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Need Help-new To 403b

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Stop bickering I need HELP:

 

WHy is it no one I have spoken to knows what a 90-24 is and why would a large company like Fidelity have my school system listed as having done business with in their 403b Dept. yet the school system says they are not on their approved list?

Who do I confront about offering different vendors?

 

Thanks for any input ("smart or otherwise")

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JustMurph,

 

Joel can certainly speak for himself, but I thought that I would do a little math with the fee schedule that you asked him to comment upon.

 

Let's look at two scenarios:

 

Scenario #1: Your investor whom you charge 1% uses loaded funds without the load. Let's be generous and say that the expense ratio for such funds is a very low .5%. This investor puts in $500 a month for 30 years, and averages an 8% return over this time period.

 

Scenario #2: A do it yourself investor uses Fidelity index funds, with expense ratios that have just been capped at .1%. This investor also puts in $500 a month for 30 years, and also averages an 8% return over this time period.

 

The result?

 

Total amount after 30 years in scenario #1: $518,249

Total amount after 30 years in scenario #2: $667,356

 

That is a difference of $149,107.

 

Again, I will be the first to agree that some folks need or want an investment adviser. I furthermore agree that advisers such as you should be fairly compensated. However, I also believe that investors need to be educated about the importance of costs in investing.

 

Costs matter.

 

 

 

 

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Guest Sierra

Murph:

 

Anyone digesting this thread for the first time will surely understand when I say that for good and obvious reasons I will not continue this conversation with you.

 

I wish you well with your 1 percent plan.

 

Peace and hope,

Joel L. Frank

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Joel,

 

Anyone reading this thread would know that you dodged my questions. You really hammered me for charging a FEE. Called into question my ethics. I make money charging my clients for advice and you do not like it. I get it.

 

You certianly did make your point that ANYONE CHARGING FOR ADVICE IS BAD...It's a point well made and one that we will not forget...let's repeat it:

 

ANYONE charging for advice = BAD.

ANYONE charging for advice = BAD.

 

Westerndad, you did a great job showing us the negative impact of fees...did the math for us. There it is again for all of us to see: charging for advice = BAD.

 

Everyone agree? Good. lets move on...

 

On to the fee schedule I listed that no-one seemed to want to give their opinion on. Not my plan to charge 1%. The other one - the one charging $125 - $200 hourly unless they want to go on retainer then charging them a flat fee of $576 to $3500 per year paid quarterly or 70bps on the first 300K. I guess that's still charging for advice isn't it?

 

ANYONE charging for advice = BAD.

 

That fee schedule I listed and asked repeatedly for your opinion on is actually the one that Scotty D or Scott Dauenhauer charges. Scott is the co-author of the 403wise Guide. So those fee's I listed are not the ones I charge they are the ones the guy that co-wrote the book for this website charges. That book sold 10,000 copies...and he's charging people just like the rest of us. Well, with one exception, he has an arrangement to share 20% of his first year fees with 403bwise! It's all fully disclosed, public information, he's not hiding it...and I'm not accusing him or this website from doing anything wrong. They are in business just like the rest of us.

 

Just like Dan Otter says about Scotty in the September 2003 issue of Teachers Talk "he truly puts his clients first". That qoute was in a reprint courtesy of...TIAA-CREF and we all know that TIAA-CREF advertises on this website. Lets dismiss that as coincidence. But all of YOU don't agree with that quote do you? Because he charges fees and:

 

ANYONE charging for advice = Bad.

 

It's marketing genius...you all come to this site, you get the book, and if you go to him for help, he charges you and kicks back 20% to 403bwise...so, in effect 403bwise is a referral source for a guy that charges fees (charging fees = Bad) and 403bwise is sharing in those fees! (fees = bad) And you were slamming ME for charging fees? Do you see the irony?

 

The sad part is...ScottyD is doing it right, he's charging a fair fee for honest work. His fees are much lower than most. I think he's someone that all reps should pattern they're practices after. but you all would slam him for charging fees right? RIGHT? Please defend him for charging fees and for this website for sharing in those fees. Tell me that somehow its okay for them to charge and share in fees. If you can somehow justify it - I will start using the exact same schedule and tell my clients that I charge the fee schedule that is endorsed by the message board on 403bwise. I can live with that.

 

What? I can't charge fees too? Just ScottyD? I'll share 20% of my first year fees with 403bwise.

 

But remember:

 

ANYONE charging for advice = Bad.

 

Lets review. The website where everyone talks about how bad it is to charge fees - is actually sharing in the fees charged to client's who are referred from 403bwise.com to the guy that co-wrote the 403bwise guide.

 

Again I am not accusing them of doing anything wrong. I charge fees too. We've already established that I am a bad person. I am also quite sure that this website is not making a profit from the fee sharing arrangement. I'm sure that the FEES this webite shares go to help keep this site operational so its all for a good cause. But the fees are still being charged and shared. AND...let's all repeat it together - ANYONE charging for advice = Bad.

 

I am now ready for you all to tell me that I'm the bad guy. That none of what I said matters...or that I'm evil or wrong to bring it up. But we need to be wise about who we are dealing with on internet message boards...403bwise.

 

I am now ready for my beating.

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Murph,

 

For what it iks worth, this forum is considered advertising. If you are a RR, any posts must be approved in advance by your B/D. I would strongly advise you not to post returns or anything else that looks like you are soliciting for clients.

 

Regarding a wrap custodial plan, do your due diligence. Over the past few years, many investors were ripped off in these plans. Make sure you know how the money is custodied, who has access to the funds and what type of insurance is provided(including the policies exclusions).

 

A 1% wrap fee would be fair, in my opinion. If you want to email me (mfischer@amdgadvisors.com), I could provide you with a plan to look at(BTW, I am in no way affiliated with the plan).

 

Mark

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Murph,

 

I won't give you a beating, but I would like to quote something that I wrote at the end of my last post. Here it is:

 

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

Again, I will be the first to agree that some folks need or want an investment adviser. I furthermore agree that advisers such as you should be fairly compensated.

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

 

So, your contention that I said that charging for advice is BAD is simply not true.

 

As for your suggested fee schedule: heck, if people are willing to pay for that, that is their business. I have merely tried to point out that costs matter. You may not like hearing this, but as my example suggested, it is true.

 

 

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Mark,

 

Thanks for your advice.

 

You are absolutly right about this forum being considered advertisement. Just not for my services.

 

I don't think anyone on this site believes that I actually think any of them would do business with me. All the referrals from this site go to someone else.

 

JM

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Murph,

 

You are correct: I don't think that anybody believes that you are advertising your services here. However, I don't think that this forum is an advertisement at all. From my perspective, it is simply a place where people can go to learn about investing, and share with others the mistakes which they might have made. Referrals from this site? That's news to me. It would not particularly bother me, either.

 

You seem quite sensitive to criticism about your positions, and that is perfectly understandable. I am just as sensitive (OK, full disclosure: probably far more) about criticism of my profession, too. But this is a forum that is dedicated to educating people about investing in 403b plans, and that includes educating people about problems that may result from using financial advisers. You should not be terribly surprised to have your views challenged. On the other hand, you should be free to express your opinions, and you should be be challenged in a respectful manner.

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Murph & others, GCHS - see the end for your answer.

 

For the record, since my name was brought up, I would like to clear up a few things. First, Dan and I did have an agreement to share 20% of any first year fees generated if clients contacted me through the site, however we discontinued that plan after only a few months as I didn't want it to appear that Dan was recommending me solely so he could recieve compensation, not because I was the best. I told Dan he could take the page down and not advertise me at all - he was kind enough to leave it up (though he can take it down at any time). I don't pay referral fees and to be quite honest, even though the page advertising me gets quite a few hits, I rarely receive a call from people.

 

As for my compensation schedule, Murph is right. I charge either an hourly fee or a retainer fee depending on the engagement. I fully disclose my fees and the impact of fees over the long term. I DO believe that individuals can benefit from investment advice, especially good investment advice. Remember, simply investing in the S & P 500 wasn't exactly the panacea everybody thought it was once large cap growth stocks came crashing down. People who were well diversified in index funds of different asset classes lost much less, if anything and had a much more consistent return - if that isn't value, I don't know what is. I fully believe in indexing, I just don't believe in buying one index. The average expense ratio of a fund I use is .30 - .40%, though it can be higher depending on the circumstances and what is available in a certain district. I don't exactly think Murph is getting rich by charging 1% - especially if he is doing so on small account - i am sure his time is more than what he earns. I think the 1% should get lower as the assets go higher and I think 1% is to high an individual is using high cost funds.

 

If the average person is paying 3% in a VA and will pay 1.3% with Murph, isn't he saving 1.7% annually and getting fully disclosed, objective advice? Fees do matter, but what matters even more is that a person is kept on track to meeting their goals. What would be worse a person with $10,000 paying .20% and not contributing because they are busy, or a person paying 1% and being fully on track to meet all their goals.

 

403bwise is not a site solely for do it yourselfers - read the book, it is a site to help people get informed and educated so they can make good decisions. Some people need advice, others don't. For those that do need advice the advisors they use should be fully disclosing all conflicts of interest that exist and all fees that may be charged (in advance) as well as the effects of those fees. Good decisions are made when all information is available - that is the principle I work on. Investment advisors are not all bad, though I do believe that the vast majority of people working in the investment industry have no clue.

 

As for Bob Brinker......Joel, you know I love you, but Bob Brinker and his market time newsletter is a bunch of baloney. Just my personal opinion. Nobody can accurately time the markets, even Warren Buffet believes this. The returns that Brinker shows may or may not be accurate, but the question is how many people actually implemted those recs in time to benefit from them (assuming their was a benefit). No offense, I just don't like Bob's newsletter (or his politics), but I do think he provides a lot of useful information in his show (ironic, I know!).

 

Ok - well that's my full disclosure.......As for the original question that was posted....I have an answer for you. Fidelity may have your school district listed as an eligible institution while your district doesn't because Fidelity might have once been an approved provider, but was dropped off the list for one reason or another. Basically the school district used to send money there, but doesn't anymore - so Fidelity shows they can accept contributions, but probably needs to sign a hold harmless agmt. The question then is will Fidelity sign the districts hold harmless and if so will the district allow them to sign it........Hopefully this solves the anomaly.

 

Murph, sounds like you are in LA - shoot me an e-mail sometime.

 

Mark - would like to hear about the platform you were referring to.

 

ScottyD

 

 

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Guest Sierra

Scott! Its good to see ya!

 

BB newsletter may be called "market timer" but in reality he is not a pure timer which as you know means for any period of time the investor is either 100 percent in cash or 100 percent in equities. It its purest form timing is asset allocation among only two asset classes: Cash or Equities with the investor being all in or all out for a distinct time period. Having said that, when BB goes "defensive" he still remains 1/3 in equities. So when he went defensive in January 2000 one third remained let's say in the 500 index which lost nearly 50 percent of its value over the succeeding 38 months...so one that followed his "timing signals" lost almost 50 percent of the 33 percent that remained in equities.

 

He is the number one newsletter around as measured by an independent rating service. Is all I know is that over the last five years he got out with 67 percent of his money in January 2000 and got back in in March 2003. Over the last 24 months someone using his "signal" has achieved a total return of nearly 48 percent as measured by the 500 index.

 

The reason I alluded to BB is because he is not just a no-load advocate recommending a bh strategy among let's say 4-5 asset classes. He supplements this important asset allocation strategy by taking out or putting in large fractions of one's money into or out of the equity markets. To me this is the 'value added' one gets by following his signals. I believe one does not need a professional advisor (RIA using no-loads not a sales rep) to invest in 4-5 asset classes as a buy and hold strategy.

 

Let's see more of each other.

 

Peace and Hope,

Joel

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Scotty,

 

Who ever said that indexing the S&P 500 alone was sufficient? It doesn't take a genius to figure that one out, though I would agree with you that some folks need help from an adviser to properly diversify. And, of course, that adviser should be properly compensated. But again, all that one has to do is invest in a target retirement fund and have all the diversification that is probably necessary.

 

Regarding the hypothetical investor who would normally pay 3% and would therefore be saving 1.7% by investing with Murph: why not pursue that logic further and have that investor go with Fidelity index funds? That would be a savings of 2.9%.

 

I certainly agree with you on the market timing issue. Nobody -- Bob Brinker, Warren Buffet, Peter Lynch -- can consistently time markets. This becomes an argument against actively managed funds, and points investors in the direction of low cost index funds.

 

That, in turn, goes to the heart of the discontent that you see from many 403b investors on this forum: we often do not have the choice of investing in true no load funds. We are forced to deal with financial advisers who, in truth, do not really have our best interests at heart. They foist lousy, costly investments on naive, unsuspecting investors. Meanwhile, those who do know a bit about investing have so little that is decent to choose from.

 

And why do we have this state of affairs? In part, because the insurance lobby has gotten its way with the legislature, leaving public sector employees at the mercy of unscrupulous salesmen. (You and Murph, by the way, do not seem to be in this category).

 

 

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Joel,

 

You are right, Brinker is not a pure timer, but his calls didn't amount to much. If his return during the past 24 months was in fact 48% over the past 24 months he has vastly trailed a diversified portfolio. From January 2003 to December 2004 a diversified portfolio did great, as follows:

 

100% Equity 79% total return

80% Eqiuty 61% total return

60% Equity 44.90% total return

 

Individual results will vary, but a well diversified portfolio containing large, small, value, growth and international has performed wonderful over the past 2 years, the past 5 years, and the past 10 years....for that matter over most time periods. The wost monthly drop over the past five years was probably in the 10% range, worst quarterly drop was 17% (again a 100% equity portfolio). The worst 1 year return was a 10% drop. Thus diversified portfolio's held their own with reasonable flucation (actually much better than expected). I don't see Brinker adding value when seen against a diversified portfolio - of course, two years is hardly a time frame that is viable.

 

It's nice talking with you as well Joel - we disagree on somethings and thats ok, I hope you are doing well!

 

Westerndad,

 

John Bogle.......although he prefers the much broader index, the Total Stock Market, not a big difference - still large, and mostly growth. Most people will not diversify on their own and do not even know how to start - for example, did you know that Small Cap Growth stocks are actually not worth investing in from a risk/return standpoint. Most people thought value stock, small stocks, and international stocks were just 4 years ago - suddenly diversification is again. It will fade as other asset classes start incredible runs (how about real estate) and attract lots of money and unwise investors. Good advisors help people maintain good behaviour and they should be doing something more than just managing money - there should be planning involved, in fact investing should be the last part of a financial plan. I am a financial planner first and an investment manager second. If an advisor can't prove his worth and add value, than yes, by all means buy the Fidelity index funds. Again, full disclosure is key.

 

I agree with most of what you said - great to have you on the board!

 

ScottyD

 

 

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Scotty,

 

Thank you for your post. You are a class act.

 

I was trying to show people that the blanket statements they use do not always fit the circumstance. Most reps just ignore this site so they can continue selling extremely high priced product. I was here trying to understand if there was a soluition that was fair to all parties. My mistake.

 

Now I'm sorry that I used you as an example. I thought you were someone that they could relate to because of your work with this site. I was hoping that when they learned that 403bwise.com was even willing to share in fees and that they were slamming me for charging them that they would see the irony in it.

 

My mistake again! They moved right passed it. You would think that they would look at this site a little differently after they found out that 403bwise was even a party to charging fees - ever.

 

There is a spirit about you that I feel I share. I'm just miles behind you... How you're pulling it off I can't quite figure out yet. I bet you make house calls, Work at night when you should be with your family, Do service work for free. I bet you sometimes lose business to some rep with a "guarantee" and a "bonus". (it has happened to me)

 

I bet you leave money on the table and discourage the client from paying the fee to rollover. Only to have a rep come in behind you with some fancy index annuity and roll it anyway!.

 

Your response to my post makes me respect the way you do business that much more.

 

Namaste,

 

JM

 

 

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Guest Sierra

From January 2003 to December 2004 a diversified portfolio did great, as follows:

 

100% Equity 79% total return

80% Eqiuty 61% total return

60% Equity 44.90% total return

=============================================

Hi Scott:

 

In order for us to compare apples to apples would you please do the calc for the 24 months ended today? I used the 500 index as a proxy for equity investment and it is up 48 percent for the last 24 months. What proxy are you using?

 

Peace and Hope,

Joel

 

 

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