403b) Investing [Video 4 of 4] – Choosing a vendor and how Finance for Teachers can assist you

In the final video of our series, we discuss how to find a good 403(b) provider, what questions to ask, and how to allocate an account. If you missed any of the prior videos they can be found here:

Video 1

Video 2

Video 3


You’ve got to the fourth video of the four part video series. Thanks for sticking with us. Today we are going to talk about how to choose a 403(b) provider. We are also going to touch on how to choose what investments inside of that account, what makes sense for you, and also how we can help as Finance for Teachers.

So, how to choose a vendor? Typically, in your district, there’s going to be a list of vendors that HR can provide to you. Some of them are great, some of them aren’t. I can say that; I’m not one of those providers. Unfortunately you’re not going to know from face value which one is good and which one is not. You’re also not going to know who’s the good one by asking other teachers. Other teachers may not know the difference between those vendors, and I’ve ran across that. Teachers will say, why I use this guy because my classmate uses it, or the teacher down the hall uses it. And they said good things about this guy. It wasn’t a great product. The guy might have been great, but the product itself did not fit. So what you need to understand is three things.

One, who will you be working with? You want to make sure that you are dealing with someone who will talk to you, not just going to open an account for you, but is going to walk the whole process with you, talk to you if you have any questions.

The second thing that you want to look at when choosing one of these vendors is what type of company is it? Is it an investment company? Or is it an insurance company that you are buying from. And sometimes it is hard to tell the difference. So let’s say for an example, AXA is on your list. AXA is an insurance company, and they sell an annuity product. Where X company maybe an advisor company who manages 403(b)s and they sell investment product.

The third thing, make sure you are comfortable with how much it costs. You know, sometimes you are not going to have control over this, but you want to ask what are all the costs involved in this? What are the surrender charges? What is your management fee? How much does it cost to invest in some of the things? Am I required to do a minimum investment? You want to ask these questions. Understand how much of your money is going to stay your money. You don’t want to invest $100 one month and find out only 75 of that was yours and 25 of it went to fees and expenses.

So now you found this great vendor. You found a great product. It fits you. You are comfortable with the expenses, and you are ready to go. Don’t rely on that person to invest everything well for you. The majority of 403(b) providers do not do this. Many 403(b) providers are paid to open an account and to have you increase your investment amount every pay period. They are not paid to design a portfolio for you. That’s important for you to know. I have come across numerous 403(b) accounts where teachers sat down and said, my 403(b) guy put this together, I don’t know if it really works. And it doesn’t. They needed a custom designed portfolio for that 403(b), and it wasn’t done for them.

So how do you go about choosing this? If this is something you are comfortable doing, then you are going to want build an allocation that is very diversified, so you are investing in different countries in the world, different stock markets, and you are also not all in one place. Not just in the stock market option, or in the bond market. Now I know that some people are comfortable with that, some people are not. That is where we come in. If you need help with a 403(b) investment, whether it be choosing a vendor, choosing what investments to put inside, or you just really have any questions, that is where Finance for Teachers can help. If you just have questions on this, you can certainly just retain us to answer those questions for you, and set you up with a wonderful 403(b). We don’t sell those products, but we will help you find the best one for you.

If you have any questions, shoot us an email.