Switching from TIAA-CREF to VALIC?

August 24, 2009 1:44 PM

I have been offered an individual consultation with a financial advisor from VALIC with the aim of convincing me to switch my 403(b) from TIAA-CREF to VALIC. Does anyone have any experience with VALIC? Should I be wary of the fact that VALIC is a rebranded arm of AIG?

Some quickie bio : I'm 33, married, starting a family. My wife and I both work at a University. We both have had TIAA-CREF accounts here for two years. We have had no problems with them (other than the same stock market woes everyone went through in 2008-09).

A financial advisor will be coming to my office to give me the rundown on how VALIC can offer better services than TIAA-CREF. He already gave me the abbreviated rundown : he can serve as an actual financial advisor for me whereas TIAA-CREF can only allow me to pick from some different funds. He will come prepared to demonstrate how that will provide a better return on my investments. He can give me a (biased) explanation of why to switch.

I did my own research and discovered that VALIC is a new name for the financial advising wing of AIG. All else being even, I suppose I'd rather not work with AIG. It seems fairly clear that they swindled some of the US Treasury this past Winter... Perhaps someone would like to argue that point to the contrary...

So, could I benefit from the collective MeFi experience regarding VALIC and the wisdom of potentially switching to their service..? Specifically, if you know, what is the impact of their connection to AIG? Thanks in advance!

posted by Slothrop to work & money (13 answers total)

I'd beg to differ on the swindling part--the money was necessary to keep them afloat and because they guarenteed a huge chunk of the private, state and municipal bond market, the bonds would have all come due immediately if they failed or lost a high rating. The effects would have been catastrophic. Never seems to get mentioned in the analyses of the situation, for some reason.

As for VALIC, I have no idea. It cannot hurt to hear their pitch, however.
posted by Ironmouth at 2:22 PM on August 24, 2009

OK, there are two really big things to consider.

Is VALIC offering a 403(b) or are they trying to convince you to put your money in some other type of fund instead? If it's not a 403(b) from your employer and switching means losing a matching contribution, it's very unlikely to be a good idea. If it's not a 403(b), you want to make sure you fully understand the tax liabilities of whatever they put you in. You need to know the differences in Roth IRAs and traditional IRAs if this is the case.

The other question you should come back to is what is the expense ratio? In other words, how much of your money goes to the people who run the fund. TIAA-CREF has some of the lowest expense ratios around, meaning most of your money is working for you.

I'd be rather surprised if it made sense for you to switch, but different people have different attitudes towards risk and no one here is psychic, so no one really knows which will make more money.
posted by advicepig at 2:36 PM on August 24, 2009

TIAA-CREF vs. AIG?

I wouldn't even listen to the pitch.
posted by fourcheesemac at 2:40 PM on August 24, 2009

Yeah.. As far as I've read, TIAA CREF is the gold standard for good stewardship of funds, and all that stuff. They aren't flashy, but they do what they say they do, unlike many other groups.

Also, TIAA CREF's website is awesome, and their customer support people are always helpful. I have quite a few accounts with them, and they should pay me millions for giving them praise.
posted by Geckwoistmeinauto at 2:45 PM on August 24, 2009

The money they spend on high-touch sales to people like you is money that comes out of whatever returns they deliver. These marketing expenses can be significant, and can eat any improved returns they deliver, and then some. Honestly, I wouldn't waste my time. If you want financial advice, ask around amount your colleagues for a recommendation of an independent financial advisor and buy a few hours of their time every year or two.
posted by Good Brain at 2:46 PM on August 24, 2009

They only just this week got relisted with distributors. I would listen, but anyone whose job it is to skim interest I assume is lying until I can be shown otherwise. It's far easier to find suckers to overpay for average advice than to give good advice.
posted by a robot made out of meat at 2:50 PM on August 24, 2009

VALIC was a fairly recent AIG acquisition, and will be sold back out of AIG's portfolio as a bailout requirement. It's comparable to TIAA-CREF in mission and clientele. Read the Wikipedia article.

Not much of AIG rubbed off on VALIC during their relationship, I think. My current retirement is through VALIC and I'm reasonably satisfied. TIAA-CREF, though, continues to have the best reputation among retirement programs designed for teachers/public servants/nonprofit employees.
posted by gum at 2:59 PM on August 24, 2009

he can serve as an actual financial advisor for me whereas TIAA-CREF can only allow me to pick from some different funds

Arguably, this is only an actual service if he is smarter than the financial analysts who run those funds. And (AFAIK) TIAA/CREF has advisors as well in any case.

Personally, I wouldn't let a financial-products salesman into my office, but that's because I hate Hate HATE being handled by smarmy dickwads. The idea that I'd be saddled with having to talk to some smarmy dickwad, or his replacement smarmy dickwad, just to do some financial whatever instead of just logging onto a web page that never ever phones me about exciting new products.... urge to kill rising.

Warning: the above applies only to other cranky introverts.
posted by ROU_Xenophobe at 3:55 PM on August 24, 2009

The AIG connection is a bit of a red herring. If you are uncomfortable with being associated with AIG - for whatever reason - then don't sign up with VALIC. Its as simple as that.

The more important thing, in my opinion, is this:

He already gave me the abbreviated rundown : he can serve as an actual financial advisor for me whereas TIAA-CREF can only allow me to pick from some different funds. He will come prepared to demonstrate how that will provide a better return on my investments. He can give me a (biased) explanation of why to switch.

Think about it this way: the budget for that financial advice he is giving you, and the budget that supports his direct marketing of his product to you, is coming from somewhere. It may be obvious, like an up-front commission or fee - e.g., 1% of total assets on an annual basis. But in most cases (I don't know if its true of VALIC), it comes out of hidden costs: higher management fees on the mutual funds he advises you to get into, higher transaction costs, more trades, and so forth. That "financial advice" is going to come at a cost, no matter what he tells you. So he not only has to get you a better return than the index funds that you are probably in in your TIAA-CREF account, he has to get you a better return that also beats the extra charges you will incur. I, for one, would be more concerned about that than any AIG connection.
posted by googly at 4:10 PM on August 24, 2009

Part of my current pension fund is with VALIC. I have had no interactions with them in years, they pretty much ignore me. The original signup was a huge ordeal, as they took my name down wrong and it took forever to fix. I am only with them because it's an organization-funded (i.e. I don't put any money in it) pension plan. If I had to choose someone to manage my money, it wouldn't be VALIC. (I have a personal Edward Jones account, and in comparison they provide the best customer service EVER.)
posted by gemmy at 4:29 PM on August 24, 2009

Thanks to everyone for their input so far. My initial reaction was similar to ROU_Xenophobe as the fellow just walked in my open door (it's open for students, not sales people). But I am rapidly reaching the point in my life where I need to pay more attention to this sort of thing, so I decided to hear him out. I may cancel the meeting given the responses I have seen so far.
posted by Slothrop at 6:20 PM on August 24, 2009

Nthing that I wouldn't even talk to this guy. TIAA-CREF is the bomb, and there are probably more people who'd LOVE to get into it, but can't, than there are customers of VALIC to begin with.
posted by Citrus at 7:01 AM on August 25, 2009

Here's another option: postpone the meeting for six months to a year.

In the meantime, read a few books. You might want to start with

* The Lazy Person's Guide to Investing
* The Bogleheads Guide to Investing

tl;dr: fees are a HUGE factor in how much your investments are worth when you're ready to use them (when your kids are ready for college, or when you retire). It's almost impossible for a managed fund to consistently outperform an index fund, for the simple reason that a managed fund has to outperform not just the index fund's basic returns, but ALSO the additional fees attached to the managed fund.

"I am rapidly reaching the point in my life where I need to pay more attention to this sort of thing"

Good for you for realizing that. Something to consider, though: many people have found that the best way to pay that attention is to clearly define your goals and then monitor your investments to make sure they're aligned with your personal goals. Watching stock tickers or trawling the net for stock tips is often a poor, risky way to pay that attention.

I would be highly surprised if anyone could consistently beat TIAA-CREF index funds.

Good luck!
posted by kristi at 9:49 AM on August 26, 2009