Tuesday, November 04, 2003

457 Plans Watch Out - Fiduciary Responsibility & Fund Scandals

Government 457(b) plans have a fiduciary responsibility associated with them and it is time that plan sponsors start realizing this. Many mutual fund companies are coming under increased scrutiny as the practices of these companies are being revealed by a probe from none other than Elliot Spitzer, the New York State Attorney General. State pension systems are pulling their money out of these companies in droves and it is time that 457(b) providers start looking at their liability in this situation. The question plan sponsors need to be asking is whether or not they want to continue to allow their plans to offer funds from the companies in question. The quick answer is "probably not." Whatever the answer is, the question better have been asked and the responses better be documented. A plan sponsor is going to have a hard time keeping funds from companies like Alger, Strong, Janus, & Putnam in the lineup. The problem is that most plan sponsors refuse to acknowledge any liability and will fail to take action, this will lead to lawsuits claiming breach of fiduciary responsibility and ultimately to more scandals. This is your warning Plan Sponsors - take charge now or expect to be charged (with breach of fiduciary responsibility).

More on this topic as it develops.....


Monday, October 20, 2003

The Retaliation Begins...The Backlash From My Advocacy Efforts Against Envoy Plan Services

Time to add another company to the 403(b) trash heap - this time it is FTJFundchoice, a relative newcomer to the 403(b) market. FTJ learned quickly about the 403(b) market and quickly sunk to the level of every other 403(b) company that is usually available on district provider lists. I made public certain documents that FTJ would have rather me keep quite about and now they are retaliating against me rescinding my selling agreement with them. The documents never should have been kept secret, but they were in order to protect the greed of some people involved. What this means is basically I can't look at client accounts that are held at FTJ. You may ask why I would want to have accounts at a company that I feel is unethical? Well, I don't have a choice. You see FTJ is connected to the hip with Envoy Plan Services in several Orange County Districts and I am forced to move money to these people. I actually think FTJ has a pretty good product, the problem is poor ethics at the top. The company is so focused at building assets that they are willing to sign agreements with companies like Envoy Plan Services that completely betray the educator and even the districts that allow them to operate. I will be posting the agreements online at www.403bretire.com in a few days for your viewing pleasure.

Ever since I started my campaign against Envoy I began getting tons of spam and viruses through e-mail, sometimes hundreds a day. My e-mail has been used for opt-in mailing lists and who knows what else. Can I say for sure that the people at Envoy and Retirement Solutions Group are behind this activity? No, but I find it curious that whenever I defeat them in something that the activity multiplies. I want to make it clear that I am not whining, I can take critiscm and childish antics just fine, I am documenting this so that people can see first hand how these companies treat people.

My internet was down all day today and I got a speeding ticket on my way to San Diego - I sure would like to blame somebody, but instead I think I will take the higher road and take a little personal responsibility. My internet was down becuase of a router I installed (though come to find out it was faulty) and I got a speeding ticket because I was speeding...... (though I was going with the flow of traffic!!).

I will continue the fight against the industry despite the fact that my allies are dropping like flies (more on this later). One day the 403(b) industry will be looked at with envy, not with spite.

I hope all is well everyone who reads this - I always enjoy the commentary that I get back, keep it coming!


Wednesday, October 15, 2003

Envoy Swings and Misses Again in San Diego

Envoy Plan Services was added to the San Diego City Schools Board Meeting Agenda late Monday afternoon, no doubt in attempt to squelch any opposition. I am happy to report that once again Envoy was shut down. The CSEA (Classified School Employees Association) led the charge along with a six page letter from myself. The CSEA was also joined by the SDEA, MetLife, and a representative from LPL. This group of people put forth a unified message that appeared to convince the Board to vote against the issue, a vote never happened as the issue was instead tabled. You can read all about the situation here on the blogger and on my website at www.403bretire.com. San Diego has made an extremely wise decision and it is my hope that they not bring up the Envoy issue again. I will post my rebuttal letter on the website shortly. This is a victory for the 6,000 participants in San Diego as well as the employees who are not yet contributing to a 403(b) plan. Please join me in thanking those people who spoke at the meeting and defeated Envoy.


Monday, October 13, 2003

Envoy Attempts To Slide Into San Diego at The Last Minute......

I was up till midnight last night reading the agenda for the Board meeting tomorrow of the San Diego City Schools, I was looking specifically to see if Envoy Plan Services was on the agenda for approval - they were not, at least that was what I thought. It turns out they have now been added at the last minute. This is what I expected, they want to get this through without opposition and the best way to do it is to not let anyone know it will be voted on.

I just found out about it and have just finished reading a statement by Gamy Rayburn and Scott Patterson, the Director of Accounting Operations and Chief Financial Officer, respectively. The document was not written (in my opinion) by either of them, it was in fact written by Robert Hornaday of Envoy Plan Services. The document is meant to be misleading and contains many inaccuracies. This report will be presented to the board as the truth (regardless of what the truth really is). The document admits that it never seeked out a competitive bid and cites Capistrano School District as one if its "happy" districts - not true.

I will keep you updated - for those in San Diego - goto the board meeting and let your voice be heard.

Sunday, October 12, 2003

School Districts - It's Your Integrity at Stake

Over the past few years I have ruffled quite a few feathers in quite a few k-12 school districts, mainly in adminstration. My quest for better supplemental retirement plans for educators has sometimes led me down the path of criticizing people in leadership positions in k-12 & community college districts. As you might imagine, this hasn't endeared me with these districts. Suddenly, a 5'8" 155 pound man becomes a "threat," and the "enemy." This line of thinking by these districts is very distressing to me because it means in some way that I have failed. I have failed to educate them enough to help them clearly understand the issues involved so that they can make a wise decision. In reality, I don't think I am the failure, the truth of the matter is that these districts NEVER allowed me the opportunity to share my thoughts or expertise. I will never target a district without first approaching management and asking them to hear me out. It is only after a district has made it clear that they don't want to hear from me that I begin the task of taking the issue to the people of their district and ultimately begin ruffling feathers.

In the past few months I have targeted quite strongly the Capistrano Unified School District. Up until 2003 I had adored this district. I loved working with educators in the district and loved working with the few people I knew on staff. However, a few very poor decisions were made by one of the leaders and I questioned them about it. I offered my expertise and guidance free of charge. I explained to them that I was a completely unbiased source as I don't accept money from anyone but my clients for the services I provide. Furthermore, my clients interest always come first. I even went and stood for four hours at the board meeting waiting for my two minutes to speak to the board and explain to them the problems they were about to face. Not a single member of the board contacted me, nor did the adminstrator who had made the final decision to hire a company by the name of Envoy Plan Services The district now believes I have put them in my crosshairs and that I want to somehow destroy them - the truth is that I only want them to do what is right for their employees. You see, it is my opinion that the district's very Integrity is at stake in this situation. Integrity is something is gained with the little decisions and if the little decisions are made without the employees interest in mind, what will happen with the big decisions?

The Capistrano Unified School District has an incredible opportunity to show what it is made of and to show the public and their employees that they have integrity even in (what they percieve) as the small decisions. It is time to simply admit they made a mistake in hiring Envoy Plan Services, correct that mistake by firing them and then do what is in the employees best interest by hiring another entity (my vote at this point is OCTFCU). There are a number of reasons why this move is best and I will get them at a later writing. The point of this message is that the decisions the districts make every effect their integrity. It is O.K. to make a mistake or a bad decision, Lord knows I make my share of mistakes and bad decisions, afterall we are only human. I am not out to make enemies or to put a "target" on anyone's back, only to see to it that my clients and the employees of this district have their voices heard and their interests protected. I know that Capistrano Unified will right this wrong as I have faith in the person who made the decision initially. Carleen Wing-Chandler made the recommendation to the board to hire Envoy and I believe she made that decisions in her heart believing it was the right one. In fact, given the facts she had Envoy must have seemed like her only choice. I believe that the victims in the case are both the employees of the distirct and the district itself - with Envoy being the responsible party. I believe Carleen was lied to by Envoy Plan Services, or at the very least not given the whole truth. Only a partial picture was painted. It is my belief that when the full picture is presented that the district will make the right decision - I have faith in them that they will do what is right. If you are from the district or are on the board and reading this, I once again extend my services free of charge to educate you on the real issues involved so that you can make a decision based upon all the facts. I don't want to sell you anything or recieve any recognition, I only want to do what is right for your employees. I don't make any money spending time on issues such as these and to be honest, they drain me and hurt the growth my business, but I have a deep belief that if I do what is right for the teachers that it will come back to me in some fashion at some point. Please contact me at 949-916-6238.

Scott Dauenhauer, CFP

Tuesday, September 23, 2003

Envoy Issued Pulled From San Diego City Schools Board Meeting - Will It reappear?

The San Diego City School board pulled the ratificiation of the Envoy Plan Services Contract from the board agenda today. I have heard that the issue has been pulled indefinetly from one source and from another source that the issue will be back on the Agenda for the next board meeting in two weeks. Which is true is anybody's guess, but I would lean toward the latter - Envoy will be back. The contract is probably worth about $600,000 and I don't see Envoy walking away without a fight regardless of if they are doing the wrong thing for teachers. I urge you to goto my website at www.403bretire.com and download the list of board members and let them know you oppose Envoy Plan Services.

Envoy To Chicken To Talk On Camera....

It appears Envoy doesn't want to talk about their services on the record in regards to their plans for San Diego City Schools. When approaced by a local news TV station they declined to give an interview. It appears they found out that I was also interviewed on the issue and they knew the truth would be told about them. The last thing Envoy wants is the truth to be told about what they are trying to do. The TV station killed the segment - but you never know, they may bring it back.

Major Spam

Ever since my talk at the San Diego City Schools board meeting two weeks ago I have been receiving an inordinate amount of spam. Sometimes up to 100 spam e-mails a day. I must have really pissed someone off that day - who on earth would do that to me?

Thursday, September 18, 2003


Well, add Fidelity to the list of companies that will not sign onto districts where Envoy Plan Services is the third party administrator. Other prominent vendors that refuse to sign on are Vanguard, American funds, TIAA-CREF, USAA, CalSTRS, and OCTFCU (local Orange County Plan). It used to be that these companies weren't available anyways, though over the past few years because of tax law changes these companies have been showing up more and more. All of the aforementioned companies are available in the San Diego City Schools, however they will be eliminated if the board chooses to hire Envoy. If you are a San Diego City Schools Teacher than I beg you to let your voice be heard - come to the board meeting this coming Tuesday at 3:00pm.

Very shortly my quarterly "Teachers Advocate" e-newsletter will be published, don't miss it. It contains several articles relating to the TPA situation in California along with a few other articles everyone should find interesting.

NYSE Head Resigns

Both CalSTRS & CalPERS sent strong letters to the New York Stock Exchange along with many other prominent members of the investment community calling for the resignation of Richard Grasso. Amazingly nobody is accusing Mr. Grasso of any wrongdoing! They simply believe he got paid to much money (about $140 million over the past 7 years). Mr. Grasso had no over control over his compensation package, but the members in charge of determining the pay package could have benefitted from keeping the boss/regulator happy with a fat salary. All in all, the boards of both CalSTRS and CalPERS did the right thing - serving as a regulator should not be so profitable. Alan Greenspan only gets paid a few hundred thousand a year (I say only!!), he is argueably much more powerful than Dick Grasso. The public is outraged over the salary fiasco and they should be, in an age where we are tyring restore confidence in all of our systems, it isn't very encouraging to find out that one of chief regulators was raking it in.

Thursday, September 11, 2003

September 11th, 2003

9/11 will be a day I never forget, not unlike most people. I remember waking up with my one month old son and giving him to his mother for his morning feeding (around 6:30am) and then going downstairs to start work. After checking a few e-mails I jumped onto a website to see how the day had started off for the stock market - to my surprise the market had not opened and the headlines read that we were under attack and that a plane had rammed into the World Trade Center. I ran into our living room to turn on the television and watched in horror as the day unfolded, I then ran upstairs to alert my wife as to what was happening. I had spent 3 weeks in WTC tower 2 just a year earlier while doing sales training for Morgan Stanley. I remember the hundreds of people that I met at the tower and feared they were all dead. I later found out that all Morgan Stanley employees had gotten out safely, except for one security guard who stayed behind to make sure there was no one left, he died a hero.

9/11 will forever be etched in my memory. Let us remember our fallen comrads on this day. God Bless.


Wednesday, September 10, 2003

San Diego Board Temporarily Tables Issue

I spoke at the San Diego City Schools Board meeting yesterday and along with a few others was able to convince the board to table the contract with Envoy Plan Services. I will shortly post a copy of my comments on my website at www.403bretire.com. It was a victory in my opinion, though the issue will be taken up again at the next board meeting on September 23rd. If you are an employee of the SDCS district please make your voice heard at the union and at the district. Let them know that you are opposed to them using Envoy Plan Services as the TPA for 403(b) and 457(b) plans.

I have stated this before, but it is worth stating again - I am not against Envoy just to pick a fight. The God's honest truth is I really don't have the time to do the advocacy work that I do, but it is imperative to my clients and to the teachers retirement that I spend time on this issue. I am against Envoy for two reasons, the first is the fee they are forcing vendors to pay them, the second are the conflicts of interest that exist. Forcing vendors to pay the fee is wrong as it will eliminate low-cost providers and force other providers to raise their fees - in the long run this hurts teachers. The second issue, conflicts of interests is one that other TPA's don't have - why pay Envoy a fee and allow them to make money off your employees through the sale of products? If you are going to pay a fee, hire a company that is completely independent of all product sales. The districts in California that have hired Envoy are going to regret it in my opinion. I think that if they want Envoy then they should pay the fee and not allow Envoy to sell products (actually Envoy's sister company sells the products) - if they would do this then I wouldn't have a problem. I have told Envoy several times that if the districts paid the fee and if they separated themselves from product sales that I wouldn't have a problem with them. I am not against the use of a TPA, simply the use of a TPA where the TPA charges vendors for its services - this harms teachers.

For those of you in San Diego, keep an eye on KFMB channel 8 - you might just see me on one of their segments!!!

A Wierd Day

September 10th is a wierd day, it is hard to believe that two years ago on this day we were all completely ignorant of what was about to happen. A lot has changed in the past two years, I don't think the world got more dangerous, I think we found out how dangerous the world actually is. I thank God every night for the blessing he has given me. I will share my thoughts on 9/11 tomorrrow.

Monday, September 08, 2003

Preparation Day

Hello all. We got the rental we were hoping to get. The yard is huge and my son will love playing in it. The house is much bigger than our current townhome and I am sure my son will love it!

The day was quite interesting, I spent most of it preparing for the San Diego City Schools board meeting tomorrow which will be televised on Channel 15 (i think (in San Diego). The local news affiliate is ready to take on the story as well. Nothing really new to report, I will keep you updated.

Mutual Fund Problems

The now famous Eliot Spitzer has begun an investigation into the mutual fund industry. Apparently a few funds were giving special perks to hedge funds that brought them lots of money. The problem was that the shareholders of the funds were the ones paying for the perks through improper trading. The lack of oversight by the mutual fund boards is to blame - there is no oversight by the boards. Most funds pay a bunch of hand picked board members huge salaries to basically sit on their hands. It is imperative that you choose a solid company to invest your money, it is imperative to have a good board watching over your money. The companies I trust most with my clients money are Dimensional Fund Advisors and Vanguard.

Thats all for today - check back on Wednesday to see how the board meeting went!!

Saturday, September 06, 2003

The Inquiry

I confronted Envoy's owner on Friday about an agreement I found out about that basically proves breach of fiduciary responsibility and poor ethics. I won't detail the agreement here yet, but perhaps in the future. After confronting Envoy via e-mail I did not recieve a response. Today I recieved a fax from the attorneys of one of the companies involved in the deal asking how I obtained the agreement. I am sure Envoy was piping mad and called over to the company to ask what the hell happened!

I actually like the company that Envoy is dealing with, though the agreement they had with Envoy makes me a little suspicious of their ethics. This company provides a very good product at a pretty reasonabe price. I haven't found another company that compares.

I recieved an e-mail from my media contact in San Diego and it appears we might have a story. She is interested in the story, though time is a factor. We are not sure when we can run it. We may run the story after the Tuesday board meeting - it all depends.

It makes me nervous any time lawyers get involved into a situation - though I am confident that my views, beliefs, and opinions are backed up with facts. If I am successful in getting rid of Envoy in San Diego (a big if) then I will have a big target on my back. I am not against Envoy, I think they will provide a fine service, I am against the way they charge their fees - it is not right. I have questions about their ethics as well and the many conflicts of interests that currently exist. I think it is a bad situation.

On a personal note - we lost the rental we were looking at getting into today. We think we have found a better one though, we will look at it tomorrow. We put out house on the market about 3 weeks ago because we felt the real estate market was getting overvalued - we sold it in three weeks and are hoping to close escrow soon. We are looking forward to renting for awhile and having a big yard for our son to run around in!

Anyway, it is late and I need my sleep - Sunday is my moring to get up with the kid!!!


Friday, September 05, 2003

San Diego Makes Poor Decision - Is There Time To Fix It

I verified today that San Diego City Schools has indeed decided to hire Envoy Plan Services. I tried to inform them why this is a mistake but they wouldn't listen. Hiring Envoy may be good for the district, but it will not be good for the teachers, they will end up with higher cost products and less money in retirement. The owner of Envoy threatened to sue me if I kept following him around and explaining the facts and consequences of his companies plans for school districts. I told him he can't sue someone for telling the truth!

Hopefully the attorney general will step in and take care of this mess, if so it will make Envoy look extremely stupid. The owner confirmed with me today that he would not be in favor of proactively seeking an opinion from the attorney general. I am not surprised to hear this as I believe the attorney general will not find favor in what Envoy is doing. You can read more about the Envoy situation at www.403bretire.com. You should read the Teachers Advocate for may.

It turns out that there is already an established entity for 403(b)/457(b) in San Diego that could take over San Diego City Schools and not affect the vendors in any way - however the district for some reason decided against this, it makes one wonder. Anyway - I will keep everyone up to date on developments.