Teachers, 403Bs, etc
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Does anyone here have any experience prospecting teachers 403Bs? I know this post doesn’t apply to anyone in a wirehouse, but all thoughts are welcomed of course.
The 403B market is what my firm is based upon; granted, not all of our offices focus, or even work with schools at all, but as a corporate culture, that's where we are. In fact, my BOM doesn't work with any schools, nor has he ever in 21 years. However, two other guys in my office do work with a couple of local districts (keep in mind, I'm in a relatively rural area, although there is a state university with about 650 employees less than a mile from our office), and past brokers have worked with them as well, so we have a payroll slot at all but one district. The thing is, the FIRM has the payroll slot, but individuals "claim" the district as "theirs." So this leaves me with two districts I can cover (with probably about 200 total employees), and the University (which isn't that friendly to prospecting on campus)...Obviously this isn't & hasn't been my focus thus far, but I would like to get involved in the 403B market (it's really pretty simple prospecting, go sit in a teachers lounge for 2 hours over lunch period, and they stop in and schedule an appointment to meet after school). My question is: Anyone that works this niche market, how many schools do you generall work with? I've read that companies like AIG VALIC (now AIG Retirement) hire reps to just work schools, and they cover like 40-50 buildings on their monthly "route." Does that sound accurate? Is that the type of coverage you need to make it worth your time? Just a note...this is a very ODD market I think...expect more questions/posts that make you go "WTF" in the future. Thanks guys.school teachers are tough to work with. 67% of the teachers do nothing because they have their pension or are broke. You are then competing for the remaining 34%. Many schools systems state that you must have so many teachers sign up with you before you can be on the approved list. Its a lot of work for $50-$100 DCA accounts
It’s like prospecting 401K plans - one participant at a time. Imagine landing a 401K plan with 100 participants each contributing $250 per month. That’s $25,000 per month, or $300,000 per year (plus maybe an employer contr.). Not bad, but no career changer. Over a few years you would have a few million in assets in that plan, without too much additional work. Now imagine landing each of those 100 participants ONE AT A TIME. That’s the teacher market. And there is (generally) no company match.
So, in essence, yes, you need to either commit to the teacher market full-bore, or ignore it. Anywhere in between and you will waste a lot of time for not enough money.
I agree the 403b market is a very tough one to make money in, and more so since the recent changes from the PPA.
First, the demographics are not good, with the typical teacher having low income/assets and little in or going into their plan. They generally know no more than the average person about investing (very little), but are nevertheless convinced they know more than they do because they think of themselves as intelligent. Add to that the general need to work with them one-by-one and the high bureaucracy/hassle factor to be ‘approved’ and you’ve got yourself some high odds to overcome. Low return/high maintenance.
I prefer to fish in the lakes where the big fish are plentiful. That ain’t the 403b lake.
If you’re stuck there, good luck to you. Obviously it’s possible to succeed there, just more difficult to do.
The 403(b) market has changed dramatically since the middle of 2007. The IRS is forcing 403(b)s to look just like 401(k)s. What this means is that sitting in the teachers lounge will get you nowhere, unless some the schools decision makers regarding benefits are around. For now, 403(b)s can be started up with anyone who is in the system. 90-24 transfers however, have been frozen until 1/1/2009 (unless a writing agreement with the receiving company is created, which I have not seen happen yet). Starting in 2009, in no agreement was made, any transfer to another 403(b) will be considered a taxable distribution. By 2009 I would expect all schools to embrace a single 403(b) plan, as they now have the authority to refuse and remove vendors from their system. One lucky organization will handle all plans for that school. It sounds like a mess, but the system was a much bigger mess before these regulation changers were implemented. I would stay away from this market UNLESS you can get in with the higher ups and run their entire plan. The good news is on 1/1/2009 you will be able to roll any and all old 403(b)s into IRAs, so by all means, stay in touch with the teachers you already know. I hope this helps and sorry if I bursted anyones bubble. Check out http://www.vankampen.com/vksite/news/403bchanges.asp for the short version of the changes. Otherwise have fun poking around the IRS website.…but I would like to get involved in the 403B market (it’s really pretty simple prospecting, go sit in a teachers lounge for 2 hours over lunch period, and they stop in and schedule an appointment to meet after school)…
The best experience I have had with 403b is with the top folks at different churchs.
Mid level churchs (membership of 200-900 approx) typically have a minimal 403b or none at all and I opened up 3 accts. for a church several years ago and they have sent me several referrals from other churchs. The accts are not big (approx $20k) but everything adds up.The 403(b) market has changed dramatically since the middle of 2007. The IRS is forcing 403(b)s to look just like 401(k)s. What this means is that sitting in the teachers lounge will get you nowhere, unless some the schools decision makers regarding benefits are around. For now, 403(b)s can be started up with anyone who is in the system. 90-24 transfers however, have been frozen until 1/1/2009 (unless a writing agreement with the receiving company is created, which I have not seen happen yet). Starting in 2009, in no agreement was made, any transfer to another 403(b) will be considered a taxable distribution. By 2009 I would expect all schools to embrace a single 403(b) plan, as they now have the authority to refuse and remove vendors from their system. One lucky organization will handle all plans for that school. It sounds like a mess, but the system was a much bigger mess before these regulation changers were implemented. I would stay away from this market UNLESS you can get in with the higher ups and run their entire plan. The good news is on 1/1/2009 you will be able to roll any and all old 403(b)s into IRAs, so by all means, stay in touch with the teachers you already know. I hope this helps and sorry if I bursted anyones bubble. Check out http://www.vankampen.com/vksite/news/403bchanges.asp for the short version of the changes. Otherwise have fun poking around the IRS website.[/quote] i see that the 90-24 rolls are frozen but from reading the PPA i am taking that rollovers can still be done for those who are retiring/leaving the plan? Is anyone else taking that away too?[quote=iceco1d]…but I would like to get involved in the 403B market (it’s really pretty simple prospecting, go sit in a teachers lounge for 2 hours over lunch period, and they stop in and schedule an appointment to meet after school)…
Huh?
My understanding of the new regs is similar to wlooney. What do you see that is wrong with what he says? In a nutshell, doing away with 90-24 transfers and forcing plan sponsors to have written plan documents, potential compliance testing, will in effect force schools to have an exclusive relationship with a few vendors instead of just having a "payroll slot." Schools will not have the resources to have many many vendors since they will be expected to take on a lot more fiduciary duty. The effect of this legislation will be to cut out some sleazy (I know this is a generalization)brokers pushing high fee products directly to participant and to consolidate the vendors into those who are truly committed to the market. From a participant and plan perspective, I think you will see 403(b) plans resemble 401(k) plans in the future. The school district will be selecting a vendor and that vendor will provide recordkeeping services. This will benefit participants since the plan sponsor will have much more ability to negotiate lower fees because of the high balances they will be able to move. What does this mean to you? Maybe you should start cold calling the superintendent.[quote=Akkula]
What does this mean to you? Maybe you should start cold calling the superintendent. [/quote] Although most districts that I have looked at will likely have an "incumbant" or two. IMHO, they should have just done away with the 403B altogether and just told schools to move onto 401K platforms. Would have been much easier. Treat their old 403B balances like an old employer 401K - move to the new plan or roll into an IRA. Would have saved years and millions of dollars in costs. Then again, I imagine the insurance industry has too strong a lobby to just let all that 403B gravy go away.[quote=Broker24][quote=Akkula]
What does this mean to you? Maybe you should start cold calling the superintendent. [/quote] IMHO, they should have just done away with the 403B altogether and just told schools to move onto 401K platforms. Would have been much easier. Treat their old 403B balances like an old employer 401K - move to the new plan or roll into an IRA. Would have saved years and millions of dollars in costs. Then again, I imagine the insurance industry has too strong a lobby to just let all that 403B gravy go away.[/quote] I have heard speculation that 457 plans may be adopted by more schools if they decide to scrap their 403b plans all together. No 10% early withdrawal penalty in a 457. http://en.wikipedia.org/wiki/457_planYou might want to read up on things before commenting on them. Call your internal at your favorite fund company and see what he/she has to say. Better yet, give old Bob Architect with the IRS a call; maybe you need to hear it straight from the horses mouth.
Before you call him though, read this http://www.insidehighered.com/news/2007/07/30/403b so you know a little more about the situation.