FTJ FundChoice - Self Directed, or Advisor

[Ozark1990 0]

Hi,

I am a 27 year old teacher in Missouri whose district's 403(b)/457 options are provided only by FTJ FundChoice. I've attempted to parse through all the documents, understanding the layers of providers, RIA's, fees, etc... It's been a rabbit hole! 

In short, here are some things I *think* I've found out:
 

• My District's plan guy (perhaps IRS Coordinator? not sure) has a title of "Investment Advisor Representative". His business card says "Forrest T. Jones & Company"
  • researching him online, he is apparently with National Pension & Group Consultants Inc. in Kansas City, Missouri. Not sure what that means.
  • He informed me that his fees are: 
    • $25/year for the account
    • .95%/year AUM Fee
• Two Options - Self Directed or Outsourced.
  • Self Directed - all done in FTJ FundChoice Website called, 'portfoliologin'. It is built on Orion Architecture. In addition, FTJ FundChoice uses TD Ameritrade Trust Company for the purchase and sale of securities. Not sure exactly why Orion's 'interface' is needed, especially if trades go through TD Ameritrade...
    • Vanguard is available. Admiral Shares. 
  • Outsourced - This is where things get interesting. I initially brushed this aside, as I was planning to go all Vanguard and be done. However, I did not realize that the option of DFA access might be available. I am especially irked by the .95% AUM fee, especially that it seems all my 'investment manager' does is sign me up and let me decide to have another company allocate my money, or have me do it myself. I'm not exactly sure how or why this is the case, but knowing that FTJ is built on Orion's web interface, which in turn uses TD Ameritrade Trust Co to actually enact trades... I feel like the layers of fees are just egregious, and I do not understand to whom every basis point is going. I guess I just took the .95% at face value, since that's our only provider.
    • Three 'strategist spectrums': Strategic, Tactical, and Diversifiers
      • Strategic - Loring Ward & PGR Solutions available.
        Loring is an additional 0 pb, PGR is 10. Both offer acccess to DFA Funds. 

So, after all of this: my only concern is that both Loring & PGR (I think) offer comprehensive portfolio solutions; I seek to create an 'all value' portfolio, preferring to invest in VTSAX/VTIAX in my Roth IRA at Vanguard. Knowing that I have a well-diversified pension (14.5% employee contribution), I know I can take the volatility that the all-value/small/emerging markets portfolio would afford. 

I tried contacting FTJ themselves about DFA Access, and they seemed unsure, claiming that my 'advisor' (Mr. .95%) might have to 'request access' himself. If this is the case, then maybe I will  be able to create my own custom allocation... still unsure here. 

Anyways, I just wanted to get some thoughts. This is my first foray into the 403b/457 world, and I want to take advantage of my age, low fees, and the academic research as best as possible. If I had known day 1 that there 'might' be a DFA option, I might have chosen to do that instead of self-direct and choose Vanguard funds...

TLDR; navigating these is a PITA, looking to offset the .95% management fee via beta, and figure out if I have DFA access/to what extent I can customize.

Linked is a .pdf of the handout the advisor gave me when I signed up for my plan. Took me a while to find it, but its the exact same as my worn, pocopied copy...

FTJ_ProgramDescription2015-07.pdf

Edited November 27, 2017 by Ozark1990

[krow36 0]

Your district has certainly done their employees a disservice by using a single vendor that adds an AUM fee of 0.90%, if that is the case! Whoever approved such an arrangement was either unaware of the critical importance of low fees, or wanted to benefit FTJ at the expense of the employees. You should complain and find out the procedure for changing to (or adding) a vendor that has low-cost index funds.

FTJ FundChoice 403(b) Custodial Account in CA charges an AUM of 0.30%, and districts in CA have multiple vendors. It’s crazy that your district has a single vendor and yet charges 3 time as much! https://www.403bcompare.com/products/47#/fees   It does appear that the 16 funds offered in CA are all load funds except one, so FTJ Fund Choice is an awful choice in CA as well as in Missouri! 

You might consider investing in a taxable account instead of such an expensive 403b or 457. For fixed income savings you could invest in I-Bonds and CDs. In the meantime you could work to get a low-cost provider for your district, or move to a district that already has one? It’s not that difficult to move money from a taxable account into an employer-based plan which you could do when you are able to contribute to a low-cost 403b or 457. I guess it depends on how serious you are about saving for retirement.

I believe that the use of DFA funds always requires you to go through an advisor and you will have to pay for that privilege. I don’t believe that your tilts to “all-value/small/emerging markets” have a high probability of doing better than the basic 3 fund portfolio, just a low probability over considerable time. The drag of high fees will overpower any possible beta.

The link to the PDF doesn’t seem to work.

[Ozark1990 0]

My understanding is that FTJ FundChoice charges advisors a certain amount of assets under management: individual advisors then set their own AUM fee on top of that. FTJ's fee takes into account Orion's AUM fee, which is the TAMP software platform FTJ is built on top of. Orion (i believe) has a deal with TD Ameritrade, which is the brokerage that all trades go through, and has a deal with them to offer investor shares and waive load fees...

I think with all of the above, that's where the 95 bp comes from. Part of the problem is parsing through all the info, and finding out that apparently each of these companies strikes deals with different markets/districts differently, and in the case of FTJ, even offers different funds (much better selection here at my district than CA, at least according to 403bCompare) and load vs no load depending on... I don't know what. Then the individual advisor for your workplace sets up his fee on top and bills it to you as 'only one' fee, instead of multiple small ones. 

At least I think that is what is going on.

 

2 hours ago, krow36 said:

? It’s not that difficult to move money from a taxable account into an employer-based plan which you could do when you are able to contribute to a low-cost 403b or 457

How in the world is this possible? My understanding is that you cannot make after-tax contributions via check or ACH into an employer plan. They all have to be salary reduction, right?

[Ozark1990 0]

Also: Here's an image of the document I tried to post. I believe it is mean for advisors, as its just a general program description that does not include my advisor's fee on top of that. Hope that works:

 

[krow36 0]

1 hour ago, Ozark1990 said:

This post is locked up and the only way to get rid of it is to post it!? Sorry--krow36

[krow36 0]

2 hours ago, Ozark1990 said:

   4 hours ago,  krow36 said: 

? It’s not that difficult to move money from a taxable account into an employer-based plan which you could do when you are able to contribute to a low-cost 403b or 457

How in the world is this possible? My understanding is that you cannot make after-tax contributions via check or ACH into an employer plan. They all have to be salary reduction, right?

  
 

 

[krow36 0]

I've done it again!? Having trouble getting a quote that is within a quote. I see now that the + sign is for a "Multiquote". Sorry.

What I was referring to was spending down the taxable account by using it for living expenses while maxing out the 403b and 457 plans and the Roth IRA. It does involve paying capital gains tax on the taxable account as it's cashed out, but that's at 0% in the likely 15% tax bracket and at 15% in the 15% tax bracket. 

[Ozark1990 0]

It turns out that the fees before funds is actually .8%... not a big drop, but still something! I am currently invested in Vanguard admiral shares, with an aggregate ER of .07. No trading fees.

 

I am invested in the following:

25% - VTSAX

10% - VEMAX

7% - VTRIX

7% - VFSVX

5% - VTIAX

35% - VSIAX

5%  - VMVAX

5% - VVIAX

1% - Custodial Cash

 

[EdLaFave 0]

I’m thoroughly confused by what you’re saying your two options are.

It sounded like you could choose a self-directed account with access to vanguard’s admiral shares or you could pay some adviser 1% to manage your account. If that’s correct then you’d obviously go with the self-directed account. So I think I’m misunderstanding something here.

[Ozark1990 0]

My two options are: 

• Self-directed brokerage with Admiral shares - only admiral shares Expenses & the .80% managment fee by FTJ
• A managed account with DFA Funds, for an extra .10% for a total of .90% before DFA fund expenses

No matter which option, FTJ charges .8% AUM; .3% is to FTJ itself, .5% is to my 'regional advisor'. The advisor originally quoted me .95%, but that seems to not be the case.

 

I have decided to go with the self-directed option, as I cannot tilt the DFA as I would like to.

[EdLaFave 0]

I understand. 

I ultimately agree with your decision to go with the lower expenses. I also agree with Krow’s suggestion to lobby for a better vendor.

[Ozark1990 0]

Yeah, I'm going to investigate other vendors. The most pressing issue at the moment is my wife's options at her community college; for example, her TIAA option is all only variable annuities with a minimum .67% expenses, and TIAA only offers a traditional 457 option, whereas they offer trad and Roth 403(b). We were hoping to max out a Roth 457, and a trad 403(b) for her, not the other way around!

Wanting to figure out the proper channels to get that situated properly...