My Challenge to ASPPA’s Brian Graff (and it’s not “silly”)

Will Mr. Graff Debate the Issues Publicly?

Recently RIAbiz did a piece that pitted my blog posts against those of ASPPA/NTSSA and labeled them “Blog Wars!”  For those of you who follow me you know that I have an ongoing philosophical disagreement with ASPPA/NTSSA and their leader, Mr. Brian Graff.  The disagreement centers around two specific issues:

  1. Should public school employees 403(b) plans limit the number of vendors? My answer: Yes.
  2. Should advisors who work with public school employees be subject to a fiduciary duty? My answer: Yes.

The history of the posts, as here, here, here, here, here and here.

I’ll admit, it feels rather surreal defending such common sense positions and stranger still being attacked for espousing them. It appears ASPPA has been taken over by the 403(b) vendors who were previously part of NTSAA (in my opinion).  It’s unfortunate that ASPPA would allow itself to be driven more by insurance company’s bottom-line than the interests of their well respected members and those of public school employees.   Yet, that is the reality we face.

When asked about the personal attacks against me, Brian Graff responded that he doesn’t endorse the blog posts written on an ASPPA sponsored website.  Mr. Graff then states “I didn’t think of it as personal attacks,” Graff says. “They were asking questions about conflicts of interest and he (Dauenhauer) answered those questions. These are blogs and in every blog I read people get a little feisty. That’s why I’m not on it.”

It seems to me that if the posts are written on a blog operated by ASPPA then they are endorsed by ASPPA and for the record they were personal attacks.  I’m used to these attacks; it’s just disappointing to see them coming from an organization that I had come to respect.

Instead of engaging in debate, ASPPA is a defending the indefensible.  When asked to respond as to why they don’t support a Fiduciary Standard, they stated:

the Dodd-Frank legislation chose not to impose a uniform fiduciary standard.  Instead, it referred the issue to the SEC. The SEC issued a report on the subject on January 22, 2011 and has taken no further action. To require non-ERISA 403(b) plan advisors to be “fiduciaries” would be inappropriate in the absence of such a uniform standard.  It is important to remember that many public school employees have moderate incomes with little or no retirement assets. Fee-based fiduciary advisors may not be willing to work with such employees. If fiduciary advisors are the only permitted option, then that will leave many public school employees without the opportunity to work with an individual advisor, particularly those who work at rural school districts.”

Mr. Graff remarked in an RIAbiz article saying:

“The question he (Dauenhauer) keeps asking me to answer is whether or not someone should be a fiduciary in a retirement plan. The reason I won’t answer that question is, my opinion isn’t relevant. It’s for the SEC to decide and not for us. Until they decide, it’s kind of a silly question to ask,”

If Mr. Graff’s and ASPPA’s opinion(s) are not relevant, why do they continue to act as if they are by lobbying congress and testifying on financial issues in front of congress?  ASPPA members certainly believe that the opinions of their leadership are relevant – if not they’d likely stop paying dues and coming to their conferences.

ASPPA does not need Dodd-Frank or the SEC’s blessing to call for a fiduciary standard among 403(b) advisors.   Is ASPPA a leadership organization? It appears not.  I will remind Mr. Graff that both the CFP, AIF and CFA designations require their holders to be fiduciaries, as does the Financial Planning Association.  Clearly organizations can take the lead instead of waiting for the government.  Will ASPPA lead or follow?  My opinion is that they are leaders – leaders AGAINST a fiduciary standard for advisors who work with defined contribution programs in government.

I’m also unsure what Mr. Graff is waiting for – the SEC has already recommended “establishing a uniform fiduciary standard for investment advisors and broker-dealers when providing investment advice about securities to retail customers that is consistent with the standard that currently applies to investment advisers” in their Dodd-Frank required study released in January of 2011 (which ASPPA referenced above) titled “Study on Investment Advisers and Broker-Dealers”.  The conclusion of the study is that there should be a “uniform fiduciary standard”. The study can be found here.

I find it ironic that the ASPPA position is that government SHOULDN’T be involved in 403(b) issues – unless that issue relates to being a fiduciary. Talk about “silly”.  In addition, ERISA is clear that advisors are fiduciaries and represents a best practice (even if inapplicable to non-ERISA plans).  It is clear that if Mr. Graff and his organization are looking for government precedent for a fiduciary standard – they have it.  The problem appears to be that the constituency that sponsors NTSAA does not want a fiduciary standard and that is why ASPPA doesn’t.  It is strange to me that an organization such as ASPPA would allow such a tiny minority of its membership to control its agenda (effectively erasing much of the good things ASPPA has accomplished in the past).

What is truly disappointing for ASPPA members is that their leader(s) continue to advocate for principles that are antithetical to ASPPA’s reason for existing.  When ASPPA merged NTSAA into its fold it (NTSAA) somehow became the puppet master.   How this could have happened is beyond me, NTSAA was an organization that was in severe financial distress and ASPPA rescued it.  ASPPA’s revenues are secure and come from members who support fiduciary principles and transparency – yet the organization has turned into a mouthpiece for insurance companies and agents selling retail 403(b) annuities.  Go figure.  How the two organizations can survive as one is beyond me and my prediction is that the members will eventually have their voice heard and will excise NTSAA and get back to its principled roots.

Mr. Graff believes that a fiduciary standard gives fee-only advisors a “monopoly” and “it’s not right” and thus fights against it.  Yet, being a fiduciary is much more than just how one is compensated.  Also, ASPPA is NOT taking up the fight to reverse the fiduciary standard embedded within ERISA even though according to Mr. Graff, this leads to a “monopoly”.  You can’t have it both ways – either you support a fiduciary standard or you don’t, supporting it in ERISA plans but not in non-ERISA plans makes no sense.

So for my friends and colleagues who are members of ASPPA (thank you for the voluminous e-mails and LinkedIN messages supporting me) I am calling on ASPPA today to either accept or reject the following statement:

“It is the right of all retirement plan participants that the advisor they CHOOSE to work with should always owe them a duty of loyalty that requires them to place the participants best interest above their own in all dealings.  Retirement plan participants have a right to a Fiduciary level of care.”

This is an easy one – a yes or no answer will suffice.  It’s time for ASPPA to go on the record in this one-sided debate and stop calling others “silly”.

Secondly, I challenge Brian Graff to openly debate me at his venue of choice on the topics of Fiduciary Standards in non-ERISA plans and vendor “choice”.  The only requirement being that the venue be open to the public and media.

Before Mr. Graff answers the above question or agrees to any debates, he might want to read an article written in his own trade magazine – it contradict his beliefs.  I was heartened to see NTSAA publish an article in their 403(b) Advisor magazine that supports my position that advisors who work with public school employees be held to a fiduciary standard.  In the Fall 2011 edition, the Director of Risk Management for the Manatee School District in Brandenton, Florida, Forrest Branscomb said:

 “It’s also important to be ethical.  You want to have someone who puts the client’s best interest first, who doesn’t use the 403(b) as a gateway to sell other products the client may not need.”

Mr. Branscomb gets it, ASPPA/NTSSA apparently does not – advisors should be held to a fiduciary standard.  By the way, the Manatee School District reduced vendors by 33% (from 15 down to 10) and participation held steady, which completely contradicts ASPPA’s “research”.

It is also a myth that fiduciary advisors will not work with small accounts and I take offense to the ASPPA position that because someone lives in a rural community they should be subjected to a lower standard of care.

ASPPA says they do “not support any particular business/distribution/compensation model and does not support any particular retirement product over any other.”  But this is clearly not true.  ASPPA/NTSAA specifically and proactively advocates for commission based insurance advisors and the companies they represent.  ASPPA specifically has singled out single-vendor models and state-based models as targets to lobby against and they have come out publicly advocating for one type of compliance TPA or another.  It’s clear they don’t advocate on behalf of fiduciary advisors.

I’m okay with an organization that lobby’s on behalf of their members, but I’m not okay with one who does it pretending that their constituency is one that it is not, i.e. public school employees.  In my opinion (based on all the evidence), ASPPA/NTSAA and Mr. Graff now exist to promote the insurance companies that sponsor NTSAA as well as their agents (or as NTSSA likes to call them “Producers”).  ASPPA is a great organization that has taken a severe wrong turn and will find its credibility damaged as a result if it doesn’t reverse course.

ASPPA says a “great deal of thought and consideration goes into the development of every position ASPPA takes”.  Unfortunately that thought process is apparently dominated by companies that do not have the best interests of participants at heart.  ASPPA has created a new “pre-Summit” to go with their newly rebranded 403(b) Agent Summit – they call it “PRECON” – maybe some additional “thought and consideration” should go into the name of this free event! Really, PRECON?

If you’d like to see the kind of effects these decisions have on the marketplace, please check out my previous post featuring a brochure from the top Arizona 403(b) agent for Midland National – a NTSAA partner, this is what ASPPA wants to represent and perpetuate?

Scott Dauenhauer CFP, MSFP, AIF

The above piece represents my opinions.

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5 thoughts on “My Challenge to ASPPA’s Brian Graff (and it’s not “silly”)”

  1. I’m glad you’re keeping your focus on the ultimate measure, Scott — what’s best for the plan participant. No matter how much various interested parties try to cloud the issue of a fiduciary duty of loyalty, when we keep our focus on the participant, those clouded positions stand out as “silly.” And we could leave them with the label “silly” if it weren’t for the very significant amount of damage these tainted delivery approaches do to participant balances and the ultimate health of the nation’s retirement income security. Keep it up, Scott!

  2. Scott, You are “spot-on” in your comments. The method of compensation isn’t the issue, its the “intent” of the adviser. Advisers receiving commissions or fees should always “act in the best interest of participants and their beneficiaries”. That’s the way we should ALL do business, legislation or not…

    Fraternally yours, in the pursuit of “Fiduciary Best Practice”, Dan

  3. ASPPA’s overarching theme is don’t worry about compliance as long as there is no enforcement. If compliance ever becomes an issue, they just whine to the IRS or the DOL and ask for relief.

    Any fiduciary standard would only increase their compliance role – and compliance is the last thing ASSPA is interested in.

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