Tuesday, August 25, 2015

Plansponsor 403(b) "Balance" Article Lacks Balance

Plansponsor recently posted an article "Can k-12 403(b)s Find A Balance", it was anything but balanced.

The problems start in the first sentence:

"Some players in the K-12 403(b) plan marketplace say the traditional model—in which plan participants have individual relationships with advisers..."
No, plan participants do not have individual relationships with "advisers", they buy products from salespeople who are mostly Registered Representatives and Life Insurance Agents, not Advisers. There is a difference between a salesperson and an advisor and this article deliberately obfuscates this distinction ignoring the huge battle going on at the Department of Labor right now.

The article essentially advocates for the status quo in k-12 403(b), multiple vendors with no fiduciary oversight. The author quotes two people and both are advocates for multiple vendor systems where commission based, non-fiduciary products are distributed. Amazingly the "advisor" quoted in the article recommends annuities....of which his firm sells (surprise, surprise)...some balance.

While auto-enroll is mentioned, it is almost immediately dismissed in favor of one-on-one "advice" from salespeople - a model that has failed in spectacular fashion in k-12. Auto-enroll would certainly go a long way toward improving contribution rates.

The article even includes the ridiculous quote:

“I think depending on built-in assumptions, especially how long someone is going to hold on to investments, you can make an argument that buy-and-hold type investors will incur less fees in commission-based investment than fee-based over the long-term,” Wolff says."
I won't even waste the space dissecting what is wrong with this quote. But I will say, where is the "balance"? Why didn't Plansponsor interview someone who actually works in this market on a Fiduciary basis?

It feels like Plansponsor is just writing articles for their advertisers or want to be advertisers. There is no balance in this article whatsoever.

Scott Dauenhauer, CFP, MPAS, AIF

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