Jump to content
Dan Otter

Time To Stop Blaming Agents?

Recommended Posts

3) You say you have repeatedly advocated that people have the choice to seek out professional advice. I scanned every comment on this thread you made and I cannot find where you suggested this of your own accord. In addition, you take issue with all the various fees in investment programs. "Yes, I have indeed criticized front loads, back loads, 12b1s, surrender fees and the like." That's fine, but for those that want advice, that is how they compensate the advisor. What I fail to understand is if you don't pay these fees because you don't want the advice, why would you criticize these fees for those who do want advice? You can't have it both ways.

 

 

If you can't find any comments from westerndad advocating the presence of professional guidance for those who need it, then you need to look in more than just this single thread. This board is somewhat top-heavy with radicalized nutjobs who really DO believe that all 403(b) reps who deal annuities are borderline crooks, but westerndad isn't one of them. He's one of the more even-handed people who post here.

 

The critique of these fees (loads, 12b1s, surrender charges, etc.) that I will sign on to 100% is that way too often, customers are not made aware of their existence until it's too late. I fully agree that it's the customer's duty to ask relevant questions to determine exactly what and how he's paying for his services, but the onus should also be on the advisor to be as upfront and honest about these aspects of investing as possible (by which I DON'T mean handing a customer a 78-page prospectus and admonishing them to read it). Sadly, the lame advisors far outnumber the competent, honest and professional ones, as nearly as I can tell. If you're in that latter group, then by all means, keep up the good work. But don't turn a blind eye to your less scrupulous competitors. Because frankly, a lot of 'em suck.

Share this post


Link to post
Share on other sites

Westerndad,

 

I honestly didn't think you would go for the bait.

 

It's not fun being unfairly stereotyped is it?

 

You've done all this great work, the AP classes, motivating your students to be the best they can be and help them get into the College of their dreams and I just lumped you in with all the other Teachers.

 

It's not a good feeling is it? You're working hard in a system that is failed and I assumed that you were like some of the other teachers that just don't care.

 

I'm sure your results are fantastic and I can sense the loving person that you are from your other posts...but man you got personal fast when someone started making "wise-cracks" about your profession.

 

I LOVE THIS WEBSITE!

Share this post


Link to post
Share on other sites
Guest TR1982

OK, I got suckered in.

 

FT,

3 things.

 

1) You say in your 2 previous messages that there are a lot of disreputable people in the 403b business and they comprise a large number of people in the industry. Now, I ask you. In your wide travels of the 403b industry how many people have you personally met, examined their business actions and concluded that they were engaged in unethical conduct? 50? 100? 200? 500? There are tens of thousands of people in this industry. To make such an assertion is unfounded in any basis of fact and is ridiculous. If I were to make such a comment about the teaching profession after having known 50 teachers personally, you would say the same thing.

 

2) It amazes me that after all these comments that none of you respond to the basic point I am making. Demonizing annuity companies and their salepeople is not the source of the problems you bring up! It is your employer you should be demonizing! The annuities companies are engaged in a legitimate business and have been for decades.

 

3) Lastly, you suggest that many people may not have the choice to use a private school if they don't like the school they have and you make that same analogy for the 403b. Well, I hate to break the news to you, I have to live with the public schools in my county. If I don't like them, I have 2 choices: move to another county or send my kids to a private school at my personal expense. I would suggest the same thing to someone who doesn't like their 403b choices: change jobs or invest in an IRA instead. You all act as if someone is forcing you to put your own money in these programs. Life is sometimes like that. You don't always get what you want all the time. Accusing the people who work in this business of being unethical and disreputable just because you don't get what you want is pretty childish.

Share this post


Link to post
Share on other sites

Murph,

 

Glad you got a hoot out of my reaction. At least I was honest enough to respond to your questions and points. You, on the other hand did not bother to respond to my post of March 26 when I asked you some tough questions. That was when you were "JustMurph" instead of "Murph."

 

I'm also glad that you love this web site. Enjoy it. In fact, you and the other salesmen can "have" it. I'm out of here.

 

When I first came here, I thought that it would be one of the few places where teachers and other public sector employees could go for information and discussion without being subjected to the propaganda of "full service providers." It's not enough that we have to hear their drivel in staff lounges and watch unwitting colleagues get snookered into inappropriate investments. It's not enough that we watch our own union, the NEA, take Security Benefit's money and then send us ads touting their lousy "Valuebuilder" product. No, now we also have to put up with 403b salesmen here, too.

 

For the rest of you folks here, consider this parting s: people like Joel, Joe, Steve, and French Teacher are not selling you anything. They receive no compensation. All that they are doing is sharing their experiences and helping others to make good decisions.

 

On the other hand, people like TR and Murph are trying to sell you something. They have a financial incentive to do so.

 

Consider the difference.

 

 

Share this post


Link to post
Share on other sites
OK, I got suckered in.

 

FT,

3 things.

 

1) You say in your 2 previous messages that there are a lot of disreputable people in the 403b business and they comprise a large number of people in the industry. Now, I ask you. In your wide travels of the 403b industry how many people have you personally met, examined their business actions and concluded that they were engaged in unethical conduct? 50? 100? 200? 500? There are tens of thousands of people in this industry. To make such an assertion is unfounded in any basis of fact and is ridiculous. If I were to make such a comment about the teaching profession after having known 50 teachers personally, you would say the same thing.

 

2) It amazes me that after all these comments that none of you respond to the basic point I am making. Demonizing annuity companies and their salepeople is not the source of the problems you bring up! It is your employer you should be demonizing! The annuities companies are engaged in a legitimate business and have been for decades.

 

3) Lastly, you suggest that many people may not have the choice to use a private school if they don't like the school they have and you make that same analogy for the 403b. Well, I hate to break the news to you, I have to live with the public schools in my county. If I don't like them, I have 2 choices: move to another county or send my kids to a private school at my personal expense. I would suggest the same thing to someone who doesn't like their 403b choices: change jobs or invest in an IRA instead. You all act as if someone is forcing you to put your own money in these programs. Life is sometimes like that. You don't always get what you want all the time. Accusing the people who work in this business of being unethical and disreputable just because you don't get what you want is pretty childish.

TR, 3 things.

 

1) Overgeneralization is a bad, bad thing. But you really ought to read more of what I've written on this site before deciding that I think all 403b reps are bad people or that they do bad work. I'll happily limit my statement to read that a simple majority of the people that *I* have encountered in this industry are salespeople, not advisors. The guy I invest with is a CFP who has helped me out on a number of unrelated-to-403b financial issues in my life. Him, and guys like him, I'll tout all day long (and have done so right here).

 

2) I'm demonizing nobody. I only mention this because you address these 3 points to me personally. I don't demonize the annuity companies...hell, I'm a client of ING!

 

3) "Life is sometimes like that. You don't always get what you want all the time." True enough. But if you're going to pseudo-quote the Rolling Stones, finish the job: "But you can try sometimes...and you just might find...you get what you need." I'm no crusader on this site: I work in a district and in a state where no-load investing is available alongside annuities, and I choose to invest with an annuity company. But I have a lot of empathy for people (like, apparently, most people in the state of California) who DON'T have such options available, and I applaud their efforts to increase availability. Another thing: I'm not accusing anybody of being unethical and disreputable because I'm childish...I'm accusing them of being unethical and disreputable because I have witnessed an extraordinary amount of unethical and disreputable behavior on their part. Not EVERYBODY in the business, and certainly not the guy I have chosen to invest with...but plenty of examples of agents who stalk teachers in their classrooms, sign them up WITHOUT full disclosure of fee structure, etc...all the boogeymen that have already been talked about here.

Share this post


Link to post
Share on other sites
Guest TR1982

FT,

 

I appreciate the honesty in your reply. I am not trying to justify anybodys behavior in this industry. I fully agree that there are plenty of unethical people in this busines and I wish they would go away. Unfortunately, that probably will not be the case.

 

BTW, I am not trying to sell anybody on this site anything. To do so would be a violation of my firms policy and a compliance violation.

 

What I am trying to do is present another point of view. I hope that is welcome here.

 

Lastly, I would hope you would consider this quote from a response to an artice that appeared on this website. I was directed to it by Dan Otter.

 

"Cooperation with Employers in Compliance Activities

Just recently, I received a call from a superintendent of schools (a member of ASBO for which I authored a Compliance Guide), who had a compliance question, and also, who wanted to touch base on her district's provider approval process. She said two things that I want to share:

1. We would like to be able to offer more low/no-cost options to our employees; however, most of those providers will not agree to take responsibility for honoring the withdrawal restriction rules, reviewing QDROs, handling hardship withdrawal requests, (they want us to do that), and a few of the other things that the Service Provider Agreement requires. We used the standard service provider agreement from the NTSAA, which we believe to be very reasonable in its terms. How can we get those providers to cooperate so that we can approve a payroll slot for them?"

 

I think it's important for consumers to understand that a large part of the reason that large mutual fund complexes (both load and no load) don't want to be in the 403b market is for the reason above. It's simply not an attractive market to them given the distribution costs. This is unfortunate for those types of employers but it is a market reality.

Share this post


Link to post
Share on other sites

TR,

 

I was the one who made the white shoe salesman and the paper bag comment. For what it is worth, I am not a public school employee. In fact, I have run three broker/dealers, and in the process of registering a fourth. I hold a Charetered Financial Analyst designation. I hold the following NASD licenses, 7, 24, 27, 4, 53 and 63. I work for a firm that sepcialized in 403(b) tax compliance and administration. I have personally seen the sales practices nationwide and I stand behind my statements.

 

The 403(b) market falls under the radar screen of the NASD and SEC. I have represented my previous firms in audits and I know that they are not interested in the 403(b) market nor do they understand it. What other investment arena do regisitered reps take custody of client assets? Where else are prospectus' not distributed? Where else are gimmicks like bonus annuities and two tiered annuities, the product of choice. How about fixed annuities with 15-20% commission?

 

Most, not all, of the 403(b) sales people I have met, know very little about investing. They sales pitches are built on cliches and myths; such as, "it is not a loss until you sell." They represent themselves as financial advisors and by being bold about their recommendations, they convince their clients that it is true.

 

Finally, and most importantly, I know of good 403(b) Reps. They are in the minority. Those who are good, deserve to be paid for their services. Thus, I am not against loaded mutual funds, nor am I against annuities in some situations.

 

Mark Fischer, CFA

Share this post


Link to post
Share on other sites
Guest TR1982

Mark,

 

I appreciate your reply and disclosing your background. I don't doubt or question the veracity of your experience. I can only speak to mine.

 

I have worked for one of the major firms in this market for the past 18 years. I hold a series 6 license as well as life and health licenses in my state. In addition, I hold a series 65 license as a registered investment advisor. I have worked in the public K-12 market for my entire career.

 

Over that time I have certainly seen poorly qualified advisors and in some cases, unethical behavior. However, I would also say that my experience in the retail brokerage business has been worse. The training my firm gives new hires is as good if not better than most of the large brokerage firms I see in the industry. In fact, the retail brokerage business over the last 10 years has been the largest distributor of fixed and variable annuities on a non qualified basis. There have been far greater abuses there than in the 403b market. I just have a hard time seeing that those who work in the 403b market are any worse on balance than the investment industry in general.

 

The quality of the people my firm has hired and trained over the years is pretty good. In fact, many industry analysts have pointed that out in reviewing the firms business model.

 

Is there sleaze in our business? Sure. I just don't think it's any greater than the industry in general. I know that many in media have loved to use this market as whipping boy because it's easy pickins. Most of the firms in this market don't spend hundreds of millions of advertising dollars with the WSJ and Forbes magazine: therefore, they can go after them without worrying about their ad revenue. Ironically, it is those same firms who are so often quoted as authorities who do almost no business in this market and have given little to help these employees save for retirement. I know because I have been there. Trust me, Fidelity is not interested in the 25 year old school teacher who wants to save $25 a paycheck.

 

I think this is the story that's not being told: Investment firms all have one objective in mind: to make money for their shareholders. It doesn't matter whether they sell annuities, mutual funds, or stocks and bonds. Consumers need to understand and appreciate this.

Share this post


Link to post
Share on other sites
I think this is the story that's not being told: Investment firms all have one objective in mind: to make money for their shareholders. It doesn't matter whether they sell annuities, mutual funds, or stocks and bonds. Consumers need to understand and appreciate this.

 

When I hear someone who's in the business say this, it really gives me pause.

 

Shouldn't it be in the mission statement of investment firms SOMEWHERE that at least ONE of their objectives is to make money for their CLIENTS?

 

I'm starting to see now why so many people on this site tout TIAA-CREF with such regularity. As a non-profit, they are perhaps uniquely positioned to do just that.

 

"Investment firms all have one objective in mind: to make money for their SHAREHOLDERS." That is troubling.

Share this post


Link to post
Share on other sites

TR,

 

My experience is that on balance the 403(b) salesman is not as well trained as brokers working for wirehouses, independents or regional firms.

 

I also think there is a distinct difference between selling annuities in tax qualified accounts and non-qualified accounts. In my experience(which included signing off on annuity sales), non-qualified annuities are more often justifiable.

 

I would also point out that most 403(b) salesmen are not interested in the 25 year old teacher contributing $25 per month. In fact, many vendors will not accept $25 a month. Further, as many salesmen have personally told me, it is all about getting the rollovers. That is convincing someone to surrender one annuity, and using the proceeds to buy another. I would venture to state that in at least 50% of the cases, these transactions are in violation of NASD rules.

 

You are correct that investment firms are in business to deliver profits to the owners.

 

Mark

Share this post


Link to post
Share on other sites
Guest TR1982

FT,

 

Don't be naive. TC has the same objective as other firms. In fact, they are no longer a non profit. Their charter was revoked back in the 90s because they were able to do what for profits could do but they didn't have to play by the rules everyone else did. Congress couldn't allow that-they had to level the playing field.

 

When I say firms have one objective, that doesn't mean that they don't want their investors to make money. On the contrary, they want you to make money. They just have to turn a profit doing it. If they don't, they won't be around and your money may not either.

 

I know this seems like a harsh reality but it's no different than the education market. Every school district knows the cost of educating a child in it's system. At some point, if the system doesn't have enough money, it either has to cut expenses or raise taxes. It's as simple as that.

 

In corporate America, shareholders provide the working capital to fund business endeavors. If the business isn't profitable, shareholders will find somewhere else to invest and the source of capital will dry up. That's the free market system.

 

I say this because people need to understand the forces that drive these markets and products rather than thinking they can invest in something for nothing. You may be able to buy it cheaper but there will some tradeoff. The question is: do you like the tradeoff? If you do, then that's where you want to be.

Share this post


Link to post
Share on other sites
Don't be naive. TC has the same objective as other firms. In fact, they are no longer a non profit. Their charter was revoked back in the 90s because they were able to do what for profits could do but they didn't have to play by the rules everyone else did. Congress couldn't allow that-they had to level the playing field.

 

******************

 

I know this seems like a harsh reality but it's no different than the education market. Every school district knows the cost of educating a child in it's system. At some point, if the system doesn't have enough money, it either has to cut expenses or raise taxes. It's as simple as that.

 

 

It's not NEARLY as simple as that. School districts can't simply "cut expenses or raise taxes," at their whim...they have to do so with an eye turned towards the 800-pound gorilla in the room, aka "No Child Left Behind." That is to say, they have standards to attain (fairly arbitrary ones, at that). And if you want to know what THAT is like, picture an unfunded mandate whereby financial service firms are mandated to provide a minimum of a 7.5% return to their investors (NOT their shareholders), regardless of market conditions, and if they can't do it, they will lose their rights to have business in that state. Thanks again, Mr. Bush.

 

Interesting little news flash there about TIAA-CREF, though. There's an AWFUL lot of touting of TC that goes on here, and more than once it has been said that because they are a non-profit, they have a purity of purpose that those filthy "for-profit" companies don't have. Rebuttal, anyone? Is TIAA-CREF a nonprofit, or not?

Share this post


Link to post
Share on other sites
I'm also glad that you love this web site. Enjoy it. In fact, you and the other salesmen can "have" it. I'm out of here.

Westerndad,

 

NO NO NO!

 

I think we all Know who needs to move on:

 

JOEL! (just kidding!)

 

It's me.

 

I'm the one that got juvinile trying to prove a point and it backfired on me. I get so crazy because I'm out here "trying" to do the right thing and I lose business to the reps that sell the high fee products with some bells & whistles that clients don't really need.

 

I talk about beta's and negative correlation and some nuckle head comes in with a GMIB rider or an index annuity and the teacher thinks they found a magic pill. I'm banging my head against a wall. I get so frustrated.

 

Then I come here looking for some answers and I "feel" like I was unfairly judged. I got lumped in with all the nutjobs I compete against. I got no credit for trying to open a discussion in search of a win-win. The posts are all still there if you want to go back and look at my first experience here.

 

But it was someone else that was doing the attacking...you were being tough but cool about it.

 

Your entitled to your opinions and this board should be for you...not me. I'm not going to fix the TSA business by adding my opinions to this board. I can be part of the solution by how I run my personal business day to day.

 

So westerndad, you stay - this board needs your imput.

 

Respectfully,

 

Justin

Series 6,7,24,26,53,63,65

Share this post


Link to post
Share on other sites
Guest TR1982

Mark,

On the 403b side, annuities are simply a funding vehicle for the plan. I think there is tremendous confusion out there about this. Many people (including the NASD) raise the issue of double tax deferral by using an annuity in a qualified plan. I don't understand this. Annuities have been used in 403b plans since 1961 and have been commonly used in 401k plans as well. It is simply a funding vehicle in the plan to spread the costs across account holders in a cost efficient way. The issue is not double tax deferral. It's already in a qualified account. The issue is cost. Annuities have simply been an efficient way to give employees an investment product that supplied their needs and allowed the investment company to make a profit.

 

Most people do not understand how high the underlying distribution costs in 403b plans are(particularly voluntary plans with no employer money). Firms like TC have never been players in the K-12 market because the distribution costs for them are to high to capture significant assets. They could hire a large captive sales force but, voila!, their distribution costs would go way up. This is not a criticism of TC or any no load firm, just an acknowledgement of the market forces that come to bear.

Share this post


Link to post
Share on other sites
Guest TR1982

FT,

You make a great point about the education business. You know far more than I do. I will add, though, our industry has had tremendous regulatory requirements thrown on us in the last 5 years. Ultimately, it drives up costs which have to be passed on to customers.

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...