Friday, October 28, 2016

NTSA Supports Extension of Fiduciary Standard to Governmental 403(b) Plans

Chris DeGrassi of NTSA
Well this is out of left field. I think Tara Siegel Bernard's New York Times articles are having an affect. Less than a week after two scathing articles about the non-ERISA 403(b) market were released, a major trade organization for 403(b) sales agents has come out in support of extending the Department of Labor's Conflict of Interest rule to government 403(b) plans.

The full release is below and can also be read here.

What is left unsaid is who in the organization supports this, many of the members of the organization were against the rule and some are currently part of trade groups that are suing to have it overturned. Further, the release didn't say that the members would be encourage to follow the DOL rule regardless of whether it was implemented for government or not.

Wednesday, August 10, 2016

Non-Profit Universites Sued Over 403(b) Programs

Image: Ray Bartkus
I was a bit surprised to see this lawsuit as I'd pretty much kill to have the providers listed in the programs being sued (Fidelity and TIAA - who are not defendants).

I'm not getting a warm and fuzzy with this lawsuit, though it may prompt system wide change, I fear that the schools will pay out a lot of money for operating programs that were, relatively speaking, pretty good.

If you think these programs are bad, you ain't seen nothing until you've dug into the world of public K-12 403(b) programs. As I dig into the lawsuits, I'll have more commentary.

Here is a short excerpt and link to the New York Times article by Tara Siegel Bernard:

Tuesday, June 28, 2016

Shark Week: Remembering AFT's "Shark Attack" 403(b) Screed

Once again it's Shark Week and I thought it might be worth remembering an article written by an American Federation of Teachers trustee way back in 2000 called Shark Attack. This is the 16th anniversary of the article.

Don Kuehn authored "Shark Attack: Investors in 403(b) plans, beware: You are especially vulnerable to predators" and it was a powerful shot across the bow of an industry hell bent on taking advantage of Teacher's good nature. The article has become legend in the 403(b) activist world and this seems like a good time to remember that original article, here is a link to it, but I've also reproduced it in full below.

I've read that the odds of an actual shark attack are 1 in 3.8 million. Considering there are about 3.8 million teachers in the United States, perhaps the analogy isn't exactly perfect, but the bite taken out of a teacher's retirement from bad products certainly is gruesome.

You'll notice a familiar name, Steve Schullo...he's still fighting, 16 years later.

Monday, June 27, 2016

Bob Toth: 403(b) and the Fiduciary Rule

Attorney Robert Toth has a quick piece on 403(b) plans and the new Department of Labor Conflict of Interest Rule. Here's an excerpt:
Non-ERISA 403(b) plans
Arguably, the plan participants most exposed to inappropriate product placement are those in public school plans.  Yet, these participants  are  excluded from much of the fiduciary rule’s protections, except where an adviser makes the recommendation to rollover those funds to an IRA. This is the same for state university 403(b) plans, as well as non-ERISA 403(b) plans for private tax exempt orgs-including “non-electing” church 403(b) plans (churches can elect to be covered by ERISA). Why? Because these plans  are not subject to ERISA, and 403(b) plans are excluded from Code Section 4975 (which is the prohibited transaction section under the Tax Code which makes the DOL rules apply to non-ERISA IRAs). This non-application really does have the potential to have a number of ancillary effects on those products, which constitute a significant percentage of the marketplace. I would also think it would serve as further incentive for the DOL to limit the application of the 403(b) “safe harbor” rules which are otherwise used to prevent ERISA’s application to certain 403(b) plans.

 My only critique is that Bob believes the Rule applies to rollover advice from a 403(b) and in a previous webcast Attorney Fred Reish said he doesn't believe it does. This will have to be sorted out.

Scott Dauenhauer, CFP, MPAS, AIF

Monday, June 13, 2016

Last Week Tonight Promotes Fiduciary

HBO's John Oliver and his Last Week Tonight show spent it's time last night taking down the Financial Advisor industry in a segment that named names and took no prisoners. Watch it below (might not be safe for work):

Scott Dauenhauer, CFP, MPAS, AIF
(and yes, a Fiduciary!)

Tuesday, June 07, 2016

Annuity Chart They Don't Want You To See

Sometimes I just type random annuity words into google to see what comes up. You'd be surprised.

This weeks treasure is a document from The Annuity Source, Inc. and it lists all the latest annuities they are selling and the commission rates.

It's marked "For Agent Use Only. Not For Consumer Distribution", but it's available on the open, here it is (18 pages of annuity products and their commission schedules):

Friday, June 03, 2016

10 Organizations That Don't Give A Sh*t About You

In the last two days, ten organizations that represent companies that sell financial products to Americans filed suit to stop the Department of Labor's Conflict of Interest rule from becoming effective.

This means that these companies and their members want to stop a regulation that would require advisors to put their client's best interest ahead of their own.

Video: The Busy Teacher's Guide To Doubling Their 403(b)'s Earning Potential

Teacher and fellow 403(b) warrior, Mark Eichenlaub recently posted a nice video about increasing your 403(b)'s earning potential. I encourage you to watch. It's great to see a new crop of 403(b) activists popping up across the country and leading their own movements. Mark recently got Fidelity add to his school district! Imagine an army of Eichenlaubs across the US working to make 403(b) plans better, the future is bright for low fees and quality providers in 403(b), but the fight is long and not nearly over.

Enjoy, Scott Dauenhauer CFP, MPAS, AIF

Wednesday, June 01, 2016

Sad: Equity Indexed Annuities Continue Setting Sales Records

Is it any surprise that a product that has little oversight, pays large commissions and offers amazing incentives to agents for selling is setting the world on fire in terms of sales?

Thursday, May 19, 2016

Maui, Cabo or Sicily...Choose Your Annuity Incentive!

Ever wonder what's behind those annuity recommendations? Here's a taste.

I've posted a few of the potential trips that annuity producers can take this year and next for selling fixed annuities.

Do you want to goto Maui? Just sell $3.5 million in annuity premium and you'll get a stay at the Ritz-Carlton! Even better, if you sell enough you could take a trip across to the next island, Lanai for three more days. Here is a video from American Equity about what an agent can expect.

You can also check out their website:

Perhaps Maui and Lanai are to far away, maybe you'd like something similar, but a little closer to home and with an advantageous exchange rate. Los Cabos, Mexico is behind door number 2! Amernican National will send you and a guest to The One and Only Pamilla resort.

Perhaps beach destinations aren't up your ally. Maybe you want a little more culture. After all, whenever one things of an annuity salesperson they think "cultured"! Well, LSW (National Life Group) has all the culture you can handle with a trip to Sicily.
Next time someone is pitching you an annuity, ask them about their compensation and what trips it might qualify them for (then watch their face turn white). This shit needs to stop.

These companies must be good because they have America or National in there name...good grief.

Scott Dauenhauer, CFP, MPAS, AIF

Teachers: Stop Replying To These Postcards

My wife gets a postcard in the mail at least every sixty days from a company that won't give its name,but the return address is "California Pension Administrator" and is located in Sacramento.

Tuesday, May 17, 2016

Friday, May 13, 2016

Dan Otter Webcast on Finance For Teachers Network

In April, Dan Otter ( joined Dave Grant for a webinar hosted by The Finance For Teachers Network. Here is the video:


Scott Dauenhauer, CFP MPAS, AIF

Tuesday, May 10, 2016

Upcoming IRS 403(b) Webcasts

Accumulated Sick and Vacation Pay Deferred to 403(b) or 457(b) Plans
June 2, 2016 - 2 p.m. Eastern Time

IRS Presenters:
Lori Stieber, Revenue Agent, Office of Federal, State and Local Governments 
Patricia A. Regetz, Revenue Agent, Office of Federal, State and Local Governments 

Learn about:
  • When is accumulated sick and vacation leave pay subject to Federal Employment Taxes
  • When can taxes be deferred and for how long?
  • What is an elective contribution?

Understanding the Universal Availability Rules in a 403(b) Retirement Plan
May 19, 2016 - 2 p.m. Eastern Time

IRS Presenters:
Bob CreMeens, Senior Program Analyst, Office of Employee Plans 
Mary Lou Bailey-Funk, Senior Internal Revenue Agent, Office of Employee Plans 
Reese Scripture, Senior Internal Revenue Agent, Office of Employee Plans 

Learn about:
  • Basic universal availability rules
  • Treatment of adjunct faculty at universities
  • Treatment of part-time, seasonal, and temporary employees
  • The 20 hours per week and the 1,000 hours rules
  • Controlled group situations and concerns
  • Mayo ruling on medical residents and its impact
  • The required notice to employees each year
  • Ways to find, fix, and avoid universal availability errors

Friday, April 22, 2016

NEA Still Not Practicing What It Preaches

The NEA Valubuster Plan Is Up To 21x The Cost of Their Own 401(k)
Fifteen years ago I exposed the National Education Association's (NEA) poor practices when it comes to the 403(b) in a piece titled "Does The NEA Practice What It Preaches?". Very little has changed. The NEA's wholly owned subsidiary NEA Member Benefits Corporation continues to operate, market and profit from the selling of 403(b) products to their members, all the while installing a top notch retirement plan for themselves.

Wednesday, April 20, 2016

NEA Making Big Bucks From Members By Selling Expensive Annuities

NEA Member Benefits Reported Annual Fees of $2.7 Million
The NEA's wholly owned subsidiary NEA Member Benefits receives a base fee of $2.7 million per year (escalating each year depending on specific unmentioned milestones) to promote the expensive NEA Valuebuilder 403(b) product(s).  

Tuesday, April 19, 2016

It's Time For The SEC To Regulate Indexed Annuities

Indexed Annuities Need More Regulation
Indexed Annuities are big business and are the path to big profits, yet they are essentially unregulated and sold by people who have no requirement to put their client's interest ahead of their own. It's time that Indexed Annuities and the people who sell them become properly regulated.

Monday, April 18, 2016

403bWise Launches Site Re-Design and Expansion

Top 403(b) education, advocacy and news site has launched a re-design and an expansion.

Since 2000, has provided unbiased information on 403(b) plans to our nation's educators. In addition, the site has helped advocate for better 403(b) plans. 403bWise is the best known 403(b) site on the internet (much to the consternation of the insurance industry) and today it just got better, with promises of additional improvements in the future.

Thursday, April 14, 2016

NTSA Continues Shameful Campaign Against California Public Employees

There is only one thing more scary to the insurance 403(b) industry than the word Fiduciary, auto-enroll.

This is my opinion.

Back in 2012 I spoke at a Town Hall in North Carolina to announce a new statewide 403(b) program that was just passed by the state legislature (yes, North Carolina did pass one law that we can all get behind). The audience was a group of insurance companies and insurance agents and they were angry, very angry. They did not like that the state wanted to offer a fiduciary based 403(b) program for teachers and they made their displeasure known.

Monday, April 11, 2016

American Retirement Association Opposed CA Auto-Enroll For Public Employees

You'd think that an organization with the word "retirement" in their name would actually support...retirement. This is not the case in California where the American Retirement Association's "premier" associate the National Tax-Deferred Savings Association (NTSA) has written a letter opposing Senate Bill 1297 which is aimed at easing the ability of public employers (including teachers) to auto-enroll their employees into quality supplemental retirement plans.

Wednesday, April 06, 2016

Teachers Now In Insurance Agents Crosshairs After DOL Rule

The long awaited Department of Labor (DOL) Conflict of Interest rule was finalized this morning.

This is a good thing. In fact, it's a great thing.

The DOL managed to do something many thought impossible in this day of special interests dominating Washington. I am proud of the DOL and wish them a sincere congrats. It was a job well done and a long, hard fight. Unfortunately, the new (some would say revolutionary) rule does not apply to non-ERISA retirement plans such as the 403(b) and 457(b), plans which millions of government employees contribute to instead of a 401(k).

Monday, April 04, 2016

Debunked ASPPA Study Used To Push Industry Agenda in Michigan

Back in 2011 I thoroughly debunked an ASPAA (now the American Retirement Association or ARA) research paper which claimed that reducing vendors in 403(b) plans leads to a drop in contributing participants.

Friday, April 01, 2016

Feeling The 403(b) Fee Bern: High Fees Strike Sanders Wife

Money magazine called me about a month ago to ask if I would go through federal disclosures for Bernie Sanders and help them write a story about the structure of the Sander's family money. I literally dropped everything, spent the next three hours examining the disclosure and briefed the reporter the following day. The resulting article is Bernie Sanders Is A De Facto Millionaire.

While I think the title is a little misleading, it's actually not the most interesting thing about the Sander's finances.

What I found surprised me.

Friday, March 18, 2016

Kiplinger 403bWise Mention: No company 401(k)? No problem

Sandra Block writes about those "other" retirement plans!

"These plans, typically offered to teachers, resemble 401(k) plans, with the same tax benefits, maximum contribution thresholds and catch-up contributions. But while private-sector plans usually contain a suite of mutual funds selected by a management committee, the primary offerings in many 403(b) plans are high-cost investments, such as equity-indexed annuities. That's because many school districts have little desire to negotiate with financial-services firms.

Still, there have been some positive developments. For example, the board of education in Montgomery County, Md., has contracted with no-load mutual fund company Fidelity Investments to administer its 403(b) plans. For advice on how to advocate for a better plan, go to In the meantime, teachers with a lackluster plan may be better off investing in a Roth IRA."

Wait, That's Legal?: The Annual American Fidelity Dance Ripoff

I come across a lot of ridiculous things in the 403(b), but some things rate off the chart, a real WTF event or moment. That's why I'm creating a new segment on the blog titled "Wait, That's Legal?".

In this first edition of WTL I'm going to focus on a situation that should be illegal. In fact, when I tell people about it they almost always come back with "wait, that's legal?" (yes, I'm very creative with my titles).

My wife's school district offers a Section 125 plan. For those not familiar, this is a plan that allows an employee to defer money pre-tax to be used for qualified medical expenses and for qualified child care. Not only is the money taken out of the paycheck on a pre-tax basis, if used for qualified expenses it is not taxed when withdrawn. It's tough to find a pre-tax and tax-free benefit and we use ours every year.

The administrator of my wife's plan is an insurance company, American Fidelity (yes, I've written about this before). It turns out that American Fidelity runs the Section 125 plan for free, meaning they don't charge the district for their services. Running a Section 125 is not cheap, so how is it that American Fidelity can do it for nothing? Coercion.

Most Americans have their health insurance premiums paid for out of their paycheck. The advantage is that if paid through a paycheck, the premiums come out pre-tax for both State and Federal taxes (it might vary on the State level). This is a perk of the tax code and one need not do anything to receive...unless of course you are an employee in my wife's school district (or other American Fidelity plans that are run in a similar fashion).

In my wife's school district every employee is assumed to NOT want their health care insurance premiums taken out pre-tax. If they want this "perk" they are forced to meet with an insurance agent from...American Fidelity. When they meet with that agent they are in a room with just that agent and the agent attempts to sell the employee any number of needless insurance policies and 403(b) products.

American Fidelity sells Accident, Cancer, Disability, Term Life Insurance, Whole Life Insurance, Youth Life Insurance and Critical Illness Insurance in addition to a terrible 403(b) product. Taxing your health insurance benefit is a ploy to get every school district employee to meet one-on-one with an American Fidelity sales rep. American Fidelity even pays for substitute to take over Teacher classes while they meet. Folks, this is nothing short of coercion.

I had the unfortunate problem of having my wife NOT meet with one of these sales reps one year and guess what, the district started taxing our health insurance benefit. A benefit that everyone receives for free and almost no one would refuse is suddenly taken away because we refused to meet with a person selling crappy insurance products during school hours.

I asked the district why anyone would want their health insurance taken out after-tax and the response was "There are employees who do not pre-tax the premium due to social security credit needs." This is not only a lame excuse, it's not true. Pre-tax health insurance has no affect on social security credits. Even if this were true, it's a tiny minority of employees who would want their health insurance taken out after-tax, they should be the ones required to meet with the agent (though a simple form would take care of it).

I believe the only reason the district forces every employee to meet with an American Fidelity sales agent is so that they can guarantee American Fidelity a steady flow of leads to sell their crappy products and make up the costs of running the Section 125 plan. In essence, the district is pimping out their employees so they won't have to pay the small expense associated with a valuable benefit.

To which my response is "Wait, that's legal?".

Every year my wife has to do the American Fidelity dance...leave her classroom in the middle of the day to march up to the front office to meet a sales agent who has no interest in protecting her best interest, solely to say "please deduct my health insurance on a pre-tax basis" and change my Section 125 elections (we can't do this online...?). This year was interesting because the sales agent didn't even ask her if she wanted her health insurance premiums taken out pre-tax, my wife reminded the agent that she wanted her premiums pre-tax and the agent said "we already took care of it!". Even the agents know it's a ploy and have it automatically marked pre-tax and they don't even take the time to ask otherwise. If that's not proof of a sales scam, I really don't know what is.

School Districts everywhere are feeding their employees to the wolves simply to pay for a program that most employees would gladly pay for out of pocket (we paid $6 per paycheck for our Section 125 plan at another district). This practice needs to stop and the state insurance commissioner needs to look into these sales tactics.

Don't believe me, here is the receipt from my wife's meeting yesterday. I also have proof of when our benefits were taken out after-tax.

This has to stop. This is not ethical and it certainly shouldn't be legal.

Scott Dauenhauer, CFP, MPAS, AIF (This is an opinion piece)

5 Top IRS Concerns for Higher Ed 403(b) Compliance

Thompson's HR Compliance Expert site recently analyzed a Higher Education compliance program that the IRS began in 2011. The top five concerns the IRS have are as follows:

Thursday, March 17, 2016

Number of Higher Education 403(b) Plans Drop

Chart from Transamerica Study
There appears to be a downward trend of the use of 403(b) plans in Higher Education institutions according to a new Transamerica study.

"Perhaps the main finding from the 2015 edition of the study is the incidence of 403(b) plans among institutions of Higher Education. For the first time, fewer than two out of three institutions (64%) sponsor a non-Roth 403(b) plan. To this day, 403(b) plans have been the dominant type of plan in the Higher Education sector (75% in 2014), but 401(k) plans have become more common and are now offered by nearly half (46%) of institutions to at least some segments of the workforce. Greater workforce mobility between corporate and Higher Education among researchers and staff, the rise of the for-profit Higher Education sector, and economic pressure to streamline retirement benefits all contribute to the trend. The rise of the 401(k) plan will likely continue into the future as Higher Education institutions compete for talent in the labor market." 

Wednesday, March 16, 2016

Money Mag: A College Administrator Reveals How Her Diligent Saving Has Paid Off

Nice profile of a college administrator by Money Magazine.

"At Fordham, she participated in the school’s mandatory 403(b), a retirement plan commonly available at nonprofit organizations and state and local governments. Her salary was soon double what it was just ten years earlier. But that wasn’t the sweetest part of her new gig.

She contributed the school-designated maximum 5% of her salary to her 403(b), which was matched by Fordham dollar-for-dollar. The school later raised its contribution to 11%, thus enabling her to save 16% of her salary in a low-cost, tax-advantaged fund."
Click to read the full article: A Mighty Saver Reaps Her Rewards

Monday, March 07, 2016

How Is This Still A Thing? Annuity Ads

John Oliver has a segment on his HBO show Last Week Tonight named “How is This Still a Thing?” and lately I’ve been scratching my head wondering the same thing about annuity advertisements.

8% Annuity Returns? Hmmm…curious.

I received an e-mail from this company (above) the other day advertising “Annuity Returns” of 8%+. If you are a consumer and you see such a high interest rate compared to what the rest of the world is paying ($7 Trillion in assets globally currently trading at negative rates) are you not likely to click to investigate further? Who wouldn’t.

Tuesday, February 23, 2016

TIAA-CREF Becomes TIAA, But Not "tee-ah"

TIAA-CREF, a company that everyone I know refer to as TIAA (or tee-ah) has now become TIAA.

But don't call them TIAA (tee-ah), no, that is a bridge to far, they are T.I.A.A. (tee-eye-ay-ay).

Note: "ay" is simply a long "a".

While there are no periods between the letters, you are not supposed to pronounce TIAA as a word, instead you are still supposed to say each letter, so much for simplification.

The CEO, Roger Ferguson says they are "shortening the name, modernizing it and making it more contemporary," but are they? Yesterday it was "tee-eye-ay-ay CREF" and today it's "tee-eye-ay-ay" with the CREF dropped. I have no idea why you have to say each letter, T...I...A....A, but then you can get away with saying CREF (pronounced...cref) without having to say those letters. Well at least you won't have to say "CREF" anymore (though CREF is not disappearing).

Yes, "tee-eye-ay-ay" is shorter than "tee-eye-ay-ay-CREF", but why not just TIAA (tee-ah), wouldn't that in reality be "shortening, modernizing...and..more contemporary"?

Monday, February 22, 2016

Isola: Why Can’t 3.6 Million Teachers Get a Group Discount on their 403(b) Plans?

My friend over at Ritholz Wealth Management, Tony Isola, is out with a new blog post today revealing the disappointing fact that Public School Employees don't get the benefit of their collective bargaining when it comes to their defined contribution 403(b) plans.

Tony elaborates:

"Companies like Walmart are able to receive massive discounts from their suppliers. The reason for this enormous competitive advantage is they buy in tremendous bulk. They maximize their gargantuan resources to get the lowest prices from their vendors.

Contrast this with teachers’ 403(b) plans, that do just the opposite. Instead of collectivizing the investment needs of millions of teachers, spindly individual contracts with plan vendors are the rule."
There is one union that I'm aware of that does use their collective power and the collective bargaining process to help teachers and that is the Wisconsin Education Association, the WEA Trust.

Read Tony's article at his blog, A Teachable Moment.

Monday, February 01, 2016

Inga Chira on CSU Transistion to Single Vendor - Fidelity

I recently met a CSU Professor who has opened a Registered Investment Advisory firm to work with Higher Education employees, her name is Inga Chira. She wrote a short piece on the transition that the Cal State system is currently undergoing from five 403(b) vendors to just one, Fidelity.

How Do We Survive All These Investment Choices... and a BONUS: Upcoming 403(b) Changes

By Inga Chira

Big changes are coming to the Cal State 403(b) plan on April 1st. 

Right now, there are FIVE 403(b) providers. In April, there will be only ONE. And that will be Fidelity. You have probably been getting letters about this if you are enrolled in the 403(b) plan. If you are not sure how to feel about it, I am going to tell you right now: you need to feel GREAT. This is especially true of people who are not currently participating in a voluntary plan but are thinking about doing it in the future. Your life will become so much easier as the result of this consolidation.

Back in November, I was wining about how I love Fidelity but how I had to decide against them, and go for the Savings Plan 401(k) because of the expensive investment options within Fidelity. Well, my friends, that is changing. This is a big enough change to make me wish I got hired about a year later and you should appreciate this big moment. A few things you need to know about the change and what it means to you:

A. Here is the link that will give you more info on the transition:

B. If you are a current participant in the 403(b), you will get information sent to your house in February.

C. There will be workshops and educational resources available on campus between February and April and you better go!

D. The investment choices are getting expanded and for someone (me), a passive investor who believes that a 403(b) account is not the place to do active management, this is really exciting. Starting in April, there will be 5 index funds you can use to build a really good diversified portfolio. All the available choices are on the website I mentioned above. Take a look and celebrate (just make sure you press the investments tab to see all the choices).

E. This consolidation is REALLY good for you because now, instead of getting sales pitches, you will be getting education advice. The 403(b) market is pretty messed up because the “advisors” you see on campus are really salesmen trying to convince you to choose their provider over the other bunch (see more on this on #4). When you only have one provider, it is so much easier to do what is best for employees. Fidelity will no longer have to put its efforts into snatching you as a customer from Voya or MetLife. Instead, it can focus on helping you understand what is going on in that 403(b) of yours. This is really good news.

F. On a related note, next time when you are power walking, listen to this podcast: in an interview with Fidelity going through the consolidation for 403(b) providers in the marketplace in general and it can explain many of the things you will be experiencing soon. I don’t want to hear that you don’t have time for this (there is always that one hour of Real Housewives of Atlanta you can trade for some 403(b) fun)!

G. The crazy idea that the more providers you can offer within your 403(b) plan, the more diversified your retirement plan is, can finally die. Having 1 or 55 providers is irrelevant; the choices you have within the provider is what matters and now you got good choices.

Wednesday, January 27, 2016

It's a F**k n' Great Life at F & G Life - Puerto Rico!
St. Regis in Puerto Rico Anyone? Just Sell F&G Annuities...Sad.

If you want a great vacation in Puerto Rico all you need to do is sell $1.5 million in annuity products from F & G Life.

Yes, that's right, for selling on average only $125,000 per month of annuities (that's maybe 1  - 5 victims) an agent can get a 4 night stay at a top resort in Bahia Beach, Puerto Rico.

It's an F'n Great Life at F & G Life! But for the teachers it's just F'n Gallows.

The Safe Income Plus Fixed Index Annuity sold by F & G, the surrender period is 11 years. The commission is 7.25% AND also may qualify for the trip featured in this post.

Let's review. An agent sells $1.5 million of this product to its base of clients and receives potentially over $100,000 in commission plus a trip to the St. Regis in Puerto Rico. That's quite an incentive to sell F & G Life Indexed Annuity products. I wonder if this product would sell at all if not for the high commission and potential for an amazing vacation? My opinion is that it wouldn't.

Do you know what's behind the recommendation of your "advisor"? This type of incentive needs to be stopped. The insurance industry is hooked on Indexed Annuity products and the commissions and incentives that come with those sales, it's their crack.

If F & G has such great annuity products, wouldn't they sell themselves? Wouldn't real advisors WANT to recommend their products?

In this low interest rate/high volatility environment the ability of an index annuity provider to support a decent rate of return to the end client is severely restricted. Add in generous commissions and luxurious trips and it's nearly impossible for the end client to get a reasonable rate of return.

Yes, index annuities are great for retirement, just not yours (they're great for the agents retirement)!

Scott Dauenhauer, CFP, MPAS, AIF

Monday, January 18, 2016

Wild West: Providing Fiduciary Advice To Public School Employees | Now Available

Wild West: Providing Fiduciary Advice to Public School Employees is now available for purchase at all major e-retailers.

After working with teachers for almost two decades and finding very few competent, fiduciary-based advisors working in the space I decided to write a book to help the industry better learn how to work with this great niche.

I titled the book Wild West due to the conditions that most teacher retirement plans operate under. The products sold and the statements made to teachers and their colleagues would be criminal if done in an ERISA plan, yet teachers are not protected by ERISA and are taken advantage of every day.

The goal of this book is to create a much broader community of fiduciary advisors serving this market. I'm not asking you to (fiduciary advisors) to work exclusively with public school employees, simply to expand your knowledge base and be part of the solution they need.

The book is less than 150 pages and only 20 short chapters. It mixes the technical with the personal and issues a strong call to action that I hope many of you will follow. Many non-advisors have asked if they should read this book (teachers, administrators, etc.) and my answer is that they should consider Teach and Retire Rich by Dan Otter first, then perhaps my book.

The Table of Contents follows:

Chapter 1           Mini-Memoir
Chapter 2           The Fiduciary Opportunity
Chapter 3           The State of the School Employees Marketplace
Chapter 4           Business Models
Chapter 5           The 403(b) Retirement Plan
Chapter 6           403(b) Products
Chapter 7           Stable Value
Chapter 8           The 457(b) Retirement Plan
Chapter 9           Other School Employee Plans
Chapter 10         Compliance Third Party Administrators
Chapter 11         Enrolling into a 403(b) or 457(b)
Chapter 12         Defined Benefit Plans
Chapter 13         Social Security & School Employees
Chapter 14         California-Specific Laws
Chapter 15         Odds & Ends
Chapter 16         Pension Maximization
Chapter 17         Professional Organizations
Chapter 18         Unions: Good, Bad and the Ugly
Chapter 19         Dan Otter

Chapter 20         A Call To Action 

Buy at Google (coming soon)

The book is $14.99 but all the proceeds goto charity and I will make the book available to colleges and universities at no cost.

I've created a website for the book at and a LinkedIn group here.

Thank you to all who have helped me over the years get this book out, you know who you are.

Scott Dauenhauer, CFP, MPAS, AIF

Thursday, January 14, 2016

Confessions of an Equity Indexed Annuity Salesperson?

Response letters to potential regulatory changes can be a gold mine. I was recently reviewing some old responses to an SEC rule that would bring Equity Indexed Annuities (EIA) under the umbrella of the SEC and require insurance agents who sell them to be registered (Registered Reps of a FINRA Broker/Dealer).

One agent for a company called #ValuTeachers wrote a response and I'm excerpting it below. Please consider that if I were to write a parody response letter to the SEC (posing as an insurance agent selling these products) it probably wouldn't look much different. The entire letter is at the end.

Claim/Statement #1

"To make the equity index annuity a security product would damage the ability of people who need this particular product to receive a fair representation of the product."

My Response:

Two things, first, no one NEEDS an EIA product, no one. Second, a sales agent that is highly motivated to sell a particular product because of its high commissions and potential luxury vacation rewards is NOT capable of providing a "fair representation" of anything. If this agent is truly concerned about representing any product fairly, he should be lobbying for the end to commissions in exchange for product sales.

Claim/Statement #2

"It would first make thousands of current Life insurance representatives have to get securities licensed to continue selling the product. Most will not do so leaving the current clients that they have stranded. This rule has not been thought through with the clients' best interest in mind. If so the SEC would realize the need to keep this an insurance product which is already being regulated by the insurance departments in the various states. If we force thousands of life insurance representatives to get licensed what if they choose not to."

My Response:

An insurance agent who advises clients on what to do with their investments, including talking about the stock market, should certainly be regulated more than the state insurance commission regulates. 

This agent claims that if forced to register as a representative or an advisor, most insurance agents would rather abandon their clients than register. What exactly does this say about such agent or agents in general (I know a lot of insurance agents who are good people and would never abandon their clients)? It says they are lazy and really don't care about their client (note, I don't believe all insurance agents are lazy, just ones that agree with this particular agent). If they really cared, they'd not abandon their clients over a specific product requirement. I find it ironic that this agent believes the SEC should have "the client's best interest in mind" but that the agent shouldn't be required to put the client's best interest first...notice he is not arguing for a fiduciary standard. If thousands of insurance agents choose not to register in order to sell EIAs, fewer EIAs will be sold and more investors/savers will have been protected.

Claim/Statement #3

"Many questions come to my attention in thinking of the client. 1. Are current insurance agents out of compliance for taking care of their current client base when they call and have questions about a product sold to them by their insurance agent but they are not securities licensed? 2. If the insurance agent is not securities licensed but continues in servicing their client and a registered representative files a complaint with the SEC because the insurance agent is discussing securities without a license how can you regulate that? 3. Should the thousands of clients that have billions of dollars in these products be penalized by having their friend and trusted advisor that is an insurance agent no longer be able to help them with their equity index annuity? 4. Will the SEC pay the surrender charges incurred by clients when a registered representative transfers them out of their current equity index annuity and into another product? 5. Will the SEC be able to monitor the activity of the sell of equity index annuities as it has shown it's lack of ability to look into it's current obligations. The headlines are evidence to this very fact! WALL STREET CRISIS! Where is the SEC now that everyone has made their money and left."

My Response:

This rambling and nonsensical statement goes after Registered Representatives as criminals and again builds a straw man. Insurance agents will not abandon their clients and source of income if forced to register, they'll register and if they don't, someone else will steal their clients. This is not an attempt to avoid needless regulation, it's an attempt to stay essentially unregulated. The insurance industry still allows what amount to kickbacks in their sales process and allowing such a system to continue is the real purpose of this agent in my opinion, a perpetuation of a corrupt system.

Claim/Statement #4

"It has been my experience in dealing with securities licensed people that the only thing that everyone needs is to put money in the market and securities. Any fixed annuity is almost below them when in fact often times people instruct them to give them a safe investment. Whoops! Insurance companies sell insurance products and broker/dealers sell securities products. This is not a time when we need to be arguing over what type of product should the equity index annuity be but whether or not the SEC a federal organization that cannot even handle it's current obligations be given authority to regulate even more that they cannot." 

My Response:

So this agent's limited experience now makes him an expert on all products sold across the industry. He presents no evidence. He does get one thing right, insurance companies sell insurance products! But B/D's sell all sorts of products, not just market based securities. If you only have an insurance license, all you can sell is fixed annuities (which are not investment, but savings products), it's the same old adage, if all you have is a hammer, everything looks like a nail. I'm certainly not going to argue that the products B/Ds sell are good for clients, but the main reason (left unspoken), in my opinion that this ValuTeachers/LSW agent doesn't want additional regulations is because it will end up cutting his commissions and all the perks received from the insurance companies. This is about the gravy train, not the regulatory train.

Claim/Statement #5

"It is evident with the current crisis on Wall Street that the SEC should spend more time regulating Wall Street and leave the insurance products to the insurance companies."

My Response:

Umm, AIG anyone? They were an insurance company, right? Nuff said.

Claim/Statement #6

"I urge you to give careful consideration to this rule and see through the mere attempt at increasing the number of people paying fees to the SEC. The product is harmless in most cases to the investor. There have been abuses as there have been in the selling of mutual funds to investors who have said they do not want any risk. The SEC handles the registered representative that does wrong and the insurance departments are handling the insurance agents that do wrong."

My Response:

The SEC doesn't regulate brokers (Registered Representatives), FINRA does (technically there is some overlap). Can anyone with a straight face really say that the state insurance departments have a handle on the sale of Equity Indexed Annuities? Anyone who reads this blog knows they don't. These products do cause harm and are mostly sold because of the high commissions and lack of any need to register combined with sales contests that send agents to Cabo, Maui, Monte Carlo...etc.


I've reprinted the letter below, I found it on the net, here. This letter provides some insights into the way EIA agents think. They are attempting to defend their turf and their income, but we need to make sure that the defense of their income doesn't come at the expense of the client. EIAs need more regulation.
Scott Dauenhauer, CFP, MPAS, AIF

Wednesday, January 06, 2016

My Congressman Is Clueless - Fiduciary Rule Response

I contacted my Congressman to let him know that he should support the Department of Labor's Fiduciary rule. His response was basically a copy and paste of an industry lobbyist, no original thinking or real explanation as to why citizen's shouldn't be protected when they receive financial advice.

Here is representative Ken Calvert's lame response:

Dear Mr. Dauenhauer, Thank you for contacting me regarding the Department of Labor's proposed rule to impose a fiduciary duty on brokerage firms. I appreciate the opportunity to respond. As you may know, two federal agencies, the Department of Labor (DOL) and Securities and Exchange Commission (SEC) are expected to release separate rules in the coming months that would change the definition of a "fiduciary" to include broker-dealers providing advice to retirement investors on a varying fee structure. This highly anticipated proposal comes nearly five years after the Obama Administration proposed a similar rule that was ultimately not adopted due to an outpouring of serious concerns over the negative impacts of the change. The current system allows low-and-moderate income investors to seek the advice of brokers on all levels of investment by providing the flexibility of a commission structure rather than an ongoing fee for service. Though it sounds like we may disagree, I believe the DOL's proposal may prove to be considerably cost-prohibitive and actually price retail-investors out of the process by taking a "one-size-fits-all" approach. Unfortunately, this proposal would do more harm than good and could make it harder for Americans to invest for retirement, college tuition, or other purposes. On February 25, 2015, Representative Ann Wagner (R-MO), introduced legislation, H.R. 1090, the Retail Investor Protection Act, following the announcement of impending rule making. H.R. 1090 would require the DOL to wait on issuing new rules until the U.S. Securities and Exchange Commission (SEC), which has primary authority and expertise on the issue, dictates recommendations. The legislation also includes some important checks and balances on the SEC's rule-making process to ensure that retail investors are not actually harmed by these new rules. I was pleased to support this legislation when it passed the House on October 27, 2015 by a vote of 245-186. Rest assured, I will keep your comments in mind moving forward in the 114th Congress.Once again, thank you for your correspondence. I hope you will continue to contact me regarding issues of importance to you and your family. In the meantime, I encourage you to visit my website at and sign up for my weekly e-newsletters. For urgent updates on critical issues, follow me on Twitter (@KenCalvert) and check out my Facebook page (Congressman Ken Calvert). Sincerely,
KEN CALVERTMember of Congress
Perhaps it should have been signed "Ken Calvert, Industry Shill". I wonder if he has seen this video from Elizabeth Warren:

One more Congressman I won't be voting for - neither should you.

Scott Dauenhauer, CFP, MPAS, AIF