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elliot

403(b) Vendor Reps

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I am trying to find if anyone out there has had any good experiences with a 403(b) vendor? Specifically, I am looking to join Lincoln Investment Planning which specializes in this field. They are not an insurance company, and do have some mutual fund options available which have no load up front by the fund company. Of course there is smaller % charged which will compensate me for the guidance, and the company for administrative fees. My understanding is these upfront fees are the only ones charged by Lincoln, and the ongoing fees all go to the mutual fund's expenses. Either way I plan to disclose all fees, especially those which will find their way to my pocket.

 

Anyway, since I know this profession is under fire because of some unscrupulous characters and companies, I am wondering what the community thinks about reps if they are honest, and genuinely offer good investment choices and advice. Also, if anyone has experience as a client of a Lincoln rep, I'd be interested to hear about that as well.

 

Along these lines, and I'm sure plenty of you will have input about this, what has been your negative experiences? Anything you can share so I can avoid them is appreciated. I am entering this field because I want to help people. I'd like to take the philosophy of "if I'm good, the money will follow", and the best way to do that is ensure a positive experience for anyone with whom I speak.

 

Elliot

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Negative experiences:

 

1) Being sold a two tiered TSA with a never ending surrender charge.

 

2) Not being counseled about the most basic things about investing, e.g., risk and return among various asset classes. Being sold a two tiered TSA in my early 30s was pretty bad advice.

 

3) Not being told the fees that I paid.

 

4) Not being told how the agent was compensated.

 

#2 above was the worst of the above. If the agent had spent 15-30 minutes explaining some things about having a diversified portfolio among several asset classes, I never would have bought the annuity. The opportunity cost of having done so is something that I do not like to think about.

 

Your biggest challenge will be to look out for your client's best interests while somehow taking care of your own, as well. It just seems as if that is a huge obstacle. However, there are some pros on this forum who seem to be doing just that.

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Guest Sierra

Negative experiences:

 

1) Being sold a two tiered TSA with a never ending surrender charge.

 

2) Not being counseled about the most basic things about investing, e.g., risk and return among various asset classes. Being sold a two tiered TSA in my early 30s was pretty bad advice.

 

3) Not being told the fees that I paid.

 

4) Not being told how the agent was compensated.

 

#2 above was the worst of the above. If the agent had spent 15-30 minutes explaining some things about having a diversified portfolio among several asset classes, I never would have bought the annuity. The opportunity cost of having done so is something that I do not like to think about.

 

Your biggest challenge will be to look out for your client's best interests while somehow taking care of your own, as well. It just seems as if that is a huge obstacle. However, there are some pros on this forum who seem to be doing just that.

 

=====================================================================

Were these experiences of yours at the hands of the Lincoln rep?

 

Joel

 

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Joel,

 

No, the agent represented Great American Life (GALIC). The guy is still in business doing the same sorts of things with teachers (like me at the time) who had no clue about the financial facts of life.

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AP-

 

Thanks for the info. It seems like your experience is a common thing among teachers, unfortunately. I would certainly like to get info from someone involving a Lincoln rep. Funny enough, the people I've spoken with at Lincoln have informed me of your same issues. In fact, they've said that's the advantage with Lincoln, and the approach they encourage reps to take when speaking with clients.

 

Those are certainly actions I intend to avoid, which will hopefully make me a better advisor, and build a better long-term relationship with more clients.

 

Thanks,

Elliot

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Elliot;

 

Why not start with full disclosure from the very beginning? Tell us, exactly what Lincoln Investment Planning is. Is it connected in any way with Lincoln Life Insurance Company? How? Please explain?? I thought Lincoln had been recently acquired by another company - Jefferson Pilot or something like that? What is going on? What will you be selling - Mutual funds, annuities or ??? Maybe you could help us understand more about exactly who you would work for & what the compensation structure would look like??

 

My experiences with Lincoln are very mixed.

 

Note to APTeacher: I have read your posts and believe you make valuable contributions to these boards. I completely agree that there are huge rip offs out there in 403b land. But to be fair, you voluntarily entered into a legal contract when you bought that TSA - nobody held a gun to your head and made you do it. The rep probably should have told you more, but did you really read and understand what you were signing up for??

 

Maybe that would be the best advice to all 403b investors considering annuity arrangements - do not sign a contract you have nor read and you do not understand!

 

Cheers

 

Danc

 

 

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Guest Sierra

Elliot;

 

Why not start with full disclosure from the very beginning? Tell us, exactly what Lincoln Investment Planning is. Is it connected in any way with Lincoln Life Insurance Company? How? Please explain?? I thought Lincoln had been recently acquired by another company - Jefferson Pilot or something like that? What is going on? What will you be selling - Mutual funds, annuities or ??? Maybe you could help us understand more about exactly who you would work for & what the compensation structure would look like??

 

My experiences with Lincoln are very mixed.

 

Note to APTeacher: I have read your posts and believe you make valuable contributions to these boards. I completely agree that there are huge rip offs out there in 403b land. But to be fair, you voluntarily entered into a legal contract when you bought that TSA - nobody held a gun to your head and made you do it. The rep probably should have told you more, but did you really read and understand what you were signing up for??

 

Maybe that would be the best advice to all 403b investors considering annuity arrangements - do not sign a contract you have nor read and you do not understand!

 

Cheers

 

Danc

 

 

And let's not forget the employer's culpability by allowing these annuity salestypes to enter america's public schools during school time and sell the VAs and loaded MF. These facts mean that the employer is endorsing the products being sold...lest they would not be allowed to enter the building. Dan, it's not like apteacher responded to an ad in the local newspaper.

 

Peace and Hope,

Joel

 

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Thanks Joel - for the reminder!

 

Yes. I am with you on that! Why not just extend the Investment Construction of the Federal Thrift Savings Plan (or at least the conceptual uderpinnings of economy & simplicity) to every Fed/State/Local Gov't Public Sector DC Plan.

 

Danc

 

 

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Note to APTeacher: I have read your posts and believe you make valuable contributions to these boards. I completely agree that there are huge rip offs out there in 403b land. But to be fair, you voluntarily entered into a legal contract when you bought that TSA - nobody held a gun to your head and made you do it. The rep probably should have told you more, but did you really read and understand what you were signing up for??

 

Danc

 

Danc,

 

Yep, I did voluntarily enter into that contract, so ultimately I am responsible. I had absolutely no idea what I was signing up for. However, I do think that the agent should have disclosed some things like:

 

- How he was compensated.

- What the fees were.

 

I also think that he should have taken just a bit of time and provided some education about investing. After all, if an investor is going to go through an agent, it seems as if the agent should do more than simply have the investor sign some papers. In effect, that is all the agent did with me: "Here is a TSA that earns ######%. You can save some taxes by investing in it."

 

So, I agree that I was responsible for my own ignorance, but I think that the agent did a very poor job with me. I'm glad that this forum helps to educate people to avoid the same mistakes I made.

 

 

 

 

 

 

 

 

And let's not forget the employer's culpability by allowing these annuity salestypes to enter america's public schools during school time and sell the VAs and loaded MF. These facts mean that the employer is endorsing the products being sold...lest they would not be allowed to enter the building.

 

 

In fact, that is exactly how I encountered the agent. He was in the faculty lounge drumming up business with free cookies.

 

Much to the chagrin of the local agents like him, the school board no longer allows this to occur.

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Here is what I found on Lincoln Investment Planning. It should come as no surprise that the fees are HIGH. This is an excerpt taken from the company web site in regards to their fees. I would advise my colleagues, friends or anyone else to steer clear from anyone recommending these high cost products.

 

In addition, if in the interest of full disclosure you tell your clients that you can benefit from sales contests, how do you think they will react. In my opinion they will probably question the motives behind your recommendations. Sales contest are a bad way of conducting business and cast the company and it's reps in a bad light.

 

The below article reinforces the recommendations members of this forum have made to stick with a low cost provider when one is available and to do business with them directly.

 

 

 

OTHER POTENTIAL CONFLICTS OF INTEREST

Differential Compensation.

 

Commissions received by Lincoln Investment on transactions vary, generally ranging from 1.0 % to 6.0% % of amount invested, and advisory fees generally range from .60 – 2.0% of the assets under management. With respect to commissions and advisory fees received, Lincoln Investment pays each Financial Representative an assigned payout rate that has been determined based upon the branch office that the Financial Representative is assigned to, his/her total level of production, and the type of product being sold. Lincoln Investment does not offer differential commission payouts based upon the specific product or the Sponsor of the Product.

 

With respect to distribution and servicing fees paid by product sponsors, the fees received by Lincoln Investment generally range from 0.10 % to 1.00 % annually of the net asset value of the investor's assets. This fee is typically an ongoing fee that is paid to Lincoln Investment in addition to the commission and/or advisory fee received. Lincoln Investment's policy as to which Financial Representative shares in the distribution and servicing fees varies based on such factors as: whether the Financial Representative is in a company owned or independent branch office; whether the Financial Representative qualifies for Lincoln Investment's achievement clubs by meeting certain production criteria (Honor Club or President's Club); whether the product paying the distribution fees is a Compensating Sponsor and/or whether the product issuing the distribution or servicing fees maintains an electronic relationship with Lincoln Investment for the sharing of investor information. This may create a financial incentive for the Financial Representative to offer to the investor only those products for which he/she does qualify to share in distribution and servicing fees paid to Lincoln Investment. Only a small number of Lincoln Investment's Financial Representatives do not share in certain products' distribution and servicing fees paid to Lincoln Investment. Lincoln Investment shares with its Financial Representatives more than 99 % of the distribution and servicing fees it receives. As an investor, you should ask your Financial Representative if he/she receives or shares in the distribution or servicing fees associated with his/her product recommendation to you.

 

Sales Contests.

 

Lincoln Investment also offers sales contests to its Financial Representatives that provides additional incentives to Financial Representatives. Lincoln Investment may offer contests throughout the year that will be limited to those accounts on Lincoln Investment's custodial retirement plan platform, Retirement SOLUTIONS, and Lincoln Investment's consolidated statement service for non-retirement accounts, Investor SOLUTIONS. In offering a contest only on sales on these platforms, Lincoln Investment may offer sales contests that may provide the Financial Representative with an incentive to offer the products or services of only those product sponsors that are approved for sale through these platforms. At December 31, 2005, there were over 400 approved product sponsors at Lincoln Investment, 35 of which were on the Retirement SOLUTIONS and Investor SOLUTIONS platforms, and 22 of the 35 which are Compensating Sponsors. Lincoln Investment includes in the contest all approved products on the platform and does not restrict these contests to Compensating Sponsors only. Top Lincoln Investment Financial Representative achievers in these contests may receive Lincoln Investment sponsored trips, cash prizes, bonus commissions, extra club points, monetary donations in their name to a charity of their choice or other nominal prizes. All contests are across the entire product line available on the platform. NO contest is offered which will award the Financial Representative based upon a specific investment product or on a specific product sponsor. Lincoln Investment will not accept any business that is not deemed suitable for the investor.

 

 

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Wow, thanks for the article, ft6. Two observations:

 

1) High fees.

2) Contests are yet another example of how sales advisors' interests are not exactly aligned with investors' interests.

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Guest TR1982

The advisory fees you quoted here are pretty typical of what most firms charge including the independents, some of whom frequently post here. I fail to see how there is anything wrong with any advisor or firm charging a fee for their services. It is up to the consumer to decide whether or not the services they receive are worth the cost.

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The advisory fees you quoted here are pretty typical of what most firms charge including the independents, some of whom frequently post here. I fail to see how there is anything wrong with any advisor or firm charging a fee for their services. It is up to the consumer to decide whether or not the services they receive are worth the cost.

 

"Commissions received by Lincoln Investment on transactions vary, generally ranging from 1.0 % to 6.0% % of amount invested, and advisory fees generally range from .60 – 2.0% of the assets under management. "

 

Between the sales loads, the advisory fees, and the underlying mutual fund fees, it would seem as if it would be difficult to put together a portfolio that is less than 2-3% in fees. To the other pros out there: is this pretty typical?

 

I certainly agree that there is nothing wrong with advisors charging fees, but 2-3% is a pretty heavy drag. On the other hand, I'm certainly no socialist, and if people are willing to pay those fees, so be it. But I sure hope that for those fees, investors receive:

 

- Full disclosure of those fees. And I would hope that this would go beyond presenting the investor with a mountain of paper work and assuming that the investor will somehow find the fees.

- Full disclosure of how the sales advisor is compensated.

- Solid education and advice that goes beyond the agent presenting the investor with some papers to sign, and then performing a disappearing act.

 

 

 

 

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The firm I'm joining is Lincoln Investment. They are not associated with Lincoln Financial Group.

 

With regards to the posting for the commissions, I do find it interesting there is criticism, given they disclose this on their website. My understanding is that I have great flexibility in what I offer for the 403(b), and it will not be VA. It is mutual funds, however, I can choose which ones I favor, which means I can favor no-load funds and ones with lower expense ratios. As for the advisory fee, I believe those apply to different types of accounts, and not necessarily the 403(b). The company offers many account types, and it doesn't specify these fee rates for the 403(b).

 

Also, and this is why I asked for experiences, I don't think there is an issue with the sales bonuses. The branch manager discussed this with me, and informed me it is not tagged to specific products. Rather it is overall productivity and sales, though it appears it will be involved with certain account types. However, find me any sales position for which there aren't bonuses associated with higher sales. Certainly I intend to disclose much of this to any potential clients. I figure if I'm open about it, it will enable me to have more clients.

 

I know the pitfalls about some unscrupulous firms and salespersons actions from postings on this site. I am looking to avoid them. I am also looking for experiences with Lincoln Investment. Criticizing full disclosure of potential fees from their website is not what I am looking for here. Once again, especially because it does not state these fees apply to the 403(b), but only that they are possible fees which have quite a wide range.

 

Thanks for future postings.

Elliot

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