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gschech

Valic's Last Days

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I work for a non-for-profit company and we have had Valic as our 403b vendor since 1991. I've been pushing to get rid of them for two years and it finally has paid off. We're switching to a local investment planner to set up our accounts and were going to have access to Vanguard and DFA funds. Metlife is going to be our vendor with which investments will be made through, but the planner will monitor the plan and conduct quarterly reviews with us. Even by using the planner, it's still lower cost than if we stayed with Valic. We tried to work with Valic to lower their fees, but they wouldn't budge. So, we're going to fire them. It feels real good. Good luck to all of you who are trying to get your company to change vendors. Don't give up!

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Guest TR1982

Please explain how you will have 2 layers of service/vendors on top of DFA and Vanguard funds that will be substantially less than what you what you have been paying. Also, let us know how many employees and the asset size of the case. It seems unlikely that there could be much cost savings given what you have described. More information would be appreciated.

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This is how it's going to work. The finanial planner has an agreement with Metlife for him to allow his customers to use Metlife as a custodian. Our planner favors using index funds for retirement savings and will set-up 5 different index portfolios and the employees will pick one based upon their risk tolerance level. Here's a breakdown of the expenses: Average portfolio expense will be .46%; financial planner will charge .40%; Metlife will charge .12% as the custodian. Total average fund expense for investing in one of these portfolios will be .98%.

 

The average funds expense for investing in a Valic fund is 1.83%.

 

We have a total of over 500 employees and over $6.5 million in assets.

 

Hope this helps.

 

 

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Why not cut out the middle man, metlife and go directly with Vanguard, TIAACREF or some of the other low cost no load investment firms.

 

I wonder does metlife charge any hidden fees, such as 12b-1?

 

Ira

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BTW,as I understand DFA is only available by an advisor( a no fee advisor wiuld be best), and they have some very excellent passive funds, that are not available by other mutual fund companies.... Ira.

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I thought about going with a low cost vendor like Vanguard, but we need a local rep to service our account (employees asked for this), Vanguard or TIAA-CREF are not local to us. Metlife has local reps that will service our account and they don't have any hidden fees. You are correct about the DFA funds. Only certain financial planners can get offer them. I think this is a good deal for our employees and I can't wait to get it going.

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Guest Sierra

Is the financial planner a one person operation or a firm of planners? Just what can the employees expect for the 40 bp? What happens if the er has a falling out with the planner?

 

Peace and Hope,

Joel

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Too bad that you are not going direct with a no load low cost vendor like Vanguard. The extra 0.52 that you are paying is expensive over time, and will significantly adversely affect the amount that is earned by the investor.

 

What will the local rep do, that going direct with a vendor cannot do? There is an 800 number to call at all the low cost providers. The local vendor is one step away from product proficiency.

 

Fidelity Investments, which provides 403b, has local offices at various locations in the United States.

 

Are you limited to only one vendor, or can you have more than one?

 

Ira

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Our CEO stressed that he wanted a local rep that employees can call and chat with. I spoke with Fidelity last year and they cannot offer us a local rep. We want to stick with using one vendor to make it simple for employees. If we have a falling out with the planner, Metlife will still be the custodian and will continue to service us. The planner and his staff will set-up the accounts and meet with employees individually. Metlife will also assist.

 

I would of preferred to go with Vanguard or TIAA-CREF, but this is the best we can do at this time. I'm just glad to get rid of Valic.

 

Garry

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some questions come to mind,

 

What are you going to do with Valic surrender charges if any.

 

I think that Metlife generallly has a time period that you cannot switch without surrender charges. Are you sure that that does not apply to you.

 

Generally, VAnguard's average expense for thier funds is 0.25. I wonder, are you also paying a fee for Vanguard and DFA to administer their funds, plus valic and the advisor for three, not two administrative costs.

 

Also, I believe that Vanguard has institutional funds at a lower rate for large plans. Are you getting those?

 

If you have a total of 6.5 million in 403b assets that will be switched. You will paying about 35K in extra costs a year, compounded after withdrawal. What services do you require from the financial planner for this. Perhaps you can buy direct and get a discounted rate from a fee paid financial planner, who can help employees develop custimized asset allocations.

 

 

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If you have a total of 6.5 million in 403b assets that will be switched. You will paying about 35K in extra costs a year, compounded after withdrawal. What services do you require from the financial planner for this. Perhaps you can buy direct and get a discounted rate from a fee paid financial planner, who can help employees develop custimized asset allocations.

 

$35,000 / 500+ employees = < $70 a year per employee for financial planning.

 

If the financial planner in question is worth anything at all, then this strikes me as an extremely reasonable cost.

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Hi Mr French

 

I think that probably less than the 500 employees are 403b participants. But I agreee the price is fairly low for financial planning. However, I tend to think that this advisor is admistering the plan and not doing individual financial plans. It seems to me that the CEO of the company , want to do it this way so he will no tdisrupt the company by employee 403b concerns, so he is having a middle man in place outside the company for the employees to contact(at their expense).

 

Ira

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IRA, I'll try to answer some of your questions:

 

1) We have no surrender charges with Valic. This has been confirmed.

2) We will not be paying any other fees to Vanguard or DFA other than their fund expense fees.

3) We will be using some of Vanguard's institutional funds where possible.

4) The planner will meet with employees one-on-one to develop their retirement plans (i.e. asset allocation) and will be available during the year to do reviews.

5) I feel confident in using this planner. I called a few of his accounts that are like ours and everyone has been pleased with his and Metlife's service.

 

 

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I think this is a very reasonable plan - nothing is free and this plan covers all the basis while providing access to some great funds. I love DFA and if you have access to them for less than 1% total than you are doing better than most plans in the US and most people. Congratulations on your persistence, you have done a great job.

 

ScottyD

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