients would sign. Great idea.

 

I also agree on making management expenses of a fund more visible. Any fund -- load, no load, whatever -- should clearly show precisely how much a client has paid in management fees over the course of a year. It should be clearly printed in a year-end statement.

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Guest Joel F

Well, Dan, you make my point. Your reaction just proves that all you care about is bashing annuities. And many of those articles do recycle and you know it. They all do searches on articles with similar content and include it in their articles. This is not new, it's done all the time in the press. Most of these incidences of abuse are referred to again and again until the impression is that 75% of all teachers are being ripped off. If that serves your purposes and that's all you care about, fine, but that's hardly the truth.

 

In my view more than 75 percent of the K-12 crowd is being ripped off!

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"At the end of the day, everybody needs to accept personal responsibility for their self-directed investments "

"

You are absolutely correct about personal responsibility, FT. I would add, though, that agents should disclose costs whether or not clients ask. I like your idea of disclosing costs on a simple, one sheet piece of paper that clients would sign. Great idea."

 

Currenly costs are disclosed, buried in a prospectus. Since there are other issues that are important to the consumer also in the prospectus, it might be, even though desirable, differcult to get a regulartory organization to require a one sheet of paper with costs (and other pertinent information to the consumer) that client and agent would sign

 

I also agree on making management expenses of a fund more visible. Any fund -- load, no load, whatever -- should clearly show precisely how much a client has paid in management fees over the course of a year. It should be clearly printed in a year-end statement"

 

Some low cost providering companies such as Fidelity and Vanguard currently do this.

 

 

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Guest Joel F

Of all the teachers that have relied on their union's paid endorsement in selecting a commissioned based 403(b) vendor why is it that only one, the French Teacher from NY, is willing to attest to his satisfaction.

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Some low cost providering companies such as Fidelity and Vanguard currently do this [disclose cost structure in a simplified format].

 

Of course, THEY do it because it's a selling point. It might be nice to see some of the more "expensive" companies do it. Of course, that would mean they have to justify the expenses, and only the better agents would be willing to do so. An agent who provides good service shouldn't be afraid to disclose such costs; only the "hit and run" agents should really be afraid.

 

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Ira and FT,

 

Actually, I think I am suggesting something different. I'm not talking about yearly maintenance fees that appear on a year end statement. I'm talking about the actual amount of dollars that were deducted from the account over the course of a year to pay for the expenses. In other words, Fidelity would not simply state in its prospectus that it charges .10 for its Spartan funds; rather, it would show on each year end statement the dollar amount that an investor actually paid for the year. I don't know of any fund that does this.

 

What would be so remarkable about requiring a seller of a product to tell the consumer how much he/she paid for that product?

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AP...........The capability exists. For example, Vanguard in their internet site shows the expense ratio for each fund in an investors portfolio (including other vendors) multiplies it by the amount that you own in each fund, and then shows the cost savings versus an average market portfolio. This information is updated daily.

 

Joel.............I believe that FT claims to be impartial, and believes that there is a place for both low fee expense funds that saves the investor houndreds of thousands of dollars over time, and extremely high priced funds sold by "SALES advisors". He likes to site the example of the SALES advisor who helps the client(which in my opinion would be mimimal at best since there are signifcantly higher fees paid that decrease returns significantly versus any asset allocation advantage the the SALES advisor might bring when compared with low cost, no load funds. It's also interesting to me that FT has started to post l when TR, an advocate of loaded funds sold to investors, has been called on his statements about the benefits of load funds, and has not been able to defend his statements at this site

 

 

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Joel.............I believe that FT claims to be impartial, and believes that there is a place for both low fee expense funds that saves the investor houndreds of thousands of dollars over time, and extremely high priced funds sold by "SALES advisors". He likes to site the example of the SALES advisor who helps the client(which in my opinion would be mimimal at best since there are signifcantly higher fees paid that decrease returns significantly versus any asset allocation advantage the the SALES advisor might bring when compared with low cost, no load funds. It's also interesting to me that FT has started to post l when TR, an advocate of loaded funds sold to investors, has been called on his statements about the benefits of load funds, and has not been able to defend his statements at this site

 

Ira, not entirely sure what you're implying here, since you've couched it in such "diplomatic" language. But TR and I are very different people: he's an agent who makes his living at this, whereas I am a teacher who has been assisted by an agent, and can vouch for their value if they do their jobs. And for what it's worth, I have avoided posting here for months because of the pissing contest that things had "devolved" into. I came back when I saw the article that explicitly mentioned ING and NYSUT, because it involved factual inaccuracies. Yet everyone continues to praise the article as though it were Gospel truth! Guess not much has changed around here, at least among certain contributors.

 

To return to your statement above: I don't stand in defense of loaded funds at all. ALL THINGS BEING EQUAL, only the most obtuse person would say that a fund with a sales charge will outperform one that has no such charge. What I do say is that people in general, and (in my experience) teachers specifically, need assistance with their investments, either through lack of knowledge or lack of interest. I agree that most people CAN learn how to handle their own investments; I also observe that most people FAIL to. A GOOD advisor can pay for himself (or herself) many times over. You seem to want to deride all such advisors as mere "SALES advisors," as you say, and that's your opinion; that's fine. Your experience with such people must have been pretty horrible over the years, and I don't doubt that there are a lot of such advisors out there that aren't worth defending. But to write them all off is a bit extreme, I would think.

 

Actually, I think I am suggesting something different. I'm not talking about yearly maintenance fees that appear on a year end statement. I'm talking about the actual amount of dollars that were deducted from the account over the course of a year to pay for the expenses. In other words, Fidelity would not simply state in its prospectus that it charges .10 for its Spartan funds; rather, it would show on each year end statement the dollar amount that an investor actually paid for the year. I don't know of any fund that does this.

 

What would be so remarkable about requiring a seller of a product to tell the consumer how much he/she paid for that product?

 

AP, this is a great idea. The financial services industry benefits from the same double standard that helps gas stations gouge us (or, more accurately, the Federal and state governments). With virtually ANY other purchase you make, the sales tax is clearly shown on the receipt...but not when you buy gas! So most people shake their fists in anger at ExxonMobil for the high prices instead of where they SHOULD: at Washington DC.

 

(Not that ExxonMobil and their energy-industry brethren don't deserve a lot of anger, too...but that's a whole longer story.)

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Guest Sierra

Some low cost providering companies such as Fidelity and Vanguard currently do this [disclose cost structure in a simplified format].

 

Of course, THEY do it because it's a selling point. It might be nice to see some of the more "expensive" companies do it. Of course, that would mean they have to justify the expenses, and only the better agents would be willing to do so. An agent who provides good service shouldn't be afraid to disclose such costs; only the "hit and run" agents should really be afraid.

 

What makes a "better agent"---what is "good service"

 

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A few comments...

 

1. I think that by and large the investing landscape for teachers in regard to the 403(b) is still very poor. In most cases teachers first learn about these plans in a sales environment. In many cases teachers--who wish to self manage or work with a fee-only planner--do not have access to low cost products. Statistics reveal that only 2 in 5 teachers participate in the 403(b) despite the obvious need to supplement a pension and/or SS. By these measures I think the plan is problematic. Until change occurs we will continue to read more stories like the one in the LA Times.

 

2. There are agents who do a terrific job for their clients.

 

3. FT is an example of someone who is informed and chose to work with an agent. I think that is to be saluted. Really that is a key goal of this site: that each investor make an informed decision. He knows exactly what he is paying, and exactly what services he is getting. If a teacher simply lets an agent take care of everything, then that is not an informed decision. Such a scenario, I think, reflects more poorly on the teacher who is not taking an active role in his/her retirement. Another key goal of this site is that teachers have access to low cost products. It shouldn't be either or.

 

4. I have to shake my head when people rail at Exxon-Mobil for high gas prices. No one is making consumers drive vehicles that get poor gas mileage. No one is making consumers vote down or fail to support transportation alternatives. I often hear that cars represent freedom. And they do to a degree. But true freedom is choice. When your only choice is to pay whatever the market asks for gas then that is not freedom. Having the choice among numerous tansportation alternatives, I think, is freedom.

 

Dan Otter

 

 

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Guest Sierra

I cannot make generalizations for all investors, but in my case, the low cost companies provided much better service than the high cost providers.

 

apteacher: You could not be more on point. You are correct because the commissioned agent only gets paid if he/she is selling----he/she does not get paid to service. Servicing is left to the home/regional office just like the no-load outfits. But because he/she is being paid a commission every two weeks to distribute product, the loaded outfits have to justify the product distribution method they have adopted, so they say the commission agent provides a service----and in order to fool the public and separate themselves from the no load firms they label themselves as "full service providers"--- NOTHING IS FURTHER FROM REALITY!

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