403(b) Sales Shark Repellent 🙅 🦈
January 19, 2021
As a kid I was terrified of sharks precisely because of Jaws. I saw the movie when I was 11 when we were living in England. I can still picture the stately, old theater I heard that infamous line: “You’re gonna need a bigger boat.” What a movie! What a score. Today, those opening notes can still trigger a degree of fight or flight (mostly flight!). Soon after seeing the movie, I learned we were moving back to the United States. California to be precise. The family was pretty excited. I had some concerns.
Close Encounter with a Shark
I was never accosted by a shark in the Pacific Ocean or any other ocean (so far!) but as a first-year teacher, I did come face-to-face with a 403(b) sales shark in my classroom. Even though I had no idea what a 403(b) or an annuity was, I managed to fight off the attack. I later learned that many of my colleagues weren’t so lucky. The encounter is actually what led me to start 403bwise in 2000.
Shark Week 2000
In May 2000 American Federation of Teachers trustee Don Kuehn wrote Shark Attack: Investors in 403(b) plans, beware: You are especially vulnerable to predators for the American Federation of Teachers publication American Teacher. The opening lines perfectly encapsulated what teachers faced...
Teachers, college professors and other education workers are being threatened by sharks--but not the kind that swim in the sea! These equally dangerous predators are "land sharks" who prey on unsuspecting or uneducated investors and devour their hard-earned retirement money. It's time we put a stop to them.
Once the hook is set, few participants monitor their statements or check the relative performance of their TSA against a benchmark such as the S&P 500 stock index or a corporate bond index....
Unlike a standard employer-managed pension plan, in 403(b) plans the employer keeps an arm's-length relationship with the vendor. Because the employer typically does not contribute to the plan, schools and colleges neither recommend nor make judgments about which companies have access to the pre-tax payroll deductions that make TSAs work. There is no "plan document" to govern the employer's service arrangement with vendors. That means no federal paperwork, no fiduciary relationship and low administrative costs...
It also means no investor education.
I am not sure a more important story about the 403(b) has ever been written. You can read the piece in its entirety here.
It's Always Shark Week for Teachers
Sadly, so much about what Mr. Kuehn wrote about is still true today. The irony is that the problem is education. School districts are still not providing objective advice or worse, are outsourcing the “education” to 403(b) sales sharks. San Francisco Unified School District invites 403(b) vendors to its annual New Teacher Orientation. Talk about chum in the water.
Furthermore, teacher certificate and credentialing programs fail to educate pre-service teachers about saving for retirement issues, leaving them as vulnerable as the infamous swimmer in the Jaws movie poster. We think educating pre-service teachers is key to both protecting them from 403(b) sales sharks, and ensuring they have better retirement outcomes.
A key goal of 403bwise is to address this pre-service shortcoming. On January 27, 2021 we are hosting the following interactive event via Zoom and Nearpod:
- Shark Repellent: A Panel discussion about how to educate pre-service teachers about saving for retirement before the 403(b) sales sharks get to them. The event, which is free, runs from 4-5:15pm PAC/7-8:15pm EST. Registration information.
- Eric McClarey, instructor, Illinois College
- Anthony Scheffler, Dean, School of Education at Lindenwood University
- Mark Schug, a retired professor, former middle school teacher and co-author of Teachers Can Be Financially Fit
Here's a Jaws themed downloadable pdf that can be used to promote the event.
Teach and Retire Rich Book Offer
We will give away to free copy of Teach and Retire Rich to any pre-service teacher in attendance. Information on receiving book will be provided at end of presentation.
Updated Jaws Lines
I’ve reworked some lines from the movie to apply to colleges of education and school districts…
"You knew there was a shark out there! (starts crying harder) You knew it was dangerous, but you let people go teaching anyway? You knew all those things. But still my boy is in an equity indexed annuity now. And there's nothing you can do about it. I wanted you to know that."
Stay wise and well.