My Company's Retirement Seminar. . . What a sham!

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adv-rider
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My Company's Retirement Seminar. . . What a sham!

Post by adv-rider »

Just spent the morning at my company's “sponsored” retirement seminar and I feel like I need a shower. Instead, I thought I’d spend some time here. Yes! a breath of fresh air.

I work for a fortune 500 company who provides periodic seminars to explain retirement benefits to its high level employees. The program is held in a fancy hotel meeting room, complete with breakfast and lunch, and is paid for by the attending investment firms who hope to drum up some new clients.

They were all there. . . Merrill Lynch Global Wealth Management, Morgan Stanley Smith Barney, Wells Fargo Advisors, Ameriprise Financial, UBS, and a bunch of others I’d never heard of. Fortunately, these guys were kept at bay in the lobby for the informative part of the session, but there they were, circling like sharks eyeing you as you came and went. They even had little trinkets to lure you in. . . pens, thumb drives. . . anything they could put their name on. After lunch, these guys got to hold their own “information” sessions, but I escaped before then. During lunch, I did sit with a couple of sharks and listened politely as they discussed their investment strategies, like keeping retirees 100% in high dividend paying stocks and managing risk with covered calls. The AUM fee for all this is “only” 2%. The sad part was seeing so many of my colleagues being roped in by this dog and pony show. Another was seeing, among the package of information my company handed out, a 27 page document called “Best of the Net”, put out by the AAII (American Association of Individual Investors - I had to look that up). This guide listed hundreds of Internet investment-related resources. Sadly, Bogleheads.org was nowhere to be found, nor were any of my favorite blogs like Mike Piper’s "The Oblivious Investor" or Rick Ferri’s site. What a shame (sham).

Anyway, glad to be back among the Bogleheads. I think I’ll go read some other threads now.
Jack FFR1846
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Re: My Company's Retirement Seminar. . . What a sham!

Post by Jack FFR1846 »

I should probably continue to stay away from the one our company puts on. Today, I would be so tempted to bait them into saying that they agree that it would be a good idea to jump on Russian stocks right now.
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jwa
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Re: My Company's Retirement Seminar. . . What a sham!

Post by jwa »

A few years back, the corporate America firm I was employed by had a 401K plan with many high price mutual fund choices. The lowest cost fund was a S & P 500 index that had a .73 expense ratio.

Finally I had enough. I was in touch via email a couple times and even had a phone conversation with the head of employee benefits about Vanguard vs the New York Life plan in place. I was told that I was the most knowledgeable employee she had ever talked with about the subject and that she wanted to put me on the committee that worked on the 401K plan and that I would be flown into the Texas home office for this. I never heard back after that and the plan stayed with New York Life where most of the fund choices had expense ratios running anywhere from 1.10 to 2.30. While I am no longer there I know from friends who are still there the same 401k plan still exists.

I often have wondered if the corporate decision makers do so based upon ignorance or if there is some financial benefit for staying with some of these plans? Financial benefits for someone other than the employees.

I'm saddened to hear of your experience but not surprised.
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Random Musings
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Re: My Company's Retirement Seminar. . . What a sham!

Post by Random Musings »

jwa wrote:A few years back, the corporate America firm I was employed by had a 401K plan with many high price mutual fund choices. The lowest cost fund was a S & P 500 index that had a .73 expense ratio.

Finally I had enough. I was in touch via email a couple times and even had a phone conversation with the head of employee benefits about Vanguard vs the New York Life plan in place. I was told that I was the most knowledgeable employee she had ever talked with about the subject and that she wanted to put me on the committee that worked on the 401K plan and that I would be flown into the Texas home office for this. I never heard back after that and the plan stayed with New York Life where most of the fund choices had expense ratios running anywhere from 1.10 to 2.30. While I am no longer there I know from friends who are still there the same 401k plan still exists.

I often have wondered if the corporate decision makers do so based upon ignorance or if there is some financial benefit for staying with some of these plans? Financial benefits for someone other than the employees.

I'm saddened to hear of your experience but not surprised.
Typically, these high cost plans cost the company nada. The employees, by paying high ER's, are paying for the cost of the plan. Plus, some lucky person (or people) at the company get to go to seminars at warm locations to keep up with, uh, you know, something relevant about investing. Did I mention it was warm?

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
chaz
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Re: My Company's Retirement Seminar. . . What a sham!

Post by chaz »

For retirement planning, read the current issue of Money magazine.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
placeholder
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Re: My Company's Retirement Seminar. . . What a sham!

Post by placeholder »

Was there any food there?
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rob
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Re: My Company's Retirement Seminar. . . What a sham!

Post by rob »

Sounds like you got lunch out of it without paying a huge price.... so well done :-)
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
scrabbler1
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Re: My Company's Retirement Seminar. . . What a sham!

Post by scrabbler1 »

In my 23 years of working from 1985-2008, our 401k plan was managed by several plan administrators. While each change tended to improve our fund options without polluting the menu with too many high-ER funds, I will say that the last change from Dreyfus-Mellon to Principal Financial Group in 2004 was a big step backward. Many of the good, low-ER funds Dreyfus offered disappeared while the higher-ER funds remained. Furthermore, the new funds PFG offered were all lousy, high-ER funds, all of them north of 1% with several of them north of 2%. I struggled to find decent funds to transfer my Dreyfus funds into before the changeover date. Thankfully, they had that good PIMCO bond fund I was able to escape to and they designed a SV fund like the one we had going back to the 1980s which each plan adminstrator kept as a condition of becoming our new plan administrator. And they had an S&P index fund with a decent ER (under 0.20%, at least).

I do recall the seminar PFG gave us with all of their glitz and rosy scenarios but we did not have any free meals.
Saving$
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Re: My Company's Retirement Seminar. . . What a sham!

Post by Saving$ »

I've been to these, but I did not get any free breakfast and lunch.

On the other hand, I was not required to spend 1/2 day away from my projects being unproductive and thereby further increasing my ER to my company.

I did once get free bagels at one that was in the morning for an hour...
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SpringMan
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Re: My Company's Retirement Seminar. . . What a sham!

Post by SpringMan »

Covered calls should not be part of a retirement seminar IMO. They are not even allowed in tax advantaged retirement accounts. Same is true for shorting. There are inverse ETFs that are allowed but that does not make them a good idea. Maybe there is an ETF that uses a covered calls strategy, I don't know. I know you said they were discussing this at lunch, not likely part of the seminar. Got to love those sharks.
Best Wishes, SpringMan
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market timer
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Re: My Company's Retirement Seminar. . . What a sham!

Post by market timer »

SpringMan wrote:Covered calls should not be part of a retirement seminar IMO. They are not even allowed in tax advantaged retirement accounts. Same is true for shorting. There are inverse ETFs that are allowed but that does not make them a good idea. Maybe there is an ETF that uses a covered calls strategy, I don't know. I know you said they were discussing this at lunch, not likely part of the seminar. Got to love those sharks.
You can actually write covered calls in an IRA. Writing naked calls is not allowed, though.
bagmite
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Re: My Company's Retirement Seminar. . . What a sham!

Post by bagmite »

As stated before, high costs are borne by the employees. Often these plans go to banks (or subsidiaries of banks) who are involved with the company and are compensation for other work they might do which is not well compensated such as revolving credit arrangements. At least the trend is getting better over time.
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ginmqi
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Re: My Company's Retirement Seminar. . . What a sham!

Post by ginmqi »

jwa wrote:I often have wondered if the corporate decision makers do so based upon ignorance or if there is some financial benefit for staying with some of these plans? Financial benefits for someone other than the employees.
My view is that the guys at the top know exactly what they're doing. They are most likely getting a benefit for offering these plans with high ERs. If they can run a fortune 500 or a very large company they're most likely smart enough to know exactly what funds they are offering and why. I think it's much less likely ignorance/stupidity but more deliberate and shrewed.
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Clearly_Irrational
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Re: My Company's Retirement Seminar. . . What a sham!

Post by Clearly_Irrational »

market timer wrote:You can actually write covered calls in an IRA. Writing naked calls is not allowed, though.
Covered calls are actually pretty neat. Essentially you can add extra "dividends" to any stock via the options premium. They reduce volatility as well. The main problem is that they're fairly expensive in comparison to most funds and the administrative burden is somewhat high since they expire regularly. Additionally since you have limited upside and unlimited downside you'll experience a ratcheting effect unless you market time. In general I don't recommend them unless you have very specific and unusual requirements.
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G-Money
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Re: My Company's Retirement Seminar. . . What a sham!

Post by G-Money »

It's at least possible that some of your colleagues were feigning interest so it didn't seem rude that they were collecting all the freebies for their kids to play with. I've definitely been guilty of that.
Don't assume I know what I'm talking about.
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rob
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Re: My Company's Retirement Seminar. . . What a sham!

Post by rob »

ginmqi wrote:My view is that the guys at the top know exactly what they're doing. They are most likely getting a benefit for offering these plans with high ERs. If they can run a fortune 500 or a very large company they're most likely smart enough to know exactly what funds they are offering and why. I think it's much less likely ignorance/stupidity but more deliberate and shrewed.
Unfortunatly .... I think this is closer to the truth than just plain ignorance. Most of these guys are part of the top hat plans or alike, so their retirement is not so affected by bad fund choices in the base 401K plan.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
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