Jump to content
Sign in to follow this  
detailgal

Vanguard, Service And Fiduciary Responsibility

Recommended Posts

Guest TR1982

Well, clearly this is a difficult situation. It seems, from what you've said, that there needs to be an education or advice component to satisfy her concern about fiduciary responsibility.

 

I think 2 other issues have to be considered:

 

1) I think it is doubtful that anyone in her position will buy into the idea that a no load fund company will satisfy the education or advice component. By their nature, no load fund companies are "self service". That's why they are cheap. I also think you need to accept that while you are willing to take on that task for yourself, other employees may not be comfortable doing that. This highlights some of the downside of this type of option.

 

2) Regarding a fixed interest option: Again, you may think this is not what you want, but there may be others who want it and need it. Should a 62 year old who comes to work there and only has few years to work invest all their money in equity funds? I think not. The plan has to have options that are suitable for a wide variety of employees and circumstances. Not everyone is aggressive and has 30 years to invest. This is part of what fiduciary responsiblity is about.

 

Frankly, while I think Vanguard is an acceptable option, I think you went to far the other direction. It seems to me that the answer is going to be in the middle somewhere. I think you can find an option and the TPA might be a good source of help. The difficulty here is that most companies in this market are not going to bend over backwards to accomodate a plan with less than a million dollars in assets. Unfortunately, that's a reality you may have to live with.

Share this post


Link to post
Share on other sites
Guest Joel Lee Frank

Detailgal: Tell your boss to drop ING and elect Vanguard. Limit the menu to the Vanguard Target Funds. These are "automatic pilot" investments and they cost about 22 basis points. KISS

 

Peace and hope,

Joel

Share this post


Link to post
Share on other sites
Detailgal: Tell your boss to drop ING and elect Vanguard. Limit the menu to the Vanguard Target Funds. These are "automatic pilot" investments and they cost about 22 basis points. KISS

 

Peace and hope,

Joel

 

Department of Labor tip #4: fulfill fiduciary responsibility by "diversifying plan investments."

 

Something tells me they have something more than a handful of target funds in mind when they wrote that.

Share this post


Link to post
Share on other sites
Guest Joel Lee Frank

Target funds by definition are diversified investments!! Each target fund is comprised of 4-6 asset classes.

Share this post


Link to post
Share on other sites

 

Do you allow for the notion that someone may want to invest in one of the 99% of mutual funds that are NOT target funds? And that therefore, limiting a plan to exclusively this ONE kind of fund does NOT qualify as diversifying the investments within the plan?

Share this post


Link to post
Share on other sites

Hi DG,

 

Keep up the good work to try to resolve your situation. it will come only by your fortitude and passion.

 

I went through a very similar situation with our nonprofit; high expense, annuity based, poor support, an unreasonable TPA, and little decision maker support.

 

My recommendation is to contact Vanguard, and see if they have your Corporate Tax ID number on file with a former employee's account(403b). If so, your organization may already have a separate non-qualified plan in place. If this is so just ask for the plan number and an application and behold, you've got your second plan available to you, non-qualified yes, but a low cost $15 per year expense per investment option plus the underlying fund ER.

 

If your organization does not have a plan in existance with Vanguard, find out what it will take to set up a separate non-qualified 403b plan through the company (both Vanguard and your nonprofit) This may be an around the fence and behind the barn approach, but it worked for us.

 

Many of our staff now have two plans, one a somewhat more expensive ERISA quaified 403b plan that handles the employer match as well as a separate non-qualified 403b with what I feel are better investment options and lower ER's.

 

Suggestion: Do your reseach and make it easy for your CFO and fidutiary committee to buy into your proposal. It must be a WIN-WIN!

Comparing dollars lost to expenses with dollars retained speaks alot.

 

Respectfully,

 

Warren P.

Share this post


Link to post
Share on other sites
Guest Sierra
Do you allow for the notion that someone may want to invest in one of the 99% of mutual funds that are NOT target funds? And that therefore, limiting a plan to exclusively this ONE kind of fund does NOT qualify as diversifying the investments within the plan?

I am of the opinion that limiting the menu to target funds does in fact meet the diversification requirement.

Share this post


Link to post
Share on other sites

All,

 

Thanks for your input. Interesting and helpful, both from an idea/info standpoint and in helping me gain perspective.

 

Part of my frustration stems from the fact that I am one of two people who max out the allowable contribution each year. I see my investment, on many levels, as more than that of most others here. But, then, it is relative to what one can do/afford.

 

SIERRA: While I'd hate to give up the 3% match, the non-qualified idea could be attractive/offset the add'l expenses from the TPA and the time it would take for payroll deductions of a 2nd plan. (There is in fact, an old, 2nd, non-Erisa plan with ING, no ongoing deductions to it and, other than the exec dir., its held by former employees. The cfo wants to consolidate it with the current ING plan.)

 

FT: Thanks re: "fiduciary responsibility" info

 

 

TR1982: I really can't argue against the reality that some, if not, many people are intimidated by the prospect of learning about their investments. And there are many here (and former employees who never rolled over) invest in stability of principle accounts. (As of 4/05 48% was in those account, though one-third of the money was mine.)

 

 

I want diversification options for us all. And I think diversification, for the level of investing interest of most, could come through a Target or Lifestyle-type fund.

 

QUESTION: Is a rep allowed to recommend specific funds? Our ING rep does, though she has denied it, and I see that out of 80+ funds, the majority of employees invest in 4 funds. I have been advised and have heard the rep advise others to invest in the FIXED and other accounts.

 

I have a call into my accountant to find out just how much more I'd pay in taxes if I only contributed to the 3% match. I may bail, and put the rest in my Roth and other after tax funds. I only consider this because my retirement tax rate will very likely be higher than it is now.

 

THANKS VERY MUCH! (yes, I'm shouting!)

DG

 

Share this post


Link to post
Share on other sites
Guest Joes

Remeber ING offers a fixed account Vanguard offrers nothing like this. Its a high interest guaranteed fund that pays a rate usually around 6.0%(in a normal interest rate enviorment) and has a guaranteed min of 3.5%.

 

so tell a worker who is 50 and that dosent understand the market and dosent care to that he has to put his money in an account and he could lose it, that employee will scream bloody murder if he loses 2 dollars i have seen it happen.

 

Also if you lay the preformance of all the ing sub accounts next to the vanguard funds you will see that some vanguard beat ING and some ING beat Vanguard.

 

Also unfortunately Vanguard is currently considering exiting the 403b market place effective Jan 1 2006, unless plan assets are over 10 million and all assets are moved to vanguard, this can only happen in erisa cases.

 

A professor I know just moved 356000 from vanguard to a variable annuity w/ an advisor because he was losing money and retired he called vanguard and they told him a specilist at vanguard could talk to him then they told him if he didnt have at least a million dollars invested w/ them and they couldnt help him or give him any advice what so ever.

Share this post


Link to post
Share on other sites
Guest Sierra

Remeber ING offers a fixed account Vanguard offrers nothing like this.

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

A good substitute is a stable value fund or a short-term bond fund.

Share this post


Link to post
Share on other sites
Guest TR1982

I couldn't care less. I just think it's laughable how you guys think your way is the best for everyone. Sounds like the former Soviet Union. I am sure am glad I live in America and don't have to follow your diktat!

Share this post


Link to post
Share on other sites

TR,

It’s a bit off topic but I thought it was interesting that you brought up the former Soviet Union. When I read Marx's Communist Manifesto as a kid, I never forgot that Marx wrote about eliminating the "middleman" or lady. The guy or gal who doesn't produce anything or consume (in a large scale way). It’s the sales person. Sales people run capitalism and anything called Western Civilization and what a job they did! Marx, of course, never dreamed that ruthless dictators might mess up his good ideas. Some of his good ideas are now in place in England’s socialism where he lived and wrote for much of his life.

 

That’s what we want new investors to do, eliminate the middle man. And this good idea is spreading and I am not alone in saying this. Other people smarter than I are. In this week's Barron's, there is an article on Vanguard, the author said about Vanguard: "A no-load shop with a heavy dose of index funds, Vanguard has done superbly by targeting direct investors who eschew intermediaries, such as brokers and financial advisers."

Perhaps Marx was on to something....

Steve

Share this post


Link to post
Share on other sites
Guest TR1982

I always figured you were a communist. I guess you could climb on a plane and go over there.......oh, I forgot, they threw off the shackles of communism about 10-15 years ago. Maybe China? Oh, silly me. They are becoming one of the biggest capitalist countries in the world. Damn. What's a commie to do? There just doesn't seem to be any respect for narrow minded intolerance anywhere in the world anymore. Oh well. Wait........I know! California!!!!!!!! Man, that is a bed of intolerance, political correctness, and narrow mindedness! Oh, I'm sorry. I forgot you already live there:(

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...
Sign in to follow this  

×
×
  • Create New...