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JudyS

New Valuebuilder Product

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Fellow Retirement Travelers:

 

I read with interest the article posted 8/39 on the home page of this website, "NEA Valuebuilder Introduces..." Interestingly, early in the article the writers refer to a TSA as a "Tax Sheltered Account". Avoiding the use of the term "annuity" in that context smells fishy to me, as if maybe, just MAYBE they are neutralizing the term TSA somehow. Did they catch on that "annuity" is an anathema in many circles?

 

It's noteworthy that the new product line is also offered by Security Benefit, the same rascals who offer the regular Valuebuilder. Also, although there are warnings aplenty about understanding expenses and fees, there is no actual statement about what kind of reduction in fees one might expect in this new "product". They say to order the prospectus. A couple of years ago I got the prospectus for the regular Valuebuilder, and I PROMISE that no normal human being can read that at all, never mind come away with an accurate understanding of expenses. Once you have read other prospecti, you inevitably must arrive at the conclusion that these folks never intended for a consumer to ACTUALLY understand the details.

 

I have recently talked to a fellow who does costs analysis in retirment products, and he estimated that the Valuebuilder charged as much as 1000 basis points (10%) in fees, expenses, costs, reimbursements, outlays, (whatever new term they can come up with)etc. etc., so how MUCH of a reduction there is in the new plan would certainly be interesting to know.

 

The NEA announcement provided openings for many, many questions indeed. What did y'all think?

 

Judy Schneider

 

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Hi Judy,

 

Thanks for the review. I have read the class action law suit brief that is found on the home page. It is a great read and very detailed. The attorneys did a thorough job researching the problem of not just high fees but how NEA and the board that oversees the plan deliberately mislead and actively promoted the NEA members into thinking that NEA was thinking about their best interests and getting the kickbacks (members did not know this of course). The brief details each count with evidence how NEA violated fiduciary responsibilities.

 

Steve

 

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Judy,

 

The new NEA Valuebuilder product (the no-load one) is better than their loaded product for sure. The fees are much lower, but they chose the revenue sharing route again - meaning they would rather continue to hide fees rather than disclose them.

 

The main problem with the product is it doesn't fill a void, its relatively high cost for no service, why not simply work with school districts to require them to offer a low cost option. Advocate on behalf of their participants, rather than profit off the back of them.

 

In my opinion this product strikes out.

 

ScottyD

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I wanted to add a few more comments about the new DirectInvest.

 

You can build a diversified index portfolio for about .50 percent. The target dates are expensive and the active fund choices are not that great. The money market is decent.

 

Overall it is a decent, though misguided effort.

 

I'll never endorse this plan, but I can't find a reason to assault either.

 

My bet is this plan will be used as a bait and switch to get members into the higher cost products that probably pay higher revenue sharing.

 

In the end the NEA is failing there members in this area.

 

ScottyD

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Guest Sierra

I wanted to add a few more comments about the new DirectInvest.

 

You can build a diversified index portfolio for about .50 percent. The target dates are expensive and the active fund choices are not that great. The money market is decent.

 

Overall it is a decent, though misguided effort.

 

I'll never endorse this plan, but I can't find a reason to assault either.

 

My bet is this plan will be used as a bait and switch to get members into the higher cost products that probably pay higher revenue sharing.

 

In the end the NEA is failing there members in this area.

 

ScottyD

 

 

If it cannot be endorsed by a RIA like you Scott, then in my book it fails and should be discarded. It is far from a "decent" plan. Most of the funds offered have 12b1 fees. So right there they do not pass the smell test! Scott, when such a menu is adopted by the 401(k) Plan that the NEA sponsors for its own employees then and only then will they be fair dealing with their members. And may I remind you, the members are collectively the employer of the NEA staff. The NEA contribution to the 401(k) comes directly from the dues paying NEA membership. THE DEVIL SURELY IS IN THE DETAIL.

 

More to the point, if the NEA and AFT really wanted to do right by their members they could use their 3 million members as leverage and offer a plan that mirrors the Federal Thrift Savings Plan. With this kind of purchasing power the most expensive investment fund offered should not cost more than 0.10 percent. Now compare this type of plan to the DirectInvest and you see how despicable the NEA is. They are ruthless!

 

In light of the new regs the NEA/AFT message is: "Members of the NEA/AFT, we recognize what a bunch of fools you are, how easy it is to fleece you, we just love collecting those endorsement fees on your back, you're doing just a great job so please just continue to invest, as you have in the past, with the TSA carriers we endorse"

 

In light of the NEA/AFT policy the message from the school boards of this nation to NEA/AFT is also quite clear. "Under the new regs we have decided to reject your endorsed carriers because our legal counsel has told us that in their opinion we would be violating our fiduciary responsibilies to our teachers (your members) if we offered such a high cost investment platform. Our loyal employees (your members) deserve so much more and we will deliver"

 

Joel

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