Jump to content
gchs

Need Help-new To 403b

Recommended Posts

gchs...at this site discussants are all investors...many of us have learned that "approved vendor" doesn't mean much..because the people who do the approving are doing so after a big dinner they didn't have to pay for...also, the A in TSA is annuity..and that is an insurance instrument that more often than not costs more than it is worth, and as a tax deferred option should not be in a tax deferred 403b plan...

 

Whether it is worth investing in depends on how you intend to fund your retirement or gain capital for various needs: college for kids, trips, leave it to the dog pound, whatever...Each of us probably out to put our money where it is mostly likely to gain at a responsible and safe rate..so I have used 403b to do that...Not through an agency "approval" process, not through an agent who would insult me by trying to foist an annuity on me, while telling me his "fees are paid by the company"...

 

What to do?..see what else is available in the employer's plan, his list of options...run them by this site..we may have experience with the companies, being familiar with the costs, and possibly hidden costs...If you talk yourself out of investing anywhere, you must take responsibility for the fact that later, at age 62 you talked yourself out of it because you learned some of the awful truth about TSA Approved Vendors...So hang in there, do a little research..look at things like 10 year growth, peer feedback, and don't let your healthy scepticism screw you. The very best to you, Dan

Share this post


Link to post
Share on other sites

Thanks for some insight. I really am trying to educate myself but I am trying to do it in a crash course way. I spoke to an agent today who offers an EIA and mutual funds through ValuTeachers INC. They write 403b and 457b's through Life Insurance of the Southwest. (Good rating through Moody's) Their mutual funds are through a company out of Calif. that I'm not aware of called Planned Members. I had him show me fees for each scenerio and it appeared the mutual funds had fees of 1.82. Is this high?

I asked him his backround which he said he had a financing degree and he has lic. to be a financial planner, sell mutual funds, etc..

 

Here are our other options:

First Investors ,American Express

Franklin Life, Horace Mann I'd appreciate any suggestions.

Metropolitan Life, Putnam

State Farm Insurance, Sun Life

Primerica ,Valic

ValuTeachers, Inc.

Share this post


Link to post
Share on other sites

I would prefer a 403(b)7. Mostly because the investments are made directly with the mutual funds companies and the fees are usually much lower than those wrapped in insurance products. However, one advantage of investing with the insurance co's is that they may be able to give you some kind of guarantee on your principal or lock in your gains over a period of time, which you could then annuitize when you retire. I still prefer the 403(b)7's.

 

Also I think that the fees of 1.8% are high. When people invest with me and put their IRA account in a fee-based account, we charge 1% and allow people to put money into funds at Net asset value, very low management fees. They can also buy equities with all trades done at no commission.

Share this post


Link to post
Share on other sites

GCH,

 

None of those providers look appealing. None of them are low cost providers. What I would do is find the company that offers the type of funds that you are looking for, charges the lowest fees and DOES NOT HAVE A SURRENDER FEE. I would then transfer my funds each year to a low cost provider (e.g., Fidelity, Vanguard, T. Rowe Price).

 

I would also work to get some better choices for your plan. The ones you listed are really pretty lousy.

Share this post


Link to post
Share on other sites

Hammer,

 

So you charge clients 1% ... Your clients will also pay management fees for the funds that they are in, as well. Assuming that those very low management fees are, say, 30 bp, your clients are paying 1.3%.

 

Compare that with an index fund at Vanguard with an expense ratio of about .23%, or with Fidelity, which just capped index funds at .10%. That means your clients are paying fees somewhere between 5 and 13 times what they would be paying if they invested on their own! Now, I will grant you that advisers can be helpful, but there sure is a steep price for that advice!

Share this post


Link to post
Share on other sites
I was hoping some more knowledgeable people could offer help! PLEASE! (see post above)

I am working with an advisor from first investors corporation. They have been around for 75yrs and the person that i work with seems to be a straight shooter. He helped me transfer my traveler's life tsa to an American Funds 403b.

Everything has been going good so far over the last 4yrs. After doing some research of my own, it seems that the american funds group has posted some great long term retuns along with some pretty low fees. Overall, i've had more interactions and service appointments with this guy over the last four years than i had in 15yrs with Traveler's.

I would give them a try. it does not cost you anything to meet with their advisors(just a few hours of your time), so you don't have much to lose.

Share this post


Link to post
Share on other sites

MST,

 

Several points:

 

1) Did you pay a surrender fee when you transferred your assets? Was this disclosed to you by your First Investors advisor?

 

2) Did your adviser tell you how he is compensated?

 

3) American Funds is indeed a fine family of funds. Very solid, very fine long term record. However, are you paying a sales load? A sales load virtually negates the advantage of the (comparatively) low expense ratio of American Funds. If, for instance, the charge is 5.25%, that means that a $1000 investment is reduced by $52.50. You pay in $1000, and end up investing only $947.50. The $52.50 typically goes to your advisor. Over time, the sales charges really add up, and become a huge drag on your returns. Check out Dan's post on another thread about the effect of fees on returns.

 

4) Lastly, you probably do not really need a financial adviser IF you are willing to spend a little time learning about investing. It's not really rocket science. I believe that the average person, with proper education that is easily available, is perfectly competent to be his/her own adviser.

 

Best of luck.

 

 

 

 

Share this post


Link to post
Share on other sites
MST,

 

Several points:

 

1) Did you pay a surrender fee when you transferred your assets? Was this disclosed to you by your First Investors advisor?

 

2) Did your adviser tell you how he is compensated?

 

3) American Funds is indeed a fine family of funds. Very solid, very fine long term record. However, are you paying a sales load? A sales load virtually negates the advantage of the (comparatively) low expense ratio of American Funds. If, for instance, the charge is 5.25%, that means that a $1000 investment is reduced by $52.50. You pay in $1000, and end up investing only $947.50. The $52.50 typically goes to your advisor. Over time, the sales charges really add up, and become a huge drag on your returns. Check out Dan's post on another thread about the effect of fees on returns.

 

4) Lastly, you probably do not really need a financial adviser IF you are willing to spend a little time learning about investing. It's not really rocket science. I believe that the average person, with proper education that is easily available, is perfectly competent to be his/her own adviser.

 

Best of luck.

1.Yes, i paid a surrender charge to move the traveller's tsa. I knew about it already and this was the first topic he brought up before anything(why would'nt he tell me if there was'nt any potential charges).

My view of an annuity surrender charge is that there is short term cost to move the annuity or there is an even larger to cost to leave it where it is(incurring extra fees and getting no value or service to justify those fees)

2. The advisor is compensated soley through the mutual fund. Obviously, any time i make a payroll deduction, the advisor gets his small cut. I am @ a breakpoint of 2.5% (i believe) for every purchase and I FEEL that this advisor has demonstrated to me the value and service that warrants the fees.

3. Perhaps you do not need a financial advisor, but i have a life that does not allow me to construct my own financial plan. Between work, my family, and leisure time, the last thing i want to do is spend time puttting a financial plan to work.

That's what the advisor is for. Whether you care or not, i have financial issues other than the 403b that i can't do myself(college savings,insurance, estate planning,etc..)So, I let the specialists handle this. An advisor or team of advisors may not be for everyone, but it has worked well for me. Furthermore, I have seen many educators over the years become miserable trying to manage their own 403b/ira's. Many have no direction, chase performance, day trade, go on the sidelines when the markets are down,etc..

Because I care about some of them, I introduced them to my advisor(s) to help them put the pieces back together and get back on track.

Share this post


Link to post
Share on other sites

Damn...now I'm really confused.

 

I've been working one way or another in the 403(b) business for nearly 20 years. I just opened up my own little firm and have dedicated myself to the highest ethical standard. When I look at the "approved" vendor lists, I'm not seeing anything that I would feel proud to offer.

 

I was really getting excited, I am working on a plan that (hopefully) would enable me to offer funds at NAV and charge a 1% fee for ongoing tsa contributions - (not just to theTeachers, but the Janitors and the staff etc...) - Selling a load waived fund and charging 1%. but based on the posts here I would still be ripping people off! someone puts in $1000 per month and at the end of one year I would make under $120.

 

My clients "seem" happy with me. My business is growing rapidly from referalls. Educators act like they need my help and seem appreciative. (although many are looking for a quick fix and do not want to complete my questionaire so that we can establish a suitable plan) I educate my clients about the high fees of fixed and variable annuities. I show them print-outs of the NASD mutual fund expense analyzer and fully disclose how I get paid and how much I get paid. Nobody works for free.

 

I am considering charging an hourly rate...I'm just not sure if someone who can only afford to put in $100. per month can afford to also pay my fee. Should I just turn my back on these people?

 

Westerndad...you really made me think...I thought Hammerbearcat was doing the job for his clients and was being real open and honest about how he helps the clients that choose to do business with him. It seemed like you were saying that he was ripping people off...when I was thinking that, if you needed the help, that he was doing the job right. For 1%? how many professionals work for 1%?

 

Is the issue so black and white?..you're making money helping people invest so you are a crook? Everybody should invest in the index and that's it?

 

Please let me know how I can be of service to Educators.

 

**I have posted my sincere comments with respect to this board and the Educator community. I am in search of suitable solutions that make sense for all parties...I would hope that any responses would share the same.

 

Share this post


Link to post
Share on other sites

JustMurph, I'm afraid you're preaching to a crowd that won't buy what you're selling. The prevailing "wisdom" on this board is that EVERYONE is capable of handling their own investments. I disagree with that, only because I work side-by-side with people who disprove it every day. (And I'm not far removed from BEING one of those people...indeed, I still feel like I have miles to go before I am confident enough to handle my own investments.)

 

Even if I were to accept that statement as true, though, there's a second part to it: not everyone WANTS to handle their own investments, and such people are grateful for professionals such as yourself and Hammerbearcat. They're willing to pay a reasonable fee for professional assistance, because they understand that professionals such as the two of you are providing a valuable service for a reasonable fee.

 

I DO understand why some people feel the way they do about financial professionals...but in my opinion, even when such points of view are based on real-life experiences with less-than-honorable reps of certain companies, it's a huge mistake to let one bad apple spoil the barrel. Saying that financial advice is NEVER needed for 403(b) accounts is as ill-advised as saying that it's ALWAYS needed.

 

End of rant.

Share this post


Link to post
Share on other sites

FrenchTeacher,

 

I really appreciate your post.

 

It's funny, I have this fairly long questionaire that I have my clients fill out to help them create a "starting point". Once we know what our current situation is, we can start to create goals and objectives of where we want to be and when. I cannot tell you how many educators resist this effort. I also work with small businesses and Realtors (who have no problem charging 2.5% by the way) who seem much more interested in the planning process and have no problems completing the "homework" I assign them.

 

I do have some clients that really checked me out. They ask for references within the district, they have a list of really tough questions about my investment philosophy, the fees I charge, and what kind of ongoing service they can expect. These people want the help of a qualified person and are not about to trust just anyone with there hard earned money. I have had a few that were meeting with several different planners...some of them became clients, some of them obviously went with someone else. I love it! Challenge me, make me work! I am your employee - charged with earning my fee everyday.

 

But the majority just want to sign up for something quickly and I see them getting glassy-eyed as I talk to them about beta and sharpe ratio's. There's no short cuts with investment planning.

 

It's no wonder when "Timmy" shows up on campus hucking a Variable Annuity and breezes over a freakin' GMIB rider that "guaratees" them a return. Teachers will sign up within 20 minutes. (Those GMIB type riders are the only features I have seen that the more useless they become for the client - the more they cost!)

 

I think this website is making planners step up and I don't mind this message board at all if it is being fair to my profession...weeding out the "enrollers" and the weak just makes my services more valued. Every profession has them...are there some Teachers at your school that you wouldn't think of sending your kids to?

 

Please let by know how I can be of help to Educators. Or should I step aside and let Timmy stop by with the latest Index Annuity?

Share this post


Link to post
Share on other sites
Guest Sierra

Justmurph:

 

In your 20 years of advising 403(b) participants have your clients matched the returns of Bob Brinker's newsletter? What is your track record compared to Mr. Brinker's over the last 5, 10, 15, 19 years. Please furnish your returns net of your advisory fee and let's see if one would have been better off paying an annual fee for BB newsletter or paying you a personal advisory fee.

 

Peace and hope,

Joel L. Frank

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

×
×
  • Create New...