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403b Plan With Over 20,000 No Load And Load Waived Mutual Funds

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The loads are waived for clients utilizing our Registered Investment Advisor (RIA), even if the only account we manage for the client is their 403b.

 

Yes, companies traditionally charging loads (Putnam for example) are just forgoing the sales charge, for our RIA clients.

 

 

I'm having a difficult time accepting that these companies are willing to give up the revenue from sales charges. The skeptic in me says they must be making it up somewhere else - revenue sharing agreements? What kind of fees are charged by the RIA?

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There is noting difficult about it.

Certain mutual fund companies waive loads for certain investment firms, like Skloff Financial Group.

There are fees (12b1, sub-TA, etc.) already built into the vast majority of mutual funds, from the American Funds Growth Fund of America (largest open end equity mutual fund) to the Fidelity Investments Contrafund.

 

See:

http://www.investopedia.com/terms/l/load_waived_fund.asp

 

The IRA fees are based on the size and complexity of the account(s).

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There is noting difficult about it.

Certain mutual fund companies waive loads for certain investment firms, like Skloff Financial Group.

There are fees (12b1, sub-TA, etc.) already built into the vast majority of mutual funds, from the American Funds Growth Fund of America (largest open end equity mutual fund) to the Fidelity Investments Contrafund.

 

See:

http://www.investopedia.com/terms/l/load_waived_fund.asp

 

The IRA fees are based on the size and complexity of the account(s).

 

 

Barney,

Revenue sharing, 12b1 fees make up the loads that are waived. It is standard practice, nothing new or extrodinary except that the quantity is supposed to equate for equality, I guess.

Mr. Skloff is making money.

For example in our 457b fees, the highest share classes bring the fees up over a 1% and thats without the TPA fees. We have some funds that have 1.34% total fees but that does not include the individual portfolio adviser fees that are 1%.

Steve

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What exactly is your compensation for your services? It’s a fair question. BTW, any other profession, MDs, will give a client a expected cost. So will the mechanic, the dentist and the remodeling contractor. Its part of doing business. But as you noted, the 403b world is different. Its loaded with secrecy, vagueness and feel good sales pitches.

 

At the beginning of this thread, you stated that your offerings break away from that world. The teachers at the district where you were contracted were not happy with the insurance company sales pitches.

All you have done is evade my questions about portfolio structure, philosophy, strategies with examples of clients and you evaded the costs. If you don't want to specify how you broke away from the 403b world, I understand, because up to now, IMHO, you have not done what you claim you have done in your first post.

 

Have a great turkey day,

Steve

 

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Point well taken.

We have modified the post to remove any suggestions to calling us.

There are oftentimes multiple share classes (A,B,C,D,etc.) of the same mutual fund.

Technically, it is over 23,000.

 

 

You talked about over "20,000 No Load and Load Waived Mutual Funds". What's the point about talking about the different classes when they are supposed to be no load or load waived? Isn't it just obvious to pick the fund with the lowest expense ratio from the classes available since the load are waived? So why mention the 20,000+ funds?

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Different clients have different needs.

As certain mutual funds have minimum investment requirements (which many investors can easily meet), some share classes may not be available to certain clients (who invest modest amounts).

We review the database to assure each client receives the lowest expense share class based on their individual circumstance.

 

Our goal is to achieve the highest risk-adjusted performance net of fees.

Through a combination of strategic and tactical discretionary portfolio management, we manage risk and performance simultaneously.

Since our fees are based on the value of the assets we manage, our goal is maximize growth at the optimal risk level.

These skill sets can only be refined with extensive education and experience - criteria oftentimes lacking in the retirement plan marketplace.

 

Like a surgeon, we do not give 'general guidance'.

If you want general information, feel free to review our website, as it provides dozens of articles we have published in the financial press on a host of topics, including: estate planning, financial planning, retirement planning and tax planning.

 

We give specific guidance and tailored investment management services designed for a specific client's needs.

We understand the client's risk level through:

1) a conversation (e.g.: in person, phone call, web call, etc.) and

2) a written risk profile

 

None of this conflicts with the original post.

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Mutual fund companies can and do collect revenue from upfront or deferred sale charges, however these sales charges are used mainly to compensate a broker for selling the fund. If these funds appear on a mutual fund platform (such as 403bASP) they are usually "load-waived" and the 12b-1 and sub-ta fees are passed onto the platform provider if those type of fees exist.

 

One should focus less on the number of funds and more on the pricing and quality of the funds. Load waived "A" shares are fine, but an institutional share class or an R6 from American would be better suited for a plan.

 

DK has a good point about Share Classes, some funds have 10 different share classes available (the average American fund has R1 - R6, F1 and F2, A, B, C, D - though they are phasing out B), while this might be atypical it is normal for a fund to have at least three share classes. A better way to describe a platform would be by number of fund families and unique funds. Again, its not the number of funds, but the quality.

 

ScottyD

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Since our fees are based on the value of the assets we manage, our goal is maximize growth at the optimal risk level.

 

 

Maybe you could give a few examples of the total cost to the participants in your plan. Say I wanted to defer to Putnam's RetirementReady 2030 Fund (PRRQX) or Fidelity's Freedom 2030 Fund (FFFEX), what would be the fees and expenses involved by going through you?

 

 

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In the 403b plan we offer, the investor who purchases either the Putnam RetirementReady 2030 Fund (PRRQX) or Fidelity Freedom 2030 Fund (FFFEX) fund:

 

1) Does Not Pay Loads,

2) Does Not Pay Sales Charges

3) Does Not Pay Transactions Fees

 

The underlying administrative provider assesses a $40 account fee and 15/100 of one percent of the assets in the plan on an annual basis (actually broken up into quarterly increments).

 

Skloff Financial Group does not receive a single penny of the above.

 

Skloff Financial Group assesses fees based on the value of the assets we manage, always including all assets we manage for the client (both inside and outside the 403b and/or 457b and/or 401k and/or IRA, etc.).

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The underlying administrative provider assesses a $40 account fee and 15/100 of one percent of the assets in the plan on an annual basis (actually broken up into quarterly increments).

 

Skloff Financial Group does not receive a single penny of the above.

 

Skloff Financial Group assesses fees based on the value of the assets we manage, always including all assets we manage for the client (both inside and outside the 403b and/or 457b and/or 401k and/or IRA, etc.).

 

 

Thank you for the information. Could you go one more step and explain your fees? If I had no other holdings with you and started with $10,000 in the Fidelity Freedom 2030 Fund I would be charged an annual $40 account fee/yr plus .15%/yr from 403bASP, plus the .76%/yr expense from Fidelity, plus what kind of fee from Skloff Financial Group?

 

 

This is the 403bASP platform.

 

ScottyD

 

 

Thank you! That explains a lot.

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As an investment advisor we manage your account for a percentage of the assets under our management. The annual fee ranges from 1/2 of 1% to 2%, depending on the size and complexity of your account.

 

In the example of solely a $10,000 account (although we cannot 'manage' an account with just one investment on an ongoing basis) it is quite likely the fee would be 1.5%.

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Lower Expense Ratios in Mutual Funds Do Not Guarantee Lower Risk or Better Performance

 

Vanguard Total Stock Mkt Idx (VTSMX) ; Expense Ratio=0.18%; 3 Yr Sharpe Ratio= -0.36; 5Yr Avg Annual Return=1.17%; 10 Yr Avg Annual Return=0.10%

 

American Funds Gw Fund of Amer A (AGTHX.LW); Expense Ratio=0.76%; 3 Yr Sharpe Ratio= -0.28; 5Yr Avg Annual Return=3.06; 10 Yr Avg Annual Return=3.19%

 

Fidelity Contrafund (FCNTX) ; Expense Ratio=0.95%; 3 Yr Sharpe Ratio= -0.19; 5Yr Avg Annual Return=4.86; 10 Yr Avg Annual Return=3.73%

 

 

The performance data quoted represents past performance, and past performance is not a guarantee of future results.

Performance Data as of 11/24/09

Source: Morningstar

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