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A fellow employee asked me to help them understand their 403b product and fees. They are using a financial planning company and have an advisor that put her in the following funds. It looks like the financial planning company is getting these Franklin funds through GWN securities? The fees listed are what I found online (at fund analyzer) and the advisory fee was the only fee listed on her statement. Would like to get others thoughts on this here as these fees seem excessive to me. What is a fair fee for an advisor if someone wants to use one? It looks like they are charging her .3752% quarterly.

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These are the companies that the employees are able to use currently. I am in the process of trying to get the district to change their third party administrator because the current one won't work with Fidelity or Vanguard. Of these companies listed does anyone know what might be their cheapest option? https://www.natlplan.com/forms/tsa/employer/TX/Mesquite ISD_428/403(b) Approved Providers.pdf

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I can't stress this enough, paying even $1 to a financial advisor is an absolute waste of money and using a financial advisor sets the stage for you to be taken advantage of. Having said that, if you're trying to figure out what a "fair" price is, Vanguard charges 0.3% for their "Personal Advisory Service."

Security Benefit's NEA DirectInvest is an elite 403b plan that I documented here. For a variety of reasons, Vanguard and Fidelity are better, but this is an objectively elite plan with rock bottom fees and the ability to build a fully diversified portfolio.

If they can max out their 403b then investing the remaining money in Aspire's self-directed 457b is a great idea. I documented that plan here.

It would be nice to get Vanguard added because they'd provide some competition to NEA DirectInvest, but the plans are comparable. However, it would be a real benefit to add Fidelity to compete with Aspire's 457b, there is an opportunity for some real savings there.

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Chris

He is paying loads or upfront fees plus the expense ratio. Are the advisory fees included or extra?   Anyway you look at it its a ripoff scenario. He needs to do Security NEA Direct Invest through Security Benefit . His retirement plan is benefiting everyone else first and him /her last

OR Aspire self-direct into Fidelity or Vanguard index funds is a second option . I'm  not sure if Fidelity Insurance company is associated with Fidelity Investments or not but the word insurance in their brand name makes me think it should be avoided. 

Ed is correct in his advice. Your friend doesn't need an advisor. He needs to get away from them and invest in a basic 3 fund index fund portfolio or a target retirement index fund through Fidelity or Vanguard. 

If Aspire is his only recourse I would suggest he look at the Vanguard Life strategy funds appropriate for his risk tolerance and age. I'm partly invested in them myself and have been very pleased. While the cost is a few pennies higher than a basic 3 fund index portfolio, its money well spend because the allocation is internally supervised which is well worth the cost especially if your friend is not interested in self managing his accounts.

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Tony, the advisory fees look to be extra. I agree Ed, that they don't need an advisor. I figured this advisor was ripping them off with his fees just like he put them in the expensive mutual funds, but I never used an advisor, so I didn't know what a fair price would be. This person has a lot of homework to do, but I'm trying to help. At the same time I have been in a battle with our school district to change our third party administrator to one that will work with Fidelity and Vanguard. Our current TPA purposely will not work with them. This advisor works for the company our district recommends to people. The district even sent out an email to all employees to meet with them for a "free retirement consultation". This is where they sign up people for this garbage. This example may help me show our benefits committee how much our employees are getting ripped off. I already have the figures of what we would pay with Fidelity and Vanguard, so now I have a comparison.

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20 minutes ago, ChrisC said:

I figured this advisor was ripping them off with his fees just like he put them in the expensive mutual funds, but I never used an advisor, so I didn't know what a fair price would be.

If Vanguard is the standard for a fair advisor then they'd charge you 0.30% and put you in either a three fund portfolio or a single fund-of-funds. So we're talking about a total expense of 0.36% - 0.46% or so?

This other advisor is charging 0.3752% and they're using funds that cost around 0.9%. So thats a total of 1.2752%, which is more than 3x as expensive. Then to add insult to injury they're charging 5.5% sales commission every time shares are purchased. It should be criminal.

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Just to make matters worse, you wrote that the adviser fee is per quarter which adds up to 1.5% per year! If my math is correct! But in the k12 403b world these outrageous fees, the loads and the cost of managed funds or pathetic annuities are all very typical. 

In any case, have your colleague run, don't walk, away from this adviser and anything he or she touches. 

Your follow employee is damn lucky to have you. 

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Just saying amen to the other comments.  Disgusted to see 5.50% "class A" sales loads on top of expensive funds and an advisory fee.  This sort of sales arrangement was standard in past decades, but should never occur in the present: in my opinion, it should be illegal.  Get your colleague away from this "advisor" now.

There's no need for an advisor for these purposes, as others have said.  But if she (or you) still feel the need for an advisor, make sure the person is a fiduciary who does not accept any commissions or sales fees.  An hourly charge for services would be the best arrangement.

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I did verify that they are charging .3752% quarterly for advice, so you are correct sschullo over 1.5% per year. Teacher says they never explained any of this to her. None of the mutual fund fees are listed on her statements either. She is freezing the account today and I'm now helping her with her options going forward. 

 

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1 hour ago, ChrisC said:

None of the mutual fund fees are listed on her statements either. She is freezing the account today and I'm now helping her with her options going forward. 

 

They love feeding on the unknowing  and/or novice investor. They got me too years ago. I learned the hard way but it's never too late to right the ship. Good for you that you want to help your friend. I wouldn't be too hard on your district. Most of the time its because they are just as unknowing and are getting biased advice. Good luck trying to get Vanguard. That's a dirty word among those involved in commissioned sales. I had my past advisors spit venom when i brought up the word. I thinking getting her into direct invest is a smart way to work around her mostly horrible choices.

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Can anyone tell me if Fidelity Insurance Company is a Fidelity Investments company or an unrelated entity?  If it is a Fidelity offshoot this would again confirm my basic mistrust of Fidelity's motives of offering zero expense ratios on index funds to draw investors over to their company with the hope they can then get them to buy higher cost funds at a later date or use their advisory services. I would imagine they are connected or Fidelity would challenge them using their well known brand or trade name but I may be wrong.

Although this outfit is charging loads, plus advisory fees, plus expense ratio IS very disgusting. It may be disgusting but it's totally legal. Buyer Beware.

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8 hours ago, EdLaFave said:

I can't stress this enough, paying even $1 to a financial advisor is an absolute waste of money and using a financial advisor sets the stage for you to be taken advantage of. Having said that, if you're trying to figure out what a "fair" price is, Vanguard charges 0.3% for their "Personal Advisory Service."

Security Benefit's NEA DirectInvest is an elite 403b plan that I documented here. For a variety of reasons, Vanguard and Fidelity are better, but this is an objectively elite plan with rock bottom fees and the ability to build a fully diversified portfolio.

If they can max out their 403b then investing the remaining money in Aspire's self-directed 457b is a great idea. I documented that plan here.

It would be nice to get Vanguard added because they'd provide some competition to NEA DirectInvest, but the plans are comparable. However, it would be a real benefit to add Fidelity to compete with Aspire's 457b, there is an opportunity for some real savings there.

Quick question about the NEA direct invest plan.  Do you have to be a member of NEA to enroll?  There doesn't appear to be any place on the paperwork that asks for your NEA number or something similar.  Thanks, Aaron

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I don't believe they have anything to do with Fidelity Investment company. I think this insurance company is using the word "Fidelity" in their name to try and trick people into thinking they are associated with Fidelity Investments. Notice how they use the green color on their website also.  https://www.fslins.com

It's looks kind of like McDowell's to me;-) 

 

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I think you are right. Thanks for the clarification. I do know we have a few " Lincoln" names floating around as well in financial services. Easy to get confused and not know what is what. So I guess they operate like Horace Mann. Beyond 403b products they try to load you up with other products you might not need beyond high fee annuities. Years ago a teacher signed up for a 403b with Horace Mann and left the meeting also signing up for life insurance and car insurance too. She was single and had no dependents. But she did leave with a Free pizza coupon too at least so she was happy even though she had no clue  at the time that she was taken to the cleaners.

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2 hours ago, Crawdaddy said:

Quick question about the NEA direct invest plan.  Do you have to be a member of NEA to enroll?  There doesn't appear to be any place on the paperwork that asks for your NEA number or something similar.  Thanks, Aaron

No, you don't have to have membership in the NEA. NEA Direct Invest is a Security Benefit run plan and NEA isn't involved in the on-the-ground administration. NEA doesn't need to be the district's union. Of course in some states and districts the teachers are not represented by any union. All that's necessary is that Security Benefit is on the district's 403b vendor list. 

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