It Begins: Montgomery County Public Schools Going Single Vendor

This just in via a bWise News Alert (www.403bWise.com):

The Montgomery County Board of Education approved changes to the structure of the district’s defined contribution retirement plans—403(b) and 457(b)—that are designed to save money and improve oversight and transparency for this key employee benefit.

The changes will move MCPS from its current nine vendors to one recordkeeper, effective January 1, 2016, and will offer independent education and advice to employees. The changes will also create a Defined Contribution Investment Committee that will select and oversee a menu of investment options for the plans. The results of these changes will be—

• Increased transparency: Allowing participants to clearly identify and compare various fees charged for recordkeeping, investment management, and investment advice;
• Lower fees: Lowering administrative costs in order to save participants money on fees charged for services;
• Independent financial advice: Offering plan participants the option to receive independent advice that is not tied to the sale of specific products; and
• Improved oversight: Establishing a governance structure that includes stakeholder representatives to oversee the plans and ensure compliance with applicable laws and best practices.

There will be no immediate changes to employee plans and detailed information will be shared with employees in the next year.

The changes are based on recommendations from a work group that has been considering ways to improve MCPS defined contribution plans for more than a year. All stakeholders were represented on this group, including the Montgomery County Education Association (MCEA), the Montgomery County Association of Administrators and Principals (MCAAP), the Service Employees International Union (SEIU) Local 500, as well as MCPS management and retirees. As part of its work, the group had an independent, third-party, national investment consultant (Graystone Consulting) benchmark the MCPS plans against other similar plans and best practices in the industry. The results of that benchmarking study were sent to staff in June.

The work group found that the current structure of the defined contribution plans—with nine vendors—leads to several inefficiencies, including:

• Higher fees: The smaller the number of participants for each vendor, the higher the cost to provide services. This translates to higher fees for MCPS employees, which are taken directly out of employee savings;
• More confusion for participants: Having multiple vendors requires more work on behalf of participants to learn about their investment options and requires navigating multiple websites to complete simple tasks. The different vendors also may promote their own investment products rather than providing participants the full array of investment options; and
• Less oversight: Each of the nine vendors offers a 403(b) and 457(b) plan, meaning there are 18 plans to oversee, each with different protocols and procedures. Oversight is an important part of running an efficient, effective defined contribution plan and the current structure makes it very difficult.

Staff from the Employee and Retiree Service Center (ERSC) is available to help answer any questions employees may have. A series of frequently asked questions has been posted on the ERSC website. If there are additional questions, email ersc@mcpsmd.org or call 301-517-8100.

Insensitive Insurance Ad Needs A Bucket of Ice Water Dumped On It

A rather insensitive ad for an insurance marketing organization made its way into my inbox this morning and I couldn't resist posting:

Not only is that add insensitive to those who actually suffer from all sorts of haunting diseases and syndromes, it somehow thinks that commissions are to low on insurance products today. Finally, it uses the term "Advisor" in the ad as if a person selling commission based life insurance is providing a fiduciary advisory service.

The ad also encourages insurance agents to switch to new products purely for the extra commissions.

There are so many things wrong with this ad, when will the insurance marketing industry learn that true advisors are interested in quality products that are in their client's best interest, not the agents.

Scott Dauenhauer, CFP, MPAS, AIF

NTSA Attack on Ohio Bill Follow Up

In my previous post I pointed out an absurd e-mail distributed by ASPPA's NTSA organization head Chris DeGrassi, attacking a bill in Ohio that would allow higher education institutions some limited rights to control their 403(b) programs. I thought I'd follow it up with some specifics from the bill so you can make your own decision. 

First, here is a highlight from the NTSA e-mail, sent from Chris DeGrassi (the full version can be seen here):

Amendment Summary

• This bill is a terrible piece of legislation that exempts public entities from any purchasing requirements for 403(b) plans

• 403(b) providers will be picked at the sole and absolute discretion of public institutions, rife with conflicts and inherent abuse

• This legislation will take away your business with absolutely no process or recourse

Here is the actual language from HB 483 (from HC0325X1):

Sec. 9.911. (A) An annuity contract or custodial account procured for an employee of a public institution of higher education pursuant to section 9.90 of the Revised Code shall comply with both of the following: 

(1) The annuity contract or custodial account must meet the
requirements of Internal Revenue Code section 403(b).

(2) The institution, in its sole and absolute discretion,
shall arrange for the procurement of the annuity contract or
custodial account by doing one of the following:

(a) Selecting a minimum of four providers of annuity
contracts or custodial accounts through a selection process
determined by the institution in its sole and absolute discretion,except that if fewer than four providers are available the institution shall select the number of providers available. 

(b) Subject to division (D) of this section, allowing each
eligible employee to designate a licensed agent, broker, or company as a provider. 

I ask you - does this language "exempt(s) public entities from any purchasing requirements for 403(b) plans"?

Sure looks like a stretch to me. It says nothing of the sort, in fact it requires the institution to choose one of the following two options:

A.  Select a minimum of four providers, or

B.  Any willing vendor

It doesn't force an institution to scrap the any willing vendor language and it doesn't scrap procurement procedures. 

The bill gives the institution the option to limit providers to at least four. You'll notice that the language doesn't say that the institution can choose any provider it wants without a process. The language makes it clear that there must be a procurement process ("...shall arrange for the procurement") and that there must be a "selection process." 

So how exactly can the NTSA claim that the bill "exempts public entities from any purchasing requirements for 403(b) plans"? Does the NTSA believe that higher ed institutions lack the ability and processes to conduct an ethical procurement? Are Ohio Higher Ed Institutions so inept that they need the oversight of annuity agents as represented by the NTSA to oversee their procurement?

This is absurd.

If you are part of ASPPA I urge you to contact Brian Graff and denounce this blatant attempt to misrepresent Ohio legislation and to ask why ASPPA should continue to support the NTSA organization (which represents the opposite interests of most ASPPA members in my opinion).

Scott Dauenhauer, CFP, MSFP, AIF

NTSA Attacks 403(b) Bill In Ohio In Bizarre E-Mail Missive

I'm not sure what to make of the latest attack by the NTSA (formerly the NTSAA) on good people attempting to control their 403(b) programs.

It's such a bizarre e-mail that I'm starting to wonder if they are in full implosion mode. Not only is it desperate, factually inaccurate and hostile, it's an outright threat against legislators that might normally be in their corner.

What I know for sure is that the NTSA continues to be a smaller, focused organization hell bent on keeping the status quo - expensive, retail, non-fiduciary services in k-14 and higher ed 403(b).




The following is the recent NTSA Attack Missive (e-mail), see my analysis below it:

To: Undisclosed recipients:;
Subject: Immediate Action Needed for All Ohio Members! - AmendedURGENT ACTION REQUIRED! Send this message to all of your Ohio representatives, immediately. Advisors have the power and responsibility to make this stand to protect their business and clients!
NTSA has just been informed that the TIAA Cref money grab amendment will be introduced into the Ohio MBR (House Bill 483). The action will take place this afternoon in the House Finance and Appropriations Committee.

We need all Ohio members to call the all of the following state representatives offices now.

Amstutz  (614) 466-1474
Ryan Smith (614) 466-1366
Dovilla (614) 466-4895
Duffey (614) 644-6030
Sprague (614) 466-3819
Stautberg (614) 644-6886

Amendment Summary

• This bill is a terrible piece of legislation that exempts public entities from any purchasing requirements for 403(b) plans

• 403(b) providers will be picked at the sole and absolute discretion of public institutions, rife with conflicts and inherent abuse

• This legislation will take away your business with absolutely no process or recourse

Message you need to send

• Republicans should not be complicit in legislation that kills Ohio businesses

• You are outraged that Republicans would participate in back room deals that resulted in the TIAA Cref money grab amendment in the budget

• You will tell all of your clients and business partners that you can no longer work with them because of this Republican party give away to TIAA Cref

• You will share the vote of every Republican that votes in favor of the TIAA Cref money grab legislation with all of your contacts and support Republicans in the primary that will stand with Ohio small business

• You support the Hackett Proposal HB 512 as it protects Ohio businesses. And is not a money grabbing big business back room budget amendment.

http://www.ohiohouse.gov/committee/finance-and-appropriations
This is the worst of back-room politics and we need to kill this effort to make it clear that this tactic will elicit an immediate painful response. Otherwise, we’ll just see this all over again in other states.


Chris DeGrassi
Executive Director, NTSA
cdegrassi@ntsa-net.orgw 703.516.9300
m 571.366.0975

This is certainly one of the more bizarre e-mails, but that is to be expected from the NTSA lately.

The first mistake is referring to the representatives who populate this organization as "Advisors," they are not (for the most part). This is not a slap in the face, they just aren't advisors, they are salespeople (this is not a judgement, only a statement of fact - this doesn't mean they couldn't become adivosrs).

You'll also notice that the NTSA is purposely disrespecting the financial services organization TIAA-CREF by not capitalizing CREF (which they know is capitalized).

Almost every claim by Degrassi and the NTSA is false.

The bill does not exempt public entities from "any purchasing requirements" and why shouldn't a public institution be able to manage who their 403(b) providers are?

This bill doesn't actually allow such "sole and absolute discretion" even though it should (when coupled by a strong procurement process and fiduciary responsibility).

The only true statement is that the "legislation will take away your business," but even that is false. I'm unaware of any "advisor" who would lose their business if a public employer acted in a responsible and fiduciary manner. A real advisor has a strong relationship with his clients, one that is NOT dependent on the ability to sell a high-cost, high-commission product.

The attack on the Republicans is even more bizarre as they are usually the strongest defenders of the NTSA and pissing them off could lose any goodwill the NTSA might have had. The only back-room politics going on is with the NTSA attempting to disparage, denigrate, demonize and defame people who have worked hard for years to bring a compromise bill up for debate.

The last dying breaths of the NTSA are gasping and this e-mail is proof. Unfortunately, the high-commission annuity providers who back the organization are alive and well, see here and here.

Scott Dauenhauer, CFP, MPAS, AIF

Alert Teachers - Want to goto Bora Bora? Quit and Sell Annuities From Midland

My wife and I have always dreamed of vacationing in Bora Bora (especially after watching the movie Couples Retreat). When I came across the following incentive from annuity and insurance company Midland National I figured out how I could do it. My "School Teacher" wife need only quit teaching and start selling Midland's annuity products. She need only sell $3.5 million in premium to qualify for a trip to Bora Bora.

Next time someone is trying to sell you an Equity or Fixed Index Annuity for your 403(b) program you should inquire as to what their incentives are to sell them.

Of course I was joking with the headline, don't quite teaching to hawk annuities to unsuspecting school employees. This document wasn't uncovered in some secret sting, it was available on the open internet for anyone to seek.

  MNL Bora Bora 2014 by Scott Dauenhauer, CFP, MSFP, AIF

Scott Dauenhauer, CFP, MSFP, AIF

CalSTRS Selects ING U.S. as New Recordkeeper for Defined Contribution Program

NEWS RELEASE APRIL 3, 2014 RICARDO DURAN

CalSTRS Selects ING U.S. as New Recordkeeper for Defined Contribution Program

ING U.S., which is rebranding as Voya Financial, is under contract for the next eight years

WEST SACRAMENTO, Calif. – The Teachers’ Retirement Board today selected ING U.S. as the new third party administrator, commonly called the recordkeeper, for the California State Teachers’ Retirement System supplementary savings plan, known as Pension2^®.

Pension2 is the defined contribution part of the CalSTRS hybrid retirement system that also includes the traditional defined benefit pension and the defined benefit supplement, which is a cash balance program.

ING U.S., which will rebrand as Voya Financial in 2014, will take on its new role effective in the late summer or fall of 2014 on an eight-year contract with two one-year extension options. Specific contract terms are now under negotiation. The program’s current contract has been with TIAA-CREF.

“California educators have traditionally been under enrolled in low-cost, high-quality supplemental retirement savings options. Our desire is to increase participation by offering a competitive product that will enhance overall retirement security,” said CalSTRS Chief Executive Officer Jack Ehnes. “In a marketplace that offers CalSTRS members so many varied choices, some of which may not be in their best interest, we want educators to look seriously at the products and services we will be delivering with ING U.S.—soon to be known as Voya Financial—as our partner.” 

The 2013 CalSTRS “Retirement Readiness Assessment Report” found that nearly three-quarters of working members are concerned about being able to afford medical expenses in retirement, while 40 percent of retired members reported spending more than expected on health care in retirement. The report is a comprehensive survey of the financial standing and retirement planning of California’s 653,000 active and retired CalSTRS members.

“Significant costs, such as healthcare, will be a fact of retirement life for our members. Having options, such as those offered through Pension2, allow members to prepare for these contingencies while they have the time to invest and grow their resources,” Mr. Ehnes added.

ING U.S. was among three bidders for the contract along with the incumbent, TIAA-CREF, and JEM Resource Partners. Since 1995, CalSTRS has offered its members, along with classified employees of CalSTRS-covered employers, the opportunity to invest through pre- or post-tax payroll deductions in low cost, flexible 403(b), Roth 403(b) and 457(b) plans for additional retirement savings. Pension2 currently has more than 11,700 participants and manages assets totaling more than $558.8 million.

“We issued the request for proposals in October, 2013 with the thought of offering our participants, if necessary, a seamless transition from one provider to the next,” said CalSTRS Director of Defined Contribution Solutions Sandy Blair. “With this contract, we plan to deliver on that expectation while expanding our program and offering our participants improved customer service.”

“We’re honored that CalSTRS has placed its trust in our business and our people,” said Jamie Ohl, president of Tax-Exempt Markets for ING U.S. Retirement Solutions. “This is a testament to the strength of our team and the commitment we have to providing clients—including some of the largest retirement systems in the country—with the integrated capabilities and distinctive value they want for the long-term. As an advocate for greater retirement readiness, ING U.S—soon to be known as Voya Financial—looks forward to helping guide the members of the CalSTRS supplemental savings plan on their journey to and through retirement.”

About CalSTRS

The California State Teachers’ Retirement System, with a portfolio valued at $180.8 billion as of February 28, 2014, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s 868,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.

About ING U.S.

ING U.S. (NYSE: VOYA), which will rebrand as Voya Financial in 2014, is a premier retirement, investment and insurance company serving the financial needs of approximately 13 million individual and institutional customers in the United States. The company’s vision is to be America’s Retirement Company and its guiding principle is centered on solving the most daunting financial challenge facing Americans today—retirement readiness.  Working directly with clients and through a broad group of financial intermediaries, independent producers, affiliated advisors and dedicated sales specialists, ING U.S. provides a comprehensive portfolio of asset accumulation, asset protection and asset distribution products and services.  With a dedicated workforce of approximately 7,000 employees, ING U.S. is grounded in a clear mission to make a secure financial future possible—one person, one family, one institution at a time. For more information, visit http://ing.us.  Follow ING U.S. on Twitter @ING_USA and Facebook.

North Carolina Launches Statewide 403(b) Program

I was the consultant for the Request for Proposal on this plan (with SST Benefits Consultants) and think it's going to be great.

From the Triangle Business Journal, Jason deBruyn:

"State Treasurer Janet Cowell and TIAA-CREF have launched the N.C. Public School Teachers’ and Professional Educators’ Investment Plan, a statewide, supplemental 403(b) retirement program for the state’s public K-12 educators.

The program offers 27 well-diversified, low-cost investment choices and a variety of services designed to help teachers prepare for retirement, according to Cowell’s office. Research shows that educators who participate in low-fee plans can accumulate significantly more retirement savings versus those in plans with higher fees.

“I’m excited that we’re launching a high-quality, low-cost supplemental retirement plan for teachers and educators across the state,” Cowell said in a statement. “This statewide plan will help teachers and education employees boost their retirement savings.”
All of North Carolina’s 115 school districts will have the option to participate in the new program. In most cases, districts will also be able to take advantage of lower fees, as the new program is designed so that fees decline as more school districts enroll and asset levels increase. 

The 403(b) program was authorized by the General Assembly in 2012 and approved by the Supplemental Retirement Plans Board of Trustees last week. The N.C. Department of State Treasurer is the program administrator, and TIAA-CREF will be the program provider."

 Scott Dauenhauer, CFP, MPAS, AIF

CalSTRS Staff Recommends Record Keeping Contract to be Awarded to Voya Financial

The California State Teachers' Retirement System posted an intent to award an eight year record keeping contract to Voya Financial, an ING company to serve the 403(b) and 457(b) run by the state. The staff has made the recommendation and it is subject to board approval on April 3rd.

Scott Dauenhauer

Top 403(b) Providers In Major School District Still Have 18% Surrender Charge

The following is my professional opinion as an Independent Fiduciary:

403bCompare screenshot Midland  Surrender Charge

Would you believe me if I told you that two of the top providers of 403(b) products in a major school district offered products that had surrender charges as high as 18% and surrender periods as long as 14 years? I'm still in shock myself (and that takes a lot to do).

Midland National Life offers a product called the Capstone in California and it has a surrender period of up to 14 years with a surrender charges of up to 18%.

Life Insurance of the Southwest, part of the National Life Group offers a product called the SecurePlus Platinum (how's that for a name) that has a 15 year surrender period and surrender charges of 14%.

These two companies are not small providers, they are the top two by assets.

This is what educators get when school employers are not allowed to control their 403(b) programs. These products would never fly in an ERISA plan and would never be sold by a fiduciary, yet everyday school teachers are sold products with excessive surrender periods and excessive surrender charges.

These are the products that ASPPA's sub-association, the NTSA fight to keep available to our nation's school employees. This is wrong.

You can check the products out on 403bCompare by clicking on the company name above.

Scott Dauenhauer CFP, MSFP, AIF

What's Behind That Fixed Indexed Annuity Sale? Great American Edition

Teachers and School Employees, are you wondering what's behind that Equity Indexed Annuity recommendation and wondering why you are feeling so much pressure to start contributing to that 403(b) with a Great American agent, perhaps the following will enlighten you:

Through May 2, 2014 Great American reps get an extra $50 per application submitted and if they submit 25 applications they get another $500. This is on top of their commissions and if that wasn't enough incentive, they'll earn points that they can use to purchase perks that range from "luxury vacations to today's hottest electronics."

Are Great American products in your best interest? It doesn't matter, they only need to be "suitable" for the rep to sell them, they do not owe you any Fiduciary responsibility.

Next time you are approached about buying a 403(b) from a Great American rep you should ask them what perk they are qualifying for by you signing up.

Scott Dauenhauer, CFP, MPAS, AIF

For the folks at Great American who are upset with me posting the screenshot, it was unprotected and available on the web with just a simple search. Here's the 

link: https://www.write403bdirect.com/library/rewards/benefits/earncashforeveryapp 

Enough With The Ridiculous Rollover Process Already

It's no secret that I use this blog to vent about my dealings with the 403(b) industry...today I present the ridiculous obstacles placed in front of employees attempting to rollover their money.

I helped a client start a 457(b) in local school district and when the client retired was helping to rollover those funds to consolidate (and get access to better options).  I inquired with the folks at the district (who were easy to work with and great people) and they gave me a number to call.

Instead of calling the number I helped the client log into her account to attempt to find the rollover form...nothing there.  We could get a distribution form to take a withdrawal, but not a form to rollover...weird.

Next step is to make a quick call.  I figured that I could get the form myself without involving my client since the form is blank (contains zero client information) and is associated with a government plan (thus technically subject California's Public Records Act).  I've done this with dozens of other companies and rarely run into an instances where I can't get such simple documentation.  I was wrong.

The representative would not e-mail me the form and could not answer why the form was not on their website (even behind the client's secure login).  I was told it was for security reasons that I could not be sent a blank rollover form.  What?  It's a breach of security for a financial services company to e-mail me a blank document associated with a public employer?  What possible security breach could occur?

My response was a bit smartass, but clearly frustrated - "exactly what privacy or security breach is occurring if you send me a blank document that allows me to help my client rollover their funds?"

The response I got was that it was just policy and that if I was sent the document it would be a breach of security, if we wanted the document my client had to be on a phone call with a representative or visit an office of the company.

I had to respond to this nonsense.  I asked "when my client receives the document and shares it with me would there be a security breach?" - the answer was no.  This was perplexing to me.  A blank document sent to me by the company is a security breach, but if shared by my client isn't.  Remember, the document has ZERO personal information on it and is even generic in regards to the employer. If it's a breach for the company to send me the document it should be a breach for me to even have possession of it.

I knew I had hit a brick wall and scheduled a three-way conference with my client and the company.   After being on hold for 20 minutes (it was the day after MLK day) we were told that the representative could not help us, if we wanted a "rollover" form we would need to be transferred to a special unit. Another few minutes go by and we get a person on the line.  The rep we were transferred to was clearly trained on how to retain the assets or to get the client to roll them over to the company's own product(s) and I finally had to cut him off and tell him "It's none of your business WHY my client is rolling over their money, they've requested the form, please e-mail."  Finally, the rep relented and said he would e-mail it, but it could take up to 48 hours as it had to be "approved"....really?

My client finally received the form later that day and e-mailed it to me (which apparently is not a security breach).

For those of you interested in the Rollover form, I've posted it below.

  VL_19724_0510_1_1

NTSAA Changes Name to NTSA

In a strange announcement the National Tax-Sheltered Account Association (NTSAA) has decided to change its name to the National Tax-Deferred Savings Association (NTSA).  No word on why it wasn't the NTDSA.

The rationale behind this change was they didn't want to be mixed up with an association that might represent off-shore tax-shelters.  Evidently this is a problem for them.

Interestingly enough, there was no change in the mission - even though the term "Tax-Deferred" certainly covers a vastly larger number of product offerings.

The mission still seems to be protecting insurance agent's product sales in k-12 employer defined contribution programs.  The theme for the upcoming conference in June is "Keep Choice Alive." There is a refusal to accept any behavioral research into the organization's mission (this is my opinion based on the evidence),  the same old "offer as many products as possible" mission is front and center.

With that being said, a quick review of their upcoming summit is actually encouraging.  There are several good sessions with many respected speakers (Michael Kitces being one of them).  I don't see some of the normal sleazy sessions that I've attended in the past.  I have to give Chris DeGrassi credit, the agenda looks good - even if the theme is mostly living in the past.  Still, there are much better conferences for Advisors to spend their money on, but if you are in the DC area in June and have the cash - the conference looks like a nice place to be for a few days.

I maintain the opinion that the NTSSA (or the NTSA) is protecting a business model that is no longer viable and not in the best interests of millions of school employees, but they're more than welcome to continue attempting to convince people of it.

Scott Dauenhauer CFP, AIF, MPAS

RIP Jack Moscowitz - A True Teacher's Advocate

I just received word that LAUSD Committee member, Jack Moscowitz has passed away, unexpectedly.  

He will be sorely missed by everyone.

I've included this video from an LAUSD oversight committee, it shows the beginning of a meeting (Jack introduces himself about 30 seconds in) that Jack chaired - demonstrating his humor, compassion and intellect.

Thank you for being a tireless advocate for Educators, Jack, may you Rest In Peace.

Services will be held Thursday, December 12,2013 at 10 am, Mount Sinai

Memorial Parks and Mortuaries - Hollywood Hills, (800) 600-0076. In lieu of

flowers donation may be made to the Association of Jewish Educators or

Associated Administrators of Los Angeles.

From Steve Schullo - Fellow Committee Member (and friend of Jack) - Blog Post.

All of us on the 457b/403b over­sight advi­sory com­mit­tee are shocked and sad­dened by Jack Moscowitz’s sud­den death.

The retired prin­ci­pal of one of the biggest high schools in our dis­trict, Los Ange­les Uni­fied School Dis­trict, Jack was a nat­ural leader and our committee’s alter­nate Chair. He rep­re­sented the admin­is­tra­tors’ union from the onset of our com­mit­tee in 2006. I had the priv­i­lege of sit­ting with Jack on the ad hoc com­mit­tees to select our finan­cial con­sul­tant and our 457b TPA. He was eager to learn, asked ques­tions and chal­lenged other com­mit­tee mem­bers to be clear with motions and other com­mit­tee business.

 Jack was well respected by all and an absolutely united and inte­gral part of our committee’s vision and com­mit­ment to reform and improve our district’s defined con­tri­bu­tion plans. Jack was an unwa­ver­ing fighter for all LAUSD employ­ees whether admin­is­tra­tors, teach­ers, teach­ers’ assis­tants, police or cus­to­di­ans in many other edu­ca­tional causes too. His inspi­ra­tion and drive for excel­lence will live on through us who knew and worked with Jack.  

Don Trone: Uniform Fiduciary Standard is "Institutionalizing Mediocrity"

As the industry struggles with expanding the definition of who is subject to a Fiduciary Standard, Donald Trone, a long time fiduciary advocate argues that creating a "Uniform Fiduciary Standard" will lead to the opposite of its intended purpose, it will institutionalize mediocrity. Trone says:

Most decision-makers fall into the advisor/trustee ranges, and for this group, a uniform fiduciary standard will make sense. However, when we consider the unique attributes of a steward, it’s clear that a uniform fiduciary standard will have the effect of institutionalizing mediocrity.

Trone leaves us with this parting thought:

The leaders of the fiduciary movement have centered their debate around a principle: “The best interests of the client.” Principles appear at the top of the pyramid. In contrast, the broker-dealer community has argued for a harmonization of rules—the lower portion of the pyramid. As it stands today, it appears that the broker-dealer community is going to prevail. If so, at some point in the future we will have a uniform fiduciary standard consisting largely of rules, and the uniform standard will fall within the lower portion of the governance hierarchy. There will be a significant gap between the uniform fiduciary standard and what we refer to as stewardship. There will no longer be a progression between professional standards; there will be the masses who are subject to a uniform fiduciary standard and the industry elite who will voluntarily adopt the higher stewardship standard.  

I encourage you to read the full article at Financial Advisor Magazine titled "Uniformity = Mediocrity."

Scott Dauenhauer, CFP, MSFP, AIF

Make Big Commissions Selling Annuities To Our Nation's Veterans!

This advertisement arrived in my e-mail inbox on November 11th, Veterans Day.

The annuity industry has sunk so low that they are actively marketing a program to sell high commission annuity products to our nation's Veterans by partnering with a Non-Profit Charity.

As if our nation's Veterans didn't have enough to deal with when working with the VA...now they'll have annuity agents chasing them around.

Disgusting.

Scott Dauenhauer CFP, MSFP, AIF

House Votes Against Fiduciary Standards

A bill passed 254 - 166  through the House of Representatives on Tuesday  which works to undermine the future retirement security of Americans.

The bill, with the Orwellian title "The Retail Investor Protection Act" (RIPA - I call it the R.I.P Act or Rest In Peace) seeks to do anything but protect "retail investors."

RIPA seeks instead to interfere with the Fiduciary Rulemaking process at the Department of Labor and Securities and Exchange Commission, delaying or eliminating any process where all financial advisors would be required to place the interest of their clients first.

Surprising as it might be, currently only a subset of "advisors" are required to be "fiduciaries," placing the best interest of their clients first.  The majority of the industry has NO duty of law to place their clients interest ahead of their own.

RIPA seeks to continue to allow salespeople to give financial advice that may be self serving and then to disguise the intent of the Act by giving it a name like "Retail Investor Protection".

The "Wall Street Over Main Street Act" might be a more apropos name.

We've apparently learned nothing from the financial crisis. Instead of looking out for the little guy, this act does all it can to ensure that the little guy never gets a fair shake.

The  good news is that it's unlikely to get support in the Senate and would be veto'd by the President even if it did.

This is yet another sad legislative day in the House or Non-Representatives.

Scott Dauenhauer CFP, MSFP, AIF

CalSTRS Releases RFP For 403(b)/457(b) Recordkeeper

The California State Teachers' Retirement System has released their first Request for Proposal for their 403(b) and 457(b) programs (collectively named Pension2) since 2006.

Submissions are due by December 19th, 2013.  Vendors interested in bidding on the program may find the information they need here.



The incumbent recordkeeper is TIAA-CREF and they are eligible to bid.

As part of the background CalSTRS states:

CalSTRS administers a hybrid retirement system which includes a defined contribution program, known as Pension2, to complement the defined benefit members receive as their primary means of retirement. Pension2 allows certified and classified California school employees to set aside savings in low-cost, flexible funds selected by CalSTRS. Pension2 offers several investment choices to certified and classified California school employees: 403(b)(7), Roth 403(b)(7) and 457(b). As of September 30, 2013, Pension2 has over 10,000 participants with over $500 million in assets. 

Meridian Fiduciary Consulting (of Meridian Wealth Management, my firm) is the consultant.

Scott Dauenhauer, CFP, MSFP, AIF

NAGDCA 403(b) Pre-Conference Session

A good 403(b) session that I missed at the Louisville conference this year at NAGDCA.

Ben Taylor did a great job moderating a panel topic that can sometimes get bogged down in the weeds. 

Scott Dauenhauer, CFP, MSFP, AIF

Otter on Chatzky Blog: A 403(b) Crash Course

Jean Chatzky runs a great personal finance website and blog over at www.jeanchatzky.com, she also runs an online "Money School" that you would be wise to check out.  Speaking of "be wise"...our very own WiseGuy Dan Otter of 403bWise.com has a guest post up today on Jean's blog, A 403(b) Crash Course.









A 403(b) Crash Course, By Dan Otter

Imagine you are at a retirement plan party. Not a retirement party — there are no gold watches being given out here. But a party attended by the various retirement plans. There’s the famous 401(k) and it’s quirky but increasingly popular sibling the Roth 401(k). There’s the modest IRA, with some of its cousins: the Roth IRA, the SEP IRA, and the Rollover IRA. Even the granddaddy of them all, Social Security, is in attendance. Then there’s this other plan. It’s kind of off by itself. You can’t quite place its name. Is it called the 401b? Or, wait, isn’t it called a tax sheltered something?

Close. The plan is actually called the 403(b). But it is commonly, and erroneously, referred to as a TSA or Tax Sheltered Annuity. Created in 1958, it predates the more famous 401(k) by twenty years, yet it remains a bit of a mystery. Why? Probably because the 403(b) covers a smaller subset of employees working in generally less glamorous positions: K-12 employees, college and university employees, pubic health care workers, and not-for-profit workers. Plus, public school teachers and administrators typically have pension plans, so for them the 403(b) is a supplemental plan.

Here’s what you need to know to make small talk with and about the 403(b):

For the rest, you'll have to jet over to Jean's blog.

Scott Dauenhauer

Annual Notice Requirement BullSh*t - A Marketing Gimmick

The following is an opinion piece, but based on actual events.

"The IRS requires that we verify that every employee has attended a meeting to learn about their 403(b) plan, so you must fill out this form.  We won't contact you unless you check the box that you want financial planning help"

This was the paraphrased message a teacher heard yesterday somewhere in Southern California and likely somewhere everyday in America after being forced into a meeting where someone with the title "Financial Consultant" tells them they can have a "free" financial plan (worth $500) just by meeting with this altruistic individual.

I call Bullsh*t!

Actually, that someone was my wife, at her school during a meeting she was required to attend where someone from the district's 403(b) "Compliance Administrator" was presenting.  I'll keep the name of the company a secret so as to avoid being sued for telling the truth.

What is the truth?

The truth is that the IRS DOES require a "meaningful notice" be communicated to each employee on an annual basis stating that they can participant in the 403(b) plan.  But not even the insurance agent based NTSAA believes that this "notice" must be in-person, there manual states:

"The notice must be provided in a manner designed to ensure delivery to each employee individually. For example, posting a notice in the employee lounge by itself is not an acceptable delivery method. However, a sum- mary provided at a benefits fair followed up by quarterly payroll stuffers would probably suffice. There is no requirement for a written receipt from each employee that they have received the annual notice." (emphasis added)

So why does it appear that "Advisors" from the "Compliance Administrator" are telling school districts that this is a requirement?  Why did my wife have to sit in on a presentation from the "Compliance Administrator" who was selling their services as if they were qualified Financial Planners and not salespeople and then fill out a form stating that she attended?  The reason given: If the IRS audited the school district they would use it as proof of compliance.

The idea here is that the same thing couldn't have been accomplished by a simple letter, an e-mail or a payroll stuffer - it had to be in person, which is clearly not what the IRS demands.  This is a clever marketing ploy to get in front of employees to sell the financial products of the "Compliance Administrator."  It's not like letter don't exist to send to employees, I found one pretty quickly using, here.

The irony is that I just wrote a whole piece on deceitful CTPA practices.

Why does this annoy me so much? It's deceitful.  It's one thing to offer in-person meetings as a service to a school district, it's quite another to make the employees sign what are in fact lead cards to verify they've been to a presentation under the guise of compliance.  I wonder, do they go through the cards and track down every single employee who didn't sign one or didn't attend a meeting? Doubtful.  

The school district meets their requirement of meaningful notice by providing just that, a meaningful notice - a letter in a teacher's box, a payroll stuffer, whatever else they might think of.  If they choose to add meetings to provide additional notice - great!  But don't make the meetings mandatory, don't hold them during hours where teachers are supposed to be working and don't do it under the guise that they are required for compliance.

These meetings are sales meetings disguised as compliance.  Whether the "Compliance Administrator's" corporate office knows this is going on is unknown to me, but they couldn't be the only company doing this, I hear it all the time - everywhere.

The last thing the financial services industry needs right now is more dishonesty, using IRS compliance sell financial products is just that.

Scott Dauenhauer, CFP, MSFP, AIF