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JudyS

Easy Question Re: Agreement Form

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Guest Sierra

I'm going to break ranks here and disagree with pretty much everyone but Intruder, keep an open mind here.

 

These new regulations are very, very onerous and the employer is now taking on a liability they've arguably never had. They need to take this very seriously. The question the employer must ask themselves is are they willing to allow the industry to write agreements for them and trust the industry to do the right thing for the employer? Would any self-respecting employer allow the vendor to dictate plan terms? The employer cannot afford to "trust" that the industry is looking out for them; they should have their own ISA and if a vendor is not willing to sign it.....they shouldn't be allowed to be a vendor. The ISA should be reasonable, but they should be writing the ISA to ensure that it works within THEIR plan, not allowing a vendor to write something that benefits the vendor.

 

The only reason Vanguard is available in AP's district is because AP's district didn't hire a competent TPA, instead they hired (I use that term loosely since the TPA doesn't get paid for doing compliance) a product sales organization. This organization is more than happy to open the district up to potential liability by allowing the vendors to run the show because they know that they'll still be around to sell products (the TPA). They aren't concerned about compliance, they are concerned about their own ability to sell products. AP benefits from this (and I am happy for him on that front), but for every 1 AP in the district there are 20 or 30 who end up with an Equity Indexed Annuity type product.

 

It pains me to rip Vanguard....it also pains me to hear through the grapevine that Fidelity may be following the same track. If they want to commit themselves to the 403(b) market, they need to play by the rules - it appears they don't want to. I love Vanguard, but they are the one's making the decision. I understand their position that they don't want to sign 13,000 different ISA's (which they won't as most districts will have TPA's - bring that number down easily to less than 1000) - but why were they willing to review and sign Hold Harmless Agreements previously? The problem isn't the agreement, its the sharing of information. Vanguard could easily create a product that works in the 403(b) market and be part of it - they have chosen not to and I think the employer has to look at Vanguard and say "No, our plan dictates the vendors, not the other way around."

 

I'm not a fan of these new regulations, but I think the employer is in a bind and needs to take them seriously. Vanguard has chosen to NOT take it seriously and I don't think that we should defend them when they make bad decisions, or decisions we don't agree with.

 

If VALIC was being rejected.......bet the tone would be different.

 

I mean no disrespect to all of my friends on this board - but in this instance - Vanguard is in the wrong.

 

ScottyD

 

Scott:

 

You make a terrific argument for a one vendor approach with that one vendor being state government. This will hurt your personal bottom line but so be it.

 

Just like the primary retirement plan to which public employees belong to is administered by state government the same should be the case with these voluntary salary reduction plans. NYC has been on target since the very start of these programs. It is a shame they are such a conspicuous minority. Could it be they care more about their employees than other public employers?

 

The forty year old experiment in farming out the responsibility to Wall Street has been a colossal failure for the bottome line of the teacher/employee but a remarkable success for those that collect the unnecessary fees/commissions paid by the teacher/employee.

 

Case In Point: The SUPPLEMENTAL ANNUITY COLLECTIVE TRUST OF NEW JERSEY is run by the Division of Pensions in the State's Treasury Department. It is a 403(b) for public employees in New Jersey who qualify. It started in 1963 with one investment choice---a common stock fund. Today, it still has the same, one, choice for investment. How's this as an example of selling out to the Wall Street crowd?

 

Peace and Hope,

Joel L. Frank

Pension Columnist

The Chief-Civil Service Leader

277 Broadway

New York, NY 10007

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Joel,

 

If that happened, a single vendor, my bottom line wouldn't be hurt at all, in fact I'd probably have to hire a bunch of planners and train them in order to take on all the new business. As I stated, most of my teacher business is hourly - it is not dependent on the investment option offered. Having said that, most of the money teachers spend with me is not on 403b asset allocation, it is on the financial planning portion.

 

I think a single platform would be great for compliance and if done correctly could do wonders for participants. If done correctly it could even be great for advisors who are willing to work with educators on a fiduciary basis.

 

ScottyD

 

 

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Guest Sierra

Skeptical,

 

I think the fact Scott is willing to take Vanguard to task tells you all you need to know about his ethics. Five years from now when 403(b) plans have largely migrated to group contracts (as opposed to individual contracts which are the norm in K-12 plans. Group contracts help shift the control from the vendor to the employer making it easier to move plan assets and are an arrangement we recommend), public 403(b) plans will be very attractive to firms such as Vanguard.

 

We are entering a period where in many cases, 403(b) plans will actually get worse for the participant in the short term. Most employers are solely focused on compliance (note: I tried to demonstrate to you how MCPS is the exception and should be championed for their efforts — great low-cost choices and an objective educational portal — but you insisted in waging a quixotic battle. The posture Vanguard is taking, if true, is disappointing and deserves to be pointed out.

 

Dan Otter

 

Dan,

 

Re: "The posture Vanguard is taking, if true, is disappointing and deserves to be pointed out"

 

And represents the very reason why the various state governments should step up to the plate and get a call into the Deferred Compensation Plan of the City of New York and learn how THEY do it. No?

 

Joel

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Guest Skeptical

The only reason Vanguard is available in AP's district is because AP's district didn't hire a competent TPA, instead they hired (I use that term loosely since the TPA doesn't get paid for doing compliance) a product sales organization.

ScottyD

 

ScottyD,

 

You can say you are only a "consultant" to a vendor but that is just semantics. Your name is prominently displayed on the CalSTRS 403(b) Comply website. This offering is in direct competition with the TPA you criticized in the previous post. You have acknowledged that you receive income from CalSTRS. Your Form ADV Part II states that you provide services to plan sponsors regarding RFPs. How can you claim that you are not a vendor? I didn't question your ethics or say you sell financial products. I just make the point that your comments about APTeacher's TPA should be taken in context. They were delivered by a competitor.

 

Jim

 

 

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Its easy for me to say I'm not a vendor - I'm not. I do push the 403bComply and other fee-for-service models. Any employer that contacts me I give them a list of fee-for-service TPA's.

 

I've always criticized AP's "TPA" as not being a TPA - they are not, they are product sales organization.

 

There is a difference between a company whose primary business is selling products and a company whose primary business is selling compliance. I believe a district should choose the latter.

 

I think its funny that I'm criticized about NOT supporting Vanguard because I'm somehow a shill for employers - yet my resume includes developing Pension2, an actual product and a vendor that must comply with those hefty rules that have been set up. I'd be criticizing Pension2 as well if they started to refuse to sign ISA's or sign onto plan documents like Vanguard - but they've chosen to play ball.

 

I don't make any more or less money if people adopt 403bComply or if they adopt Pension2. I've disclosed my affiliations many, many times and certainly won't apologize for them - heck, they are both great services.

 

I find it funny that nobody is actually addressing what my post was about - the fact that Vanguard SHOULD be held to account for its actions and shouldn't get a free ride just because they are Vanguard. The IRS set up this regime and if Vanguard wants to play in it - they should make a commitment.

 

ScottyD

 

P.S. My name is not "prominently displayed" on the comply website, you have to scroll all the way down to ######.......I wish it was more prominently displayed!

 

BTW - if the posters here wouldn't mine, can you all goto www.calstrs.com/403bcomply and goto the ###### section and try to play the ###### (you don't have to watch them) and let me know via e-mail, private message or via this board whether you can get them to work - I can't (using three different browsers and two different Operating Systems).

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Skeptical,

I think you have gone to far criticizing one of the most respected and I might add courageous pros in the 403b business. You might want to become a healthy skeptical, not an all out war on every pro. Scotty has been very clear at the beginning that he is a consultant to CalSTRS. You make excellent points but, you don't stop, you keep at it and then it becomes something else. First you went after Dan for his portal and yes you made a good point about transparency to which I agree, but you just keep at it as if to punish pros who really are trying to do something different. Of course mistakes will be made because this 403b system is so corrupt.

 

Heck if I were Scotty, I would be thinking these ungrateful teachers don’t deserve my time. But thankfully Scotty has a lot of class, a heck of a lot of more class than I have. We need good pros and Scotty is one of us. FYI, Scotty has gotten his share of threatening emails because he dares to criticize the annuity sales people at the professional conferences he attends. That takes a lot of courage.

 

Thank you,

Steve

 

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Guest Skeptical

I don't make any more or less money if people adopt 403bComply or if they adopt Pension2. I've disclosed my affiliations many, many times and certainly won't apologize for them - heck, they are both great services.

 

Scotty,

 

You are just amazing. You admit that you are paid by CalSTRS to promote their offering(s) but then try to convince us that you're not a vendor. So if I'm paid a "consulting" fee by Waddell & Reed or AXA to promote their TPA - Compliance division and/or Investment platform I'm not a vendor? Do you have any idea how silly that sounds. When partcipants on the board here read your negative comments about a provider organization (not talking about VG here), they should know that you receive payments from that provider's competitor. Readers can make up there own minds. I presume that many of your individual clients have the opportunity to invest in Pension2, and that you have a method by which you disclose that you receive income from the sponsor CaLSTRS. FYI: Disclosing a conflict doesn't mean it disappears.

 

Jim

 

p.s. I watched all the clips on the comply web site with no problem.

 

 

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Guest Skeptical
Skeptical,

I think you have gone to far criticizing one of the most respected and I might add courageous pros in the 403b business. You might want to become a healthy skeptical, not an all out war on every pro. Scotty has been very clear at the beginning that he is a consultant to CalSTRS. You make excellent points but, you don't stop, you keep at it and then it becomes something else. First you went after Dan for his portal and yes you made a good point about transparency to which I agree, but you just keep at it as if to punish pros who really are trying to do something different. Of course mistakes will be made because this 403b system is so corrupt.

 

Heck if I were Scotty, I would be thinking these ungrateful teachers don't deserve my time. But thankfully Scotty has a lot of class, a heck of a lot of more class than I have. We need good pros and Scotty is one of us. FYI, Scotty has gotten his share of threatening emails because he dares to criticize the annuity sales people at the professional conferences he attends. That takes a lot of courage.

 

Thank you,

Steve

 

Steve,

 

With all due respect you were completely silent on the transparency issue. Remember when we discussed CalSTRS reporting lower than actual admin costs? That they chose to leave out certain expenses, including the cost of private equity? When there was no reason to do so?

 

The main theme of excuses I've heard when I've pointed out these issues is something like,"but they a good group, organization, advocate" and it's OK because they're the good guys, on our side".

 

That just doesn't fly. NO FREE PASSES. If they wish to be vendors collecting payments (hidden or not) then that's FINE. But don't tell me it's OK because they're the "good guys". Baloney. If you want me to post a scathing list of the outrageous costs of the MCPS plan (with sources and links), including the fact that the board member who pushed for the "full service" option to remain in the plan, is employed by a WEALTH MANAGEMENT FIRM, I'd be happy to do so.

 

What's the problem with just saying, "oh yeah I am a paid spokesman for XYZ and I think they're better", rather than pretending to be unbiased. This is what burns me up. First it was Scotty saying "I'm not a vendor", and now it's "he's disclosed all of this before". Which is it?

 

Jim

 

 

 

 

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Guest Sierra

Scott says; "I find it funny that nobody is actually addressing what my post was about - the fact that Vanguard SHOULD be held to account for its actions and shouldn't get a free ride just because they are Vanguard. The IRS set up this regime and if Vanguard wants to play in it - they should make a commitment."

 

Scott:

 

Vanguard will do what is good for Vanguard. I, for one, am not giving the Vanguard Group a free ride. Vanguard is a profit making company just like the loaded investment management companies are. They simply utilize the direct marketing method to sell product while the loaded management companies employ a network of Broker/Dealers. They are free to do what they perceive is in their best interests based on the business plan they have adopted.

 

POINT OF INTEREST: A few years ago NYC Deferred Comp used the Vanguard Equity Index Fund and after a few years attempted to negotiate a reduction in fees. The Vanguard was unwilling to negotiate so the Deferred Comp Plan took its business over to an outfit called the Bank of New York and had them design an equity index portfolio as a Separately Managed Account with the Deferred Comp Plan as the sole client. Result: lower cost! So it stands to reason that if The Vanguard was willing to walk away from a client the size of the Deferred Comp Plan of the City of New York it will walk away from other, much smaller institutional investors.

 

Peace and hope,

Joel

 

 

 

 

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Skeptical,

 

You're full of it - I don't get paid by CalSTRS to "promote" their products and services. If I did I'd probably make a lot more money. I get paid by CalSTRS to consult on compliance issues and issues related to Comply and Pension 2. I'll occasionally do a presentation about the program, but don't get paid if a district adopts it. I get paid an hourly fee when I consult - thats it.

 

If Vanguard were to call me up and say they wanted to hire me for a few hours to consult on 403(b) issues would I suddenly become a Vanguard Vendor? B.S.

 

I've disclosed my relationships many, many times on this board, my biases are toward fee-for-service entities because that is what is best for the employees and districts. You tend to jump to conclusions before you know the facts.

 

I also think the issue here was not the TPA that AP has (which if you notice I never mentioned by name and any reader would have to e-mail AP to find out where he works) but was the fact that Vanguard won't sign Information Sharing Agreements. You like to take tangents to attempt to discredit people so that you don't have to actually address the real issue - which is Vanguard.

 

Joel has addressed the issue - in fact he is the only one (next to Steve.....and thanks Steve for the complements).

 

For the last time, I am not a vendor, I'm a financial planner and occasionally a consultant. My main consulting client is CalSTRS. BTW, I've been approached by many, many districts in California to act as their advisor for choosing a TPA and my response is that I helped build the CalSTRS 403bComply program and think it is the best one - but if they don't choose it they should go with a fee-for-service, non-product based entity. I then tell them that I can't be their consultant.

 

I think I've been more than clear and I don't have anything to apologize for.

 

ScottyD

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Scotty,

You do not have to explain yourself again and again, you are a good guy, on our side, etc etc.

Keep up the great work,

Steve

 

 

 

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Joel,

 

Excellent points. I believe Vanguard should do what is best for Vanguard and their shareholders. If building a 403(b) program will be a poor use of shareholder funds, they shouldn't do it. I think they believe (and probably correctly) that because they are so loved, that as most 403(b) plans go to limited vendor platforms that their mutual funds will be available on those platforms. I don't think they want to be in the 403b custody business, but they want to manage 403(b) money, just not directly.

 

I don't fault them for this, but I don't believe we should give Vanguard an exception and not make them play by the rules. It really pains me to know that Vanguard will not be available in a lot of districts - I really think they are a great company.

 

ScottyD

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Skeptical,

 

You are turning TOTALLY negative and that doesn't fly around here either. You are not a leader but simply a reactionary. Its sooooooo easy to criticize EVERY little thing that does not go your way. For somebody who has contributed much good to this forum, you are out of line bashing Scotty and what he has done for educators everywhere.

I was silent on the transparency issue because sometimes I am incoherent and in conflict too. There is such a thing as friends and friends do count in this crazy world of 403b. I was very torn, did not know the total issue with Dan's portal, but having said all of that you won't buy it anyway.

I have a feeling that this discussion will go no where.

 

Steve

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Guest Skeptical

Steve,

 

You are very thoughtful participant on this board. That's why I was so disappointed with your noticeable silence on the previous issue. It's also pretty clear that Scotty & Dan can do whatever they wish without criticism here. That's fine. Not my board and I'm not paying the bills. I'm sure my future participation here will be discouraged if only by the failure of folks like yourself to speak up when something doesn't smell right. You say you were torn. But I guess you've come to some level of justification in your mind. I don't know.

 

There are specific philosophies that are critical to any serious reform. The primary one is complete and accurate information for participants. Financial & business relationships ALWAYS create conflict and bias. Especially in 403(b) plans where the participant has complete responsibility for choosing from among perhaps hundreds of different investment choices. In my view, Scotty is so close to the industry, providers, consultants, and specialists that he has lost his perspective. Notice, I have never said ethics or morals. Things will only improve when participants refuse to accept the classic dismissal and require those who earn a living from the industry (yes, that's Scotty and to at least some extent Dan) to respond to reasonable questions. The old, "we're the good guys, trust us, don't worry" is the method the lunchroom sharks use everyday.

 

History:

 

Scotty went on the record that he saw no problem with CalSTRS reporting misleading admin expense ratios in their financial statements. He never disputed the data presented but simply offered a concise dismissal that they do a good job and the issue was irrelevant. This was a red flag for me so I've read his subsequent posts very closely. How someone so quick to slam a traditional vendor for hidden expenses would give the CalSTRS folks a free pass for failing to report accurate information just shocked me. RED FLAG #2.Then he reminded me that he collects income from CalSTRS.

 

The thread-post at hand:

 

---The simple fact is Scotty has a financial relationship with CalSTRS regarding the comply program.

 

---I am quite confident that the CalSTRS business office has him listed as a Vendor in order to pay him and issue a 1099.

 

---His name appears on the splash page of the CalSTRS comply site (no need to look hard it's right there).

 

---Clips of his stand up presentations about the program are highlighted.

 

---I was mostly irritated by the one titled "Fee Pass Through" in which he discusses how sponsors can get participants to pay for this new service.

 

---This service is marketed in DIRECT competition to other TPAs. THE POINT OF MY POST! Bias.

 

I don't expect to change any minds here. All will line up behind Scotty and Dan. That's fine. But remember this. Those who earn a living from the industry can never be true advocates. We're all human; the tempation is too great. It's too easy to look the other way, not rock the boat, not say the way things really are. I have reached a point of complete disillusionment with this board and I will not bother you any further. Good luck with your hidden fees, double standards, and status quo. The vendors win this time. But not forever.

 

Very truly yours,

 

I remain...

 

SKEPTICAL

 

 

 

 

 

 

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Guest Sierra

Skeptical,

 

You are turning TOTALLY negative and that doesn't fly around here either. You are not a leader but simply a reactionary. Its sooooooo easy to criticize EVERY little thing that does not go your way. For somebody who has contributed much good to this forum, you are out of line bashing Scotty and what he has done for educators everywhere.

I was silent on the transparency issue because sometimes I am incoherent and in conflict too. There is such a thing as friends and friends do count in this crazy world of 403b. I was very torn, did not know the total issue with Dan's portal, but having said all of that you won't buy it anyway.

I have a feeling that this discussion will go no where.

 

Steve

 

Steve,

 

Scott is well equipped to speak for himself especially on a topic that you admit to being "incoherent and in conflict too" . Your inability to grasp the issue(s) at hand is the very reason you remained silent during the discussion Dan, Scott and Jim had about 4 weeks ago. Have you improved your understanding of the issue at hand over the last 4 weeks? I don't think so. I, therefore, find your bashing Jim, at this late date, to be quite disingenuous and just a childish attempt to gain favor with Scott. Steve, if anything, you are sooooo transparent.

 

Peace and Hope,

Joel

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