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I work with a small non-profit that is in the process of moving its current 403(b) to a new institution. We currently use a brokerage firm which offers thousands of funds from many fund families. We're thinking of moving to a company like Fidelity or Vanguard, but we noticed that each of these companies, and others, allow you to invest ONLY in their own mutual funds. (Fidelity's 403(b) plans include only Fidelity funds, Vanguard's plan only includes Vanguard funds, etc.) I am wondering if there is any risk to the employer in providing a single-family plan. Does anyone know more about this? Can you point me in the right direction? Thanks.

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I think there is no risk with going with only one fund family. Fidelity is the largest mutual fund company in the country, with Vanguard coming in second. Both of these companies offer very good funds. Vanguard offers lower cost funds than Fidelity. They also offer more index fund. If you don't mind me asking, but why do you want to switch? Are you not happy with your current provider? My company is going to switch plans going from Valic to TIAA-CREF. I too checked out Fidelity and Vanguard, but both of them don't offer the one-on-one customer service that we need. We need a Rep to come in and explain the plans to employees on a regular basis. If we went with either company, our HR department would have to do more of the work and our HR dept. is not situated to do this. TIAA-CREF has an office about 1.5 hours away from my company and they do offer more of the customer service that we're looking for. Hope this helps.



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Per my conversation with Vanguard you can actually get them to offer more funds then just Vanguard funds. I believe you can also get funds from Janus, Strong, etc. Make sure to ask them this question. As I have been going through the bid process, Vanguard keeps telling me this.


In addition, I don't think there is any risk with only offering Vanguard Funds to your employees. Many employers do this and I actually think if they are quality funds its better. Too many fund options for employees is not a good thing. As long as the funds offered are quality (like a Vanguard) I think its better. We have 67 funds in our VALIC 403b plan and I can't stand it and that is why I want it changed.


Check out this link from Vanguard that explains too many funds is a bad option.



IN addition, when you say Vanguard can't offer you the same services what do you mean? The only thing I can think of is having some rep visit your site to help employees. However, are these reps really worth much other than making employees feel better. Vanguard can offer you good phone service, some special seminars on site, web education, etc.


I like TIAA-CREF from what I see, but I think Vanguard's costs are a lot lower than TIAA-CREF and offer more options. No knock on TIAA-CREF as I believe they aren't far below Vanguard. Just stay away from VALIC.




John (aka Tampa Gator)



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