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Guest Sierra

"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".

 

Why is he the only one that has certified to receiving fair value on his investment return notwithstanding the fact that he pays a commission every two weeks to ACQUIRE product?

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Hi,

On M*, Conversation 50054, on the Vanguard Forum, I found this interesting post about the 403b article:

 

5. Guilty where I stand

mickeyd| 04-30-06 | 12:24 PM

A number of years ago I was in the business of selling 403b plans to public school teachers and other school employees. I was amazed at how unsophisticated that all of these well-educated individuals were. I sold them many annuties and held my nose each time that they signed the forms because I knew that it was wrong and I would never sell to anyone that I personally knew or my family knew. I could only take it for about a year and had to get out of that racket as I began to have a difficult time sleeping at night.

 

The most unsophisticated of all of those that I sold to were recent female college graduates for some reason.

 

Why the US Congress has never dis-allowed the practice of selling an annuity inside of a 403b has always been a big mystery to me as it is clearly a poor choice in EVERY case.

 

regards,

mickeyd

 

Well, at least one person selling those high cost annuities admits they are a bad deal. Best Wishes.

 

Joe

 

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Hi Joe,

Wow, I go out of town for a day and half and events keep happening. I was wondering why the 403b article was not published in Chicago, since the Tribune owns the LA Times. This article prompted somebody in DH forum to post a link. Obviously, we are all very happy the article came out today and the honesty of this ONE individual for telling the truth, the hard truth and only but the truth about this terrible unethical system of bilking teacher after teacher.

Regards,

Steve

 

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"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."

 

OK, FT I will take you at your word, and not make any further references to associate you with TR with respect to industry paid posts. I will simply respond to your posts, both the one's I agree with and the one's that I don't.

 

Your right, at times communication skills can be improved by all of us; hopefully the posts will be more on target to discuss the issues rather than personal attacks on each other.

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

 

One man's opinion:

 

A good agent is RESPONSIVE. If you call with a question about your account, the agent either takes your call or responds to it in a timely fashion.

 

A good agent is KNOWLEDGEABLE. If you ask about asset allocation, you won't get a list of funds with a wink and a "Trust me." I appreciate that my agent is a Certified Financial Planner, as well. I've never heard anyone suggest the CFP is an easy degree or designation to get.

 

A good agent is HONEST. He won't duck questions, or hide things from you (such as cost, everyone's favorite subject).

 

And last but not least, a good agent is a good TEACHER, too. I've learned a lot about my account from holding it with the guy that I have. I've also made, I think, a fair effort to educate myself independent of him, and I've not found the things he says to be contradicted by most reasonable people.

 

I'd say those are the best indicators of a good agent. I'd add that it's nice if he has social graces, but if he's not competent, then it doesn't really matter how courteous or friendly he is, now, does it?

 

"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".

 

Why is he the only one that has certified to receiving fair value on his investment return notwithstanding the fact that he pays a commission every two weeks to ACQUIRE product?

 

I dunno. Perhaps I am the ONLY satisfied client of a full-service provider in New York State? Or the country? Maybe the WORLD...!

 

In all seriousness, you might ask the same question of Vanguard Diehards, or other sites that are obviously geared towards do-it-yourself investors. Most appear to share the same contempt for agents, insurance companies, high fees, etc. Sites like this one, as Dan Otter has written himself, welcome all points of view, but are obviously meant to be addressing a self-help-oriented audience. I'm not surprised that mine is a minority voice in this particular group of people...it's kind of like going to Giants Stadium on any given Sunday and wondering where all the Redskins fans are. If you came to my lunchroom on any given day, on the other hand, you in turn might be surprised at how many people are as satisfied as I.

 

 

OK, FT I will take you at your word, and not make any further references to associate you with TR with respect to industry paid posts. I will simply respond to your posts, both the one's I agree with and the one's that I don't.

 

Your right, at times communication skills can be improved by all of us; hopefully the posts will be more on target to discuss the issues rather than personal attacks on each other.

 

Thanks, Ira...I would hope that you would see that I have never made any blind defenses of agents in general, or how great it is to pay a sales charge. I speak (usually) about my circumstances only, or at the very least of circumstances that I know well. The LA Times raised a number of issues in their article; I raised my voice only against the handful that I knew to be factually wrong. While these errors don't give me great confidence about the remainder of the facts that were presented, I have no way of fact-checking them (or at least, don't care to spend my time that way!).

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"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".

 

Why is he the only one that has certified to receiving fair value on his investment return notwithstanding the fact that he pays a commission every two weeks to ACQUIRE product?

 

 

Sierra; this site is dedicated to the person that wants to do-it-themselves, and part of the genre is the whole-sale attack on any agent and or insurance company, and the denegration of those that receive good service fron agents. And, you all know that is the truth. That being said, are you surprised that agents and their clients would not come to this site? I am not shocked by that all.

 

I, as an agent, come here to assist the new site visitor with technical questions. But, I would discourage any client of mine from coming here. The client will be attacked. I, as an agent, will not participate in 'the game' of attacking/defending annuity and annuity companies. There is no point in trying to have a discussion with people that trying have an argument.

 

And, and by the way, the tactics of attcking companies and products is an activity that an agent can not engage in. By our licensing, we can not participate in derogatory comments about companies, products or business competitors. Nor can an agent intrepret products of companies that he is not contracted with. To do so opens the agent to liability.

 

All this is why there are so few agents and their clients here.

 

 

Herbert Hussey

 

 

 

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"I, as an agent, come here to assist the new site visitor with technical questions."

 

Herbert, I feel that you do an excellent job of assisting new site visitors. It is a great service that you perform.

 

"Sierra; this site is dedicated to the person that wants to do-it-themselves, and part of the genre is the whole-sale attack on any agent and or insurance company, and the denegration of those that receive good service fron agents. And, you all know that is the truth. That being said, are you surprised that agents and their clients would not come to this site? I am not shocked by that all.

 

I, as an agent, come here to assist the new site visitor with technical questions. But, I would discourage any client of mine from coming here. The client will be attacked. I, as an agent, will not participate in 'the game' of attacking/defending annuity and annuity companies. There is no point in trying to have a discussion with people that trying have an argument.

 

And, and by the way, the tactics of attcking companies and products is an activity that an agent can not engage in. By our licensing, we can not participate in derogatory comments about companies, products or business competitors. Nor can an agent intrepret products of companies that he is not contracted with. To do so opens the agent to liability.

 

All this is why there are so few agents and their clients here"

 

 

Speaking only to clients: Actually many clients of agents do post here seeking advise on how to switch away from agent sponsored funds(as you may note there is constant of these type people. Why do you think this is so?),

 

or, a novice investor to determine how and in what type financial institution to invest in. The financial agents are free to give their opinions on where best to invest. Of course, this site is set up for interchange of perceived information, so we are free to post differing opinions(which apparently you see as attacks-(that in all honesty are true in some cases)) , and the novice can make a decision based on the information received. It seems to me that most of these posters are more interested in investing in low cost funds. without the aid of an agent after hearing the information that is given on this site.

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IRA; thank you for your comments. To respond to your question: the clients that post here are clearly dealing with agents they are unhappy with. But, I cant and no else here can, accurately assess why this unhappy situation has ocuurred. The poster is posting only their opinion, and the other point of view is not presented. To interpret more from the posted comments would be unfair.

 

You mention that agents can give their opinion on where to invest on this site. I doubt that the agent can do that, because he would be giving investment advice without the benefit of broad information about the prospective client. Further, I am of the opinion that agent investment suggestions posted on public websites may be seen as advertising, and as, such may require the permission of the insurance company.

 

One key point I would make is this: the agent does not work for the client. He works for the company with whom he is contracted. There is a written contract between the agent and the company; there is no contract between the agent and the client. The agent represents the company, but can act independently of the company when suggesting products to a potential client. Once the client says he wants to buy, the agent then represents the company.

 

 

Herb

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Hi,

Herb: "One key point I would make is this: the agent does not work for the client. He works for the company with whom he is contracted. There is a written contract between the agent and the company; there is no contract between the agent and the client. The agent represents the company, but can act independently of the company when suggesting products to a potential client. Once the client says he wants to buy, the agent then represents the company."

 

That is precisely the point. That is why the client needs an independent voice like a fee-only financial advisor. Or for the person who would like to manage their own portfolio, then this website can be helpful. Best Wishes.

 

Joe

 

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IRA: I have sketched out some of the rules that agents have to work by, so let me ask the next, logical, question: AS mentioned previously, agents have guidelines to follow on giving investment advice. So, what about the do-it-yourselfers that post here: are they giving investment advice?

 

One of the recommendations given here, (in fact, it is the central strategy for many here) is that the buyer cancel their insurance contract (annuity) and buy a low cost mutual fund.

 

IRA, recommending that someone cancel an insurance contract is a very, very big deal for an agent. Each state has regs that govern that type of activity, and insurance companies closely monitor agents that do that a lot. One reason is that insurance contracts include benefits that may be important to a client, and the loss of that benefit has to be weighed carefully. I'l give you an example; the VA takes a hit here because of the M&E costs. Ellie Lauder, who has been the business for many years, takes the position that the M&E is a value to her clients, and she recounts the many calls she fields because this benefit is in the VA contract.

 

What happens if a VA client asks about the contract on this site? How is it going to work out if the client cancels their VA, but then dies after the new mutual funds have dropped in value? What will the client's kids will do when they realise that they would have been better off with the VA?

 

I know that posters repeatedly suggest reading some books. But that suggestion is very often bracketed with negative comments about annuities, agents, and insurance companies.The overwhelming tone is negative so I doubt that mentioning a book or two creates real balance in any discussion.

 

So, IRA, what do you think, are the posters giving investment advice? What will happen when it goes badly?

 

 

Herb

 

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Hi Herbert,

I appreciate your comments on the agents’ side of the story when a teacher gets out of a TSA contract. There are many, many stories like this. Crystal Mendez had this exact story and so do thousands of teachers. In my personal situation, I was sold not one but two fixed annuities. I told my agent NOT to put me into a product that had a surrender fee, she did anyway. How are educators supposed to feel about that? Later, I had to pay a $2000 surrender fee to get $9000 out. I paid another $4000 to get out of the other. I was NOT happy as you can imagine and this in part propelled me to do something about this.

 

I have no apologies for the condemnation of those inappropriate products and how and why they are sold to teachers. Its not just on this site but on many others. I am sorry we will have to totally disagree on the M&E fees. What really amazes me about the "benefit" is that number 1. you have to die, which does happen, no argument there, but the second reason is preposterous, your account guarantees the principle and if the account goes down then you get the benefit of the M&E. Its sound great ON THE SURFACE. But let’s examine this more closely. It’s bad enough that the benefit only insures the difference between the original principle and the current account balance. So if the account is down 3000 from the original then the benefit is $3000. That is hardly a benefit that demands such a high fee of 1.25% per year for decades in most cases. Also, around here we think long term, 10-20 years. Retirement planning takes at least 15-20 years. Why on earth would you insure a product that might go down especially in an insurance annuity after all that time? And especially after many, many years with that company? When anybody invests in the safe bond fund, you would think the account would grow after 15-20 years. So when the account is higher than the original principal, there is NO BENEFIT if one dies. But the educator has paid year after year for this.

 

I have heard that the number of claims is very small and sure the person involved benefited. However, there are other forms of insurance to cover deaths. That’s what we suggest to people around here is to purchase term life insurance. If you call that attack on your products and companies, when we say that M&E is an expensive fee with no real benefits to the vast majority of educators, well that’s too bad.

 

I call this exchange healthy, this website is healthy because like it or not, this entire movement was started by teachers. The LA Times article was a result of teachers, a small group in Los Angeles, sat down with the reporter, Kathy Kristoff two years ago and suggested to her that she needs to write about expensive products sold to teachers and how the union is complicit and Kathy did it with a vengeance. Yes, I agree it’s not pretty or civil sometimes, but neither were all of the great changes that have occurred in human history that made our lives much better.

 

In the end, I am happy that you post here. You are a gentlemen and we can disagree. I also believe that in the end, educated teachers in finances will help both the pros and the teachers. I have always believed that.

Have a good day,

Steve

 

 

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Guest Sierra

What is the fee threshold (1 percent, 2 percent, 3 percent) beyond which the pre-tax investor would be better off cancelling such investment and replacing it with an after tax, cost efficient index fund? Can anyone out there working with a commissioned agent give us an answer? Let's assume the answer is percent. Is it fair for the no-load crowd to say that salespeople whose products meet this threshold should be rediculed?

 

Peace and hope,

Joel L. Frank

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Guest Sierra

"And, and by the way, the tactics of attcking companies and products is an activity that an agent can not engage in. By our licensing, we can not participate in derogatory comments about companies, products or business competitors. Nor can an agent intrepret products of companies that he is not contracted with. To do so opens the agent to liability."

 

Herb, having said that should not these unions be taken to task for being involved in the securities business witout the proper licensing? These endorsement fees are nothing more than the union receiving a commission without having a securities license. Herb, do you agree?

 

Joel L. Frank

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Sierra: In the state where I live, the teachers union recommends various insurance companies for teachers. I have always found this practice difficult to accept. I have concerns as to what an "endorsement" from a union means for the teacher. I would think that a teacher could be led to believe that the endorsed company's product, and service are superior. This seems to be a natural assumption since the union is making that endorsement. Because many teachers are risk adverse, I can see a teacher assuming that an endorsed company would have superior credting rates. It has not be demonstrated to me that any of this is, in fact, the case.

 

While some companies seek out endorsements, there are other companies that will not participate in these programs because of ethical reasons and purely business reasons. Companies have to justify to themselves, and, finally, to their shareholders how their funds are spent. Companies are concerned about being good corporate citizens, and do not want to be perceived as taking advantage of clients. Because companies have limited amount of funds to market to a particular state or district, there must be a business case of expenditure. Any thoughtful company would be concerned about entering into an endorsement agreement; how does it look if the company refuses later to continue the financial payment to a union and therefore, "loses" the endorsement?

 

The fundamental question of the endorsement issue has to be asked: what are the unions using the funds for? I dont know what the funds are collected for, and if there is legal or ethical grounds to do this, nor do I know if the rank and file understand that fees are collected for that endoresement. Obviously, the practice is wide-spread, so there should be history to this practice. Asking is good.

 

The endorsement issue should not be about the quality, fee structure, rate of return, of any product offered by an endorsed company. To begin with that issue presumes that the practice is acceptable as long as the product is acceptable. The first question should be; is this what unions should be doing to raise funds?

 

I, for one, would be interested in understanding the iner working of this issue.

 

 

Herbert Hussey

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Steve; you and I agree on the issue of M&E. I dont sell VA products. My firm sells fixed account and mutual funds. We dont offer VA's because we are concerned about the M&E fees. My point about the VA was this: when a non-agent posts regular attacks on the VA, they are focusing on the cost issue. Very little attention is given to a benefit of the insurance contract. And, while the non-agent may find no personal value to the insurance coverage afforded under the VA, that benefit is there, and accrues to the contract owner.

 

So, my question is this: are the people that post here giving investment advice without knowing all the reasons why a person purchased the VA? Are they liable for poor consequences for the advice they give?

 

Steve, people can share any idea they wish. But, at what point does a person go from being an advocate to being considered an "expert"? And, if they put themselves out there as knowing the "truth", and "knowledgeable" about a topic, and they "encourage" other to take a course of action, and "discourage" other actions, and people "rely" on their "expertise", are they giving investment advice?

 

In this situation, the agents take one very large step back. But, the non-agents rush forward. Is this the wisest move to make?

 

 

Herb Hussey

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