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apteacher

More On Valic

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Thinking more about VALIC:

 

Why on earth is a middle man like Valic needed in 403b and 457 plans in the first place? Wouldn't it be easier, and certainly less expensive, for school districts to make deals directly with providers such as T. Rowe Price, Fidelity, and Vanguard? I have a difficult time believing that, with its huge employee base, these companies would not be interested in a district such as LAUSD.

 

I know that it is not impossible. LA County Office of Education offers both Fidelity and Vanguard for its 403b plan. IT CAN BE DONE. Plenty of school districts in the county have access to this plan.

 

Steve:

 

What do district folks tell you when you point this out?

 

What kind of answers do they provide?

 

Is there something else going on here, e.g., the influence of insurance companies being brought to bear on LAUSD?

 

 

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Hi AP,

Try to answer your questions. Fidelity could have been the TPA but because of the educational piece that everybody claims is needed, LAUSD choose VALIC. My guess is that a TPA must be utilized to have a 457, as 457 plans require a plan document. If LAUSD waited until now, CalSTRS has the legal authority to provide 457 plans for all school districts in California and very good prices.

But LAUSD is not going through another rfp.

 

I have argued with LAUSD officials for ten years off and on about the hold harmless agreement. They language is the same as the county's hold harmless and yet why does the county have VG? Never got an answer.

You are right on when you say about insurance impact. Wow, the influence of the insurance industry is massive with LAUSD. They can do no wrong. They would never go against Mercer's recommendations. They are so frightened about this stuff. The 457 committee is only in excistent because they have to have a committee for the 457. Mercer thinks and acts just like LAUSD and the procurement officials. After all, Mercer was picked by procurement.

 

The other matter about the 15 basis points as a teaser to get the contract is correct. However, VALIC is not stupid and would certainly not set themselves up for any wrong doing. Remember they are very good at playing by the legal rules and very good at putting on the good vendor face, while acting unethical. They have played that game for years. Anyway, Mercer rep brought up the revenue sharing costs to the Board of Education at their first presentation. We cannot say that VALIC acted improperly. VALIC did not say it; it was Mercer who said that the revenue sharing costs must be added to the plan. Mercer has stuck with that dogma all summer long, meeting after meeting. They would not back down about the precious revenue sharing. They are also wrong about investments saying over and over that managed funds beat the indices crap. It was insulting to us real investors.

 

But regarding the fees, very few of us knew what revenue sharing was at the time and that was our mistake. We instead were focused on the 403b and got VALIC to agree not to sell new 403bs. So they were approved by the board and I just took a wait and see about the other fees. I realize now that was a costly mistake. We should have took them to task about the 15 basis points before the board approval.

 

We still have some leverage now because the reps want to get into the schools and UTLA holds the line on that. UTLA has no official statement about this plan because we needed to wait until all the facts are out. The only official business left is to hire a real investment consultant. Mercer was hired temporary, thank god. But if things go against what we have fought for in this terrible plan, full disclosure and explanation of all fees in plain English and no selling of new 403b products or another horrible consultant, UTLA might deny access of VALIC reps the schools. It’s still too early to tell.

Hope I answered your questions. We had a lengthy discussion on VALIC and the 457 last May and June and I thought this was all covered then.

Regards,

Steve

 

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Wow ... Fidelity or Valic? What a no brainer. It's laughable that an outfit like Valic was chosen over Fidelity.

 

Educational value? As if Valic would really provide educational services to benefit teachers. I have a difficult time believing that Valic's educational efforts will be anything more than sales pitches.

 

What a darned shame.

 

 

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Wow ... Fidelity or Valic? What a no brainer. It's laughable that an outfit like Valic was chosen over Fidelity.

 

Educational value? As if Valic would really provide educational services to benefit teachers. I have a difficult time believing that Valic's educational efforts will be anything more than sales pitches.

 

What a darned shame.

 

Ap:

Valic has not provided any advice to me. When I made my presentaion to the board in August, I pointed this fact out. I refuse to call them financial advisers. When I do call their clip the customer center, I simply refer to them as your rep. I have refuse to talk to any Valic rep.

 

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Fe,

 

As others have pointed out, I think it is best to call reps "sales advisors." In fact, "salesmen" or "saleswomen" would be more appropriate. They are there to sell their products, and nobody should expect anything else. IBM salesmen sell IBM services, Ford salesmen sell Fords, Merck salesmen sell Merck pharmaceuticals, so it's not terribly surprising that Valic salesmen sell Valic products. If Valic customers think that they are getting anything other than Valic products, they are expecting too much. Let the buyer beware.

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