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403b Asp - Open Fund Platform - Is This A Good Idea?

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James,

Thanks for the update to include fees, but its was Rntgolf that wanted it.

 

Two comments and a summary (heck I am retired and have some time):

 

1. If 403bAsp is not a TPA, then your company is another level of administration? At LAUSD, we only have the TPA with the 457 plan.

 

2. The omission of fees until asked is the primary systemic problem with the entire 403b/457b defined contribution plans. As I understand it, you are required to disclose the fees when asked, but if you are not asked, you do not have to verbally disclose it because it is in the small print, to CYA.

 

Just curious, in this day and age of total transparency especially in this forum, why did you not have the fees easily available on the home page at the very start? Only after it was pointed out that you rushed in to correct it. You apparently agree that putting the fees on a downloadable form is not enough as Rntgolf pointed out. Is it in the thinking of your management profession? Are you taught in college or a previous company to disclose the fees only when asked? I am trying to understand your thinking and might help other pros to be more forthright. I have experienced this with our own fine financial consultant for our oversight committee when in one report he "forgot" to disclose the TPA fees. After it was pointed out, he now discloses the fees on every report. If the omission had not been pointed out, it would never been reported. So this problem is not just with you James, it appears to be systemic in the profession and I am trying to understand why. You are in the profession perhaps you can explain.

 

In summary, unfortunately, you made a mistake by not disclosing the fees from the beginning. You should have known this if you have been reading the comments and frustrations from educators year after year on this site about expensive products. Our standards are high and our tolerance is low because of our experience with the financial management system for decades. Its nothing personal, its just the way it is. New IRS regs improved NOTHING but the auditing process for them. The sales profession needs to be upfront on this site. My questions are for professionals: Are you taught this or is this "unconscious" or "conscious" motivation to the omit fees to get that sale so you can make the house payment? What gives? You can get away with this behavior at the school cafeteria but not here. Why does the profession require so much ignorance of educators to survive in this business?

 

Have a good day,

Steve

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If 403bAsp is not a TPA, then your company is another level of administration? At LAUSD, we only have the TPA with the 457 plan.

 

403bASP does look pretty good, and its fees are low. But if it is not a TPA, then we have yet another level of players:

 

- 403bASP

- A TPA

- A school district

- A mutual fund company

 

Doesn't this seem ridiculous?

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If 403bAsp is not a TPA, then your company is another level of administration? At LAUSD, we only have the TPA with the 457 plan.

 

403bASP does look pretty good, and its fees are low. But if it is not a TPA, then we have yet another level of players:

 

- 403bASP

- A TPA

- A school district

- A mutual fund company

 

Doesn't this seem ridiculous?

 

 

Hi Ap,

Precisely, the pros don't seem to understand that its the end user, the participant, who has to pay ALL of the fees. Sure 403bASP, by itself, probably has reasonable costs, but when added with everything else, the entire plan is expensive.

Steve

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If 403bAsp is not a TPA, then your company is another level of administration? At LAUSD, we only have the TPA with the 457 plan.

 

403bASP does look pretty good, and its fees are low. But if it is not a TPA, then we have yet another level of players:

 

- 403bASP

- A TPA

- A school district

- A mutual fund company

 

Doesn't this seem ridiculous?

 

 

I can top that. Our TPA won't accept checks or ACH transfers so we have to move money from one place to another just so we can do a wire transfer.

 

- 403bASP

- TPA

- bank (wire to TPA)

- treasurer's office (check to bank)

- a school district

- A mutual fund company

 

Are these regulations helping anyone other than the IRS?

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I can top that. Our TPA won't accept checks or ACH transfers so we have to move money from one place to another just so we can do a wire transfer.

 

- 403bASP

- TPA

- bank (wire to TPA)

- treasurer's office (check to bank)

- a school district

- A mutual fund company

 

Are these regulations helping anyone other than the IRS?

 

Barney,

 

Yep, you sure topped it!

 

I forgot another player in my county: LA County Office of Education. I think that they are somehow involved in the movement of money. So, if we continue to use 403b ASP in this scenario:

 

- 403bASP

- TPA

- School district

- LACOE

- Mutual fund company

 

To answer your question: companies like 403bASP and TPAs would seem to be benefitting. All that the regulations mean for investors are higher costs and higher levels of frustration.

 

Geez, how many more middle men do we need? To paraphrase an old joke:

 

How many middle men does it take to facilitate a 403b account?

 

Any answers?

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Steve

 

So if you had the option of going with Vanguard through 403asp or Using Fidelity Direct which would you choose? Just Curious

 

Rich

 

 

 

Rtngolf/Rich,

 

Are you saying that Vanguard is available through Fidelity Direct? Is that the same thing as Fidelity's FundsNetwork? If so, I think there is a $75/transaction fee associated with Vanguard funds. Or did I completely miss the point?

 

Craig

 

 

Barney, No i am not saying that Vanguard is available through Fidelity Direct. Fidelity Direct has low cost index funds that rival those of Vanguard and is a very good alternative to Vanguard.

 

Rich

 

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Rntgolf,

Fidelity direct. A middle person, a TPA, is of no use to me.

Steve

 

So what are the cost going through Fidelity? Do they get paid revenue sharing? Do they charged for Vanguard funds because they don't get paid revenue sharing? I noticed on thier website they don't disclose fees but they do state the following "I understand that my account may be subject to an annual maintenance and/or recordkeeping fee." Does this make them a middle man to get to funds other than Fidelity? Are they consiered a TPA then?

 

 

James First The Fidelity Direct option at my wifes school charges a yearly fee of $24.00. No they are not a TPA. My wifes money would go to a TPA then to Fidelity. Do they get paid revenue sharing? Not sure but it seems if they did they would be paying themselves as only fidelity funds are available. I guess you could say it is not really direct because there is a

TPA in the middle.

 

Rich

 

 

 

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James,

Thanks for the update to include fees, but its was Rntgolf that wanted it.

 

Two comments and a summary (heck I am retired and have some time):

 

1. If 403bAsp is not a TPA, then your company is another level of administration? At LAUSD, we only have the TPA with the 457 plan.

 

2. The omission of fees until asked is the primary systemic problem with the entire 403b/457b defined contribution plans. As I understand it, you are required to disclose the fees when asked, but if you are not asked, you do not have to verbally disclose it because it is in the small print, to CYA.

 

Just curious, in this day and age of total transparency especially in this forum, why did you not have the fees easily available on the home page at the very start? Only after it was pointed out that you rushed in to correct it. You apparently agree that putting the fees on a downloadable form is not enough as Rntgolf pointed out. Is it in the thinking of your management profession? Are you taught in college or a previous company to disclose the fees only when asked? I am trying to understand your thinking and might help other pros to be more forthright. I have experienced this with our own fine financial consultant for our oversight committee when in one report he "forgot" to disclose the TPA fees. After it was pointed out, he now discloses the fees on every report. If the omission had not been pointed out, it would never been reported. So this problem is not just with you James, it appears to be systemic in the profession and I am trying to understand why. You are in the profession perhaps you can explain.

 

In summary, unfortunately, you made a mistake by not disclosing the fees from the beginning. You should have known this if you have been reading the comments and frustrations from educators year after year on this site about expensive products. Our standards are high and our tolerance is low because of our experience with the financial management system for decades. Its nothing personal, its just the way it is. New IRS regs improved NOTHING but the auditing process for them. The sales profession needs to be upfront on this site. My questions are for professionals: Are you taught this or is this "unconscious" or "conscious" motivation to the omit fees to get that sale so you can make the house payment? What gives? You can get away with this behavior at the school cafeteria but not here. Why does the profession require so much ignorance of educators to survive in this business?

 

Have a good day,

Steve

 

Hey Steve, I have explained everything in my previous post. I did not change the 403b regs I'm just trying to improve upon what happened by giving participants a low cost option to get to the funds that are no longer available -- A through Z -- American to Vanguard and so on... thanks for debate.

 

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If 403bAsp is not a TPA, then your company is another level of administration? At LAUSD, we only have the TPA with the 457 plan.

403bASP does look pretty good, and its fees are low. But if it is not a TPA, then we have yet another level of players:

 

- 403bASP

- A TPA

- A school district

- A mutual fund company

 

Doesn't this seem ridiculous?

 

I can top that. Our TPA won't accept checks or ACH transfers so we have to move money from one place to another just so we can do a wire transfer.

 

- 403bASP

- TPA

- bank (wire to TPA)

- treasurer's office (check to bank)

- a school district

- A mutual fund company

 

Are these regulations helping anyone other than the IRS?

 

I'm not sure of the details of your Plan operations but the typical structure in the 403b landscape is:

 

- School District (Plan Sponsor) Payroll does salary deferral and sends to approved investment vendors directly or to the TPA/Common Remitter

 

- TPA/Common Remitter (TPA/CR) validates contribution amounts and sends to approved vendors (optional -- district may send contributions themselves and opt to self administer)

 

- Investment Vendors (Fund Companies (that chose to stay) | Trading Platforms (403b ASP/Fidelity/Etc) | Annuities) receive contributions from District and/or TPA/CR

 

What has really changed is the TPA level that has been introduced to have a compliance oversight to help districts with complying with the new regulations. This has also impacted the investment vendors that need to comply with information sharing to ensure the Plan remains in compliance. The investment vendors have always been there and if there is any good from the regulatory changes it has introduced new vendors that bring the cost savings and efficiencies from the other aspects of the retirement plan industry that has been long overdue tin the 403b market.

 

 

 

 

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What has really changed is the TPA level that has been introduced to have a compliance oversight to help districts with complying with the new regulations. This has also impacted the investment vendors that need to comply with information sharing to ensure the Plan remains in compliance. The investment vendors have always been there and if there is any good from the regulatory changes it has introduced new vendors that bring the cost savings and efficiencies from the other aspects of the retirement plan industry that has been long overdue tin the 403b market.

 

James: Could you elaborate on your last sentence? Which new vendors are you referring to?

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The investment vendors have always been there and if there is any good from the regulatory changes it has introduced new vendors that bring the cost savings and efficiencies from the other aspects of the retirement plan industry that has been long overdue tin the 403b market.

James,

 

As I noted previously, your company seems like one of the good guys, given the 403b mess that currently exists. However, I don't really see "cost savings and efficiencies" that have resulted from the new regulations. I continually see on this forum higher costs and more middle men.

 

To take my wife's district as an example, until now she invested directly with Fidelity. It was pretty simple, and the costs of Fidelity Spartan Funds were very low. Now, however, Fidelity is no longer an option, the district has hired a TPA, she will end up paying far more in fees than she previously did, and her investment choices are not nearly as good.

 

She has hardly experienced "cost savings and efficiencies." A cursory reading of the posts on this forum suggests that she is far from the only one.

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I'm not sure why 403bASP of all companies is getting beat up on and Fidelity is being basically praised. Fidelity is hands down a terrible manager of money, I'd never place a penny with their active managers. There index funds are fine, but not great even though they are low in cost. You still pay Fidelity $24 per year.

 

403bASP has a straight forward pricing structure and it cannot be beat, at least I haven't seen anyone come close.

 

403bASP is a vendor, your money goes out of your check to the Compliance TPA (Who may or may not charge for there service......oh and if they do 403bASP will pay up to $20 of the $40 they charge per year to cover your compliance TPA fees, which means there actual cost is even lower), the compliance TPA sends your money to 403bASP's Trust company (the entity that holds the money) and that is it. No different than sending your money to Vanguard or Fidelity, except neither of them will rebate a portion of their fee to cover the TPA. Granted, Vanguard is cheaper for bigger accounts - however with ASP you have a lot of freedom of choice besides Vanguard. If that is worth 10 bps - great, if it isn't then try getting Vanguard directly.

 

I can't believe that we finally have a company who has built a technology platform for 403(b), a company that gets it and we treat them like they are a VALIC or an LSW.

 

Let's give them the benefit of the doubt here, ask your questions, but this company is not like the other vendors out there.

 

ScottyD

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.

 

 

 

 

 

quote name='JamesOlson403bASP' date='Jan 2 2009, 07:45 PM' post='24068']

First let me say thank you for the interest with 403b ASP. I'm one of the founders of the company and developed our 403b offering. I wanted to jump in and clarify some of the dialogue regarding 403b ASP.

 

Regarding Fees:

We charge an annuall account fee of $40 per year -- we will apply $20 of this amount to offset any TPA/Common Remitter fees.

 

We charge an annual custodial fee of 10 basis points (bps). For the record 10 bps equal 1 cent for every dollar. You may see this expressed as 0.10% or .10% -- to get the correct figure you need to enter 0.0010% on a calculator. (To be sure we do not charge 1.00% on any account -- we are NOT an annutiy product)

 

For example if you had the account is outline below the fees would be as follows:

 

$5,000 Vanguard Growth & Income - VQNPX

$5,000 Vanguard Dividend Appreciation - VDAIX

----------------------------------

$10,000 Total account value

----------------------------------

$10.00 Custodial Fee -- 10 bps (0.0010%)

$40.00 Account Fee

----------------------------------

$50.00 Total 403b ASP Fee

 

Please note there is no account fee applied by Vanguard – the fund expense ratio still applies -- which is always applicable regardless of vendor selection; mutual fund or annutiy product.

 

Rtngolf: Thank you for your comment regarding our site. I will have a fee section added to our website to provide a clearer picture -- and too clarify the 10 bps is an annual fee not quarterly -- it is charged at 0.25% (0.0025) per quarter). The $40 account fee is charged at $10 per quarter.

 

We are an open free agent platform that allows a participant to appoint a financial advisor to their account regardless of the firm they work with and we charge nothing for this service. The advisors compensation can be a RIA fee (agreed to by the participant and the advisor) or they can be compensated by 12b1 fees paid by the fund companies which are built-in to the fund expense ratio.

 

Yes I think we offer a very good deal... maybe too good. We have a very simply belief. "Help participants accummulate a better retirement benefit". Do I make money doing this? Yes. I do not make a lot of moeny off any single account, however, I do not loose money on any single account. Our goal is that participants when they become aware of a low cost mutual fund offering that provides all of the features without the cost we will capture a lot of accounts.

 

Thanks for letting me chime in.

 

 

James, Only problem I as an advisor am having is talking to anyone at ASP to get a couple of questions answered regarding required forms. I keep calling and punching in on phone as advisor and all I have gotten for two days is a recording telling me ASP has such a high volume of traffic. No way to leave a message.

 

Then when I send an email, I am on my second day waiting for a reply. Hope this is not normal for you.

 

BPG

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I'm not sure why 403bASP of all companies is getting beat up on and Fidelity is being basically praised. Fidelity is hands down a terrible manager of money, I'd never place a penny with their active managers. There index funds are fine, but not great even though they are low in cost. You still pay Fidelity $24 per year.

 

403bASP has a straight forward pricing structure and it cannot be beat, at least I haven't seen anyone come close.

 

I can't believe that we finally have a company who has built a technology platform for 403(b), a company that gets it and we treat them like they are a VALIC or an LSW.

 

Let's give them the benefit of the doubt here, ask your questions, but this company is not like the other vendors out there.

 

ScottyD

 

Scotty,

 

My point was in response to James claiming that the new regulations have brought "cost savings and efficiencies" to the 403b market. We have all kinds of evidence to the contrary on this forum. I praised Fidelity because I have had an excellent experience with their Spartan Funds, which generally cost .10.

 

I also noted that 403bASP seemed to be one of the good guys in this business. And I certainly did not compare them to companies like VALIC of LSW.

 

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