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bruce6601

457 Single Vendor

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1. What are the pros of going with a Single Vendor?

2. What are the pros for using a broker for the 457?

Thanks!

 

1. That depends on the vendor. If you get an insurance company, the employees will most likely be sold insurance products. If you get an independent vendor (a vendor that has no funds of its own) such as what our pension plan CalSTRS Pension2 (403b) uses, you will get good mix of low costs, broad based index funds.

 

2. What I said in #1 applies here. The great advantage is that the 457 allows for an employee envolved oversight committee. But just having a committee is not enough, you need people who are committed and are willing to learn about how these plans work.

 

Hope this helps,

Steve

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bruce 0661,

 

For me it comes down to product offered and costs.

 

We have four 457(b) vendors. Two are insurance companies (Valic & Hartford), one is Nationwide and the other is FTJ fundchoice. Valic and Hartford are annuity based products that are high cost.

 

Nationwide is ok as they offer their own index funds and the cost is ok.

 

FTJ is an open source mutual fund platform. I can basically get any Vanguard fund and/or any Fidelity spartan funds. The choice is great, BUT the cost is 85 bps (.85%) plus the mutual fund fees. We are trying to lower this cost, but it is an uphill battle. FTJ is offered through a vendor/advisor hence the 85 bps fee. We would have a better chance to LOWER the cost if there are less vendors (we are working on that now).

 

I will not be satisfied with my 457(b) plans until employees are offered a reasonable selection of index funds (thinking TSP here) for 50 bps (.5%) or less in total fees.

 

The more assets you offer, generally the better the pricing you can get. With multiple vendors, the assets under management get really spread out.

 

One option, I tried (it failed) was to provide for an advisor based mutual fund platform (FTJ) for people who needed a lot of guidence/hand holding, but offer a second no frills mutual fund platform at very low cost for the do-it-yourself investor (457bASP, JEM, etc). In the end, management/HR did not want to limit employee choice, etc.

 

Needless to say, I am still working on making some changes.

 

 

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