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Thrift Savings Plans? Need Advice

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Nov 9, 2005 1:59 am

Here is my deal, I have a client who has about 75K with me. Client also
has a 125K+ gov. tsp plan that I would love to have rollover to me.

Each time we meet, I feel as if he is pumping me for information… for
his current employer plan and doing very little business with me

He loves is thrift… such great options to invest in! (yeah right)
Shown him just about every option there is… Fees too high… etc…
"not sure if activly managed MF are as good as these index funds that I

Anyone had any experience in dealing these gov’t plans before?

Are people simply that ignorant or am I dilusional.

Nov 9, 2005 2:15 am

Mr. Jones

I realize that the TSP has several low cost investment options, but fees aren't the only thing we should be looking at.  Obviously your not 100% sure what you should be doing with this since your constantly asking for my input about this.  See this S & P 500 index fund, it was down 46% over this 3 year period and it only cost .2% for you to do that.  I have to be paid, but the value I bring will offset my costs or you should fire me and find someone who can add value.  Pull up the S& P 500 company list and show them the good and bad companies, explain how the index must hold the junk and an active fund can dump the losers.

I would like to help you construct a successful portfolio and manage all of your money as one of my trusted clients.  What would it take for me to bring over your TSP?  If you prefer index funds we can buy them through vanguard or these ETF's in a wrap account where I charge about 1% a year or else we can use these funds where.... 

Nov 9, 2005 2:56 am

The TSP has about 6-8 crap index funds. But if every investment reco hasnt worked, then show him somehting else. Show him the taxable consequences to his beneifciary if he dies and the money is still in his plan. Show him perhaps a stretch IRA concept. I’m positive he has no clue what that is… You need to hgit him with a different angle to eventually get him to s ign forms. As for GETTING the money over once the paperworks signed- good luck… I moved a few accounts abot 18 months ago and it took about 3 months…

Nov 9, 2005 3:05 am

i agree about the new angle… however how can i make a client in their mid 30’s see the importance of a stretch ira. 

Nov 9, 2005 3:12 pm

You guys have not done your research the Gov TSP is one of the most efficient plans out there today! BAR NONE! The only investments that can beat the the TSP is DFA!

I suggest a lot of hand holding because you cannot compete on the cost or the performance side!

Good Luck.

Nov 9, 2005 3:50 pm

If he loves the TSP, why would you have him make a change?  ...other so that you can earn some money.

Nov 9, 2005 4:15 pm

i agree about the new angle... however how can i make a client in their mid 30's see the importance of a stretch ira"

thats a different story- I apologize for assuming they were older.... In that case, you can always speak of the control issue. Right now, they are limited by the sparse investment options in their TSP. By rolling it out, they gain access to numerous investment options that they have control over...

"If he loves the TSP, why would you have him make a change?  ...other so that you can earn some money"

Its one thing if the client has the knowledge to realize the schortcomings of the TSP and still chooses to stay, its another if they are educated enough to realize that most likely their best option is to expand their options and utilyze the help of their professional. As for getting paid, the 1-2% the FA would get on that asset level is barely enough to fill up the SUV, so that cant be the overriding reason...

Nov 9, 2005 6:56 pm


Are you an advisor?  If so why don't you invest all of your clients money in no load funds.  I mean the charges hinder performance to some extent.

This guy obviously wants trusted advice, you cannot provide that or any level of service for free.  I would hardly say the indexes are the best thing outside of DFA, if that were the case I would invest my money in index funds and I don't and won't other to fill in gaps.

Nov 9, 2005 7:46 pm



Are you an advisor?  If so why don't you invest all of your clients money in no load funds.  I mean the charges hinder performance to some extent.

I can get paid by the hour. This allows me to allocate retirement accounts for my clients and get paid. I also have several  million dollars with discount firms that I get paid on for a percentage basis !    You do not always have to custodian the assets with your BD if you do you are loosing out and need to adapt to the times   

Nov 9, 2005 8:44 pm

I prefer to manage my clients money.  How many of your customers listened to your recommendations then never acted on them because they had to place the trades themsleves, how can you ensure the trades were properly placed?  How can you prevent the client from making stupid decisions without having custody of his/her assets. 

There is nothing wrong with getting paid by the hour, just like there is nothing wrong with rolling the TSP into an account under your control.  I would never not directly control money I have the ability to control.  It is easier to monitor, report on and control.

Getting paid a percentage on assets is no different from some other form of comp.  I am a CFP and always here the BS about commmissions vs. fees.  FACT: some clients hate to pay fees.  Every quarter you send them a statment with fees coming out they get pissed about it.  I can ensure you in many situations they are better off paying commissions than fees.

Nov 9, 2005 8:49 pm

Greenbacks my question was suppposed to be directec toward anonymous.

My apoligies

Nov 10, 2005 2:00 am

bankrep, I am an advisor.  I do believe in getting paid for my work.  I also recommend that my clients remove money from the TSP when they no longer work for the Feds.   However, I have never had a client who “loved” the TSP.  If I did, I would have them leave the money alone. 

Nov 13, 2005 2:51 pm

Are <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />they CSRS or FERS?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Different deal, while 90-24 doesn't work they can make a 1 time distribution. Considering FERS is partly SS I figure some good diversification is needed and some guarantees (5% a year to age 80 or the market is a great POA)    

May 22, 2006 9:43 pm

This is what y'all are fightin' and what the thrift plans believes and preaches..

Most Investors Would be Better Off in Index Funds"...Peter Lynch, Barons pa 15 April 2, 1990.

"The Best Way to Own Common Stocks is Through an Index Fund"...Warren Buffett, 1996 Berkshire Hathaway Annual Report.

"The Deeper One Dives The Worse Things Look for Actively Managed Funds" ... William Berstein, The Intelligent Allocator 2001

"The Results fo This Study Are Not Good News for Investors Who Purchase Actively Managed Mutual Funds. No Investment Style Generated Positive Abnormal Returns Over the 1965-1998 Sample Period.  The Sample Contained 4,686 Funds Covering 26,564 Fund Years"...James L. Davis, Mutual Fund Performance and Manager Style, Financial Analyst Journal 57,(2001)19-27.

I have about 762 more documented and authoritative sources on this concept. 

May 23, 2006 3:21 am


With all do respect investor returns have little to do with the investment vehicles they choose, they have more to do with investor behavior - the feds, sec, money magazine all assume people are rational.  Clearly not including this variable into the equation produces results that are useless.  I always add lots of new clients in down markets... 

So saying index funds produce superior returns could be true - but saying investors achieve the highest returns by using index funds is inconclusive.  I don't buy it and I have supportive research that provides quantitative results proving this to be true.

Investor behavior study shows weak returns

Industry 401k plan providers have tried diligently to create clear, effective investment education programs to help their clients achieve positive results. But despite their efforts, it hasn’t worked.

The failure of participant education was made very clear in a recent study by Dalbar, Inc.1, which tracked investor returns from equity, fixed income and money market mutual funds from January 1984 through December 2002. The study shows the following comparisons:

The average equity investor earned 2.5% annually

-Inflation was 3.14%

-The S&P 500 Index earned 12.22%

The average fixed income investor earned 4.24% annually

-The Long-term Government Bond Index earned 11.70%

According to Dalbar’s press release about the study, "investors continue to chase investment returns to the detriment of their pocket books. Motivated by fear… investors pour money into equity funds on market upswings and are quick to sell on downturns."

May 23, 2006 6:07 am

Greenbacks, you are truly and idiot.  Let me guess how your conversation goes with a TSP client.

"let's use the TSP plan to give you proper diversification.  Let's pepper in some convertable bond funds, buy a laddered CD and bond portfolio, look at some small caps, add some style specific Large cap Value, and take a look at some individual stocks.  Oh, sorry Mr. Client, I forgot, the TSP doesn't have any of these asset classes.  I also forgot that the S&P was beaten by 68% of actively managed funds the last 5-years.  A child with a dart could have thrown one at the sunday business section and would have done better than the index."

To answer the question on this thread, go to the TSP website, print out the rollover paperwork, and put sign here stickers on the forms.  Make it easy for the client.  Tell the client that proper diversification is key, and why would he keep his money someplace where only 5 choices are available?  Tell him that the government can't even balance the budget, why would he keep his money someplace that runs in the red?

May 23, 2006 2:19 pm

I agree with rankstocks...

As a side note, managing investor behavior is another reason I like VA's for folks in their 50's and 60's...I'd rather them get 10% than 12% and feel comfortable, as opposed to having them sell out and get 3% instead of 12%.

May 23, 2006 6:11 pm

Bank Rep

I am not saying that investors are better off in index funds. Warren Buffett and Peter Lynch are just a few of the people that are saying that. Disagree with them, not me.  Send your research to Warren Buffett

May 24, 2006 12:43 am

Buffet... Lynch... Times have changed?? Index down what 5-10% over the past two weeks.  

People who like the funds like the convenience of easy access, moving to different funds at no cost. Seems there is a lot of people with 100 to 200k in these TSP's.