How the New Jersey State Police are Being Cheated

June 30th, 2020
June 30, 2020
Joseph Vecchio

Let me be clear… When I say LEGAL THEFT, I am referring to LIMITING retirement plan participants to choose from HIGH COST INVESTMENT OPTIONS, as opposed to offering LOW-COST investment alternatives. (The difference = legal theft)

The SEC even acknowledges that fees & expenses affect your investment portfolio.
These fees may seem small, but over time they can have a major impact on your investment portfolio.
https://www.sec.gov/investor/alerts/ib_fees_expenses.pdf

While helping a client review their investment portfolio I uncovered a disturbing fact, the NJSDECP investment options stink!!!

BUYER BEWARE = CAVEAT EMPTOR!!! The devil is in the details
The NJSEDCP Retirement Plan is for NJ State Employees.
IS THIS THE BEST THE STATE OF NEW JERSEY CAN DO FOR IT”S PUBLIC EMPLOYEES?

The NJSDECP Plan & all details can be found here:
http://www3.prudential.com/email/retirement/IMFPWeb/hosted_websites/cs/njsedcp/workbook.html
(NOTICE the website is NOT SECURE!!!) Read my RED FLAGS at the end for more details.

The Plan is limited the Plan to 20 Investment Options = 20 Core Investment Options

Here is a breakdown of the Expense Ratios:
DCP Stable Value Fund 0.45%
Core Bond Enhanced Index/PGIM Fund 0.24%
Core Plus Bond/PGIM Fund 0.37%
PIMCO All Asset Fund 1.25%
Vanguard Wellesley Income Fund 0.16%
Vanguard Institutional Index Fund 0.04%
Prudential IncomeFlex Target Balanced Fund 1.36%
DCP Equity Fund 0.11%
Calvert Equity Fund Class I 0.75%
Large Cap Growth/ Columbia Management Fund 0.46%
QMA Large Cap Quantitative Core Equity Fund 0.54%
Polen Capital large Cap Growth 0.63%
Large Cap Value/LSV Asset Management 0.52%
QMA Mid Cap Quantitative Core Equity Fund 0.56%
DCP Small Cap Equity Fund 0.11%
Small Cap Growth II Fund/RBC/Wellington 0.88%
Small Cap Value/TBCAM 0.93%
Dodge & Cox International Stock Fund 0.63%
INVESCO Oppenheimer Developing Markets 1.00%
International Blend/Lazard 0.85%

IN ENGLISH:

The cost of an investment is the best predictor of future returns, according to a study by Vanguard. In other words, lower-cost investments typically perform better than higher-cost investments over long periods of time.

When choosing a fund, don’t look at past performance, focus on the costs.
The higher the fees, the worse funds perform, according to a study by Morningstar. And that held true across asset classes. Intuitively it makes sense: The higher the fees, the bigger the hurdle the fund must overcome to outperform its competitors.

Here’s why this number (the “Expense Ratio”) is important: If you put $100,000 into a mutual fund with an expense ratio of 0.70%, the mutual fund company is charging you $700/YEAR.
Over time as your portfolio grows the math gets larger. For example: Now you portfolio is worth $500,000 and you are paying 0.50% in unnecessary fees, that equals $2,500/YEAR that is being STOLEN from you!
You pay this every year!!!

Why the word STOLEN because you were not offered LOW-COST INVESTMENT OPTIONS.
By being limited by the 20 HIGH COST investment options as opposed to similar investments with low costs you are losing.

NOT ALL RETIREMENT PLANS ARE EQUAL
You could be losing hundreds of thousands of dollars in hidden fees in your retirement accounts. Over time, these fees add up and can dramatically reduce your lifetime savings.

Believe it or not, many investors pay ridiculous fees like these all the time without ever realizing it. Why? Because they never ask about fees!
Obviously, you’ll want investments with the lowest expense ratios you can find. For reference, an expense ratio of 0.03% is amazing, 0.70% or more is unacceptable, and everything in between should be questioned.

By keeping your investment costs low, you’ll have a greater chance of reaching your financial goals over long periods of time.

The NJSEDCP plan offer 2 Vanguard investments.

WHY ONLY LIMIT the plan to 20 investment options???

WHY not offer Vanguard alternatives to the high cost investments that are forced upon plan participants???

The average Vanguard mutual fund and ETF (exchange-traded fund) expense ratio is 82% less than the industry average.*

Vanguard is the GOLD STANDARD. Vanguard has a fairly unique structure in terms of investment management companies. The company is owned by its funds. The company’s different funds are then owned by the shareholders. Thus, the shareholders are the true owners of Vanguard.

So who offers investment advice to plan participants???
Prudential Retirement Counselors.
http://www3.prudential.com/email/retirement/IMFPWeb/hosted_websites/cs/njsedcp/counselors.html

DO YOU SEE THE CONFLICT OF INTEREST???
These licensed salespeople work for Prudential NOT YOU!!!

WALL STREET IS A BROKEN MODEL.
Investments merely need to be ‘SUITABLE’.
Suitability means they only need to prove that a product is suitable for you. They don’t need to take into consideration fees, quality, or expected investment return of the recommendation.
Additionally, financial advisors working under the “suitability standard” are able to sell products in return for a commission. This should be
Just about every big brokerage firm you know by name operates under the “suitability standard.”
Obviously, this creates a huge conflict of interest.

I am proud to be part of the XY Planning Network that sued the SEC over this B.S.

XY Planning Network sues SEC over Reg BI

QUESTION: Why are our New Jersey State Police’s Retirement Plan not being protected by a FIDUCIARY???

The NJSEDCP Plan offers a GOAL MAKER program.
They say it is available at “NO ADDITIONAL COST”????
What a joke??? All this is doing is creating a quasi- Target Date Fund.
Target Date Funds are ALL-IN-ONE done for you portfolios.
The GOAL MAKER creates 12 Possible portfolios
The EXPENSE RATIOS RANGE FROM 0.475% – 0.805%
VANGUARD TARGET DATE 0.09%
THE DIFFERENCE = LEGAL THEFT
Now I am willing to bet that most plan if not just about all realize how much they are overpaying in hidden fees?

COMPARE THESE HIGH COST FUNDS to Hackensack Meridian’s Target Date Investment Options via VANGUARD FUNDS:

Who is looking out for the participants’’ BEST INTEREST of the NJ State Employees’ Deferred Compensation Plan?

The questions I have are:
• WHY do people have to choose from horrible investment options?
• WHY are dedicated ‘Retirement Counselors’ NOT FIDUCIARIES??? (they are merely FINRA licensed salespeople)
• WHY doesn’t someone teach employees how to create a low-cost, diversified portfolio?
• WHO is benefitting from offering these high-cost investments?

Investing is not rocket science BUT you better understand it to retire successfully.
I believe in:
• Keeping things simple
• Nobel-prize winning research
• Focusing on what I can control

Don’t let Wall Street lead you to believe that investing is complicated. Wall Street LEGALLY STEALS FROM YOU by throwing out tons of data, charts, graphs, etc… They intentionally bury details in fine print that not many people read.

2 RED FLAGS THAT NEED TO ADDRESSED
RED FLAG #1
Prudential is managing this for the state of NJ & the link is NOT SECURE!!!

Under an unencrypted HTTP connection, any information that you send across the web can be intercepted by a hacker or other bad actor. In extreme cases, like in what are called man-in-the-middle attacks, someone could pose as a destination site—tricking you into handing over your credentials, credit card info, or other sensitive information.
“Encryption is something that web users should expect by default,” says Chrome security product manager Emily Schechter.
The use of HTTP has privacy implications as well. If you’re browsing on an unsecured connection, your internet provider and any bad actors can hypothetically see not just which site you’re on, but what specific pages.

RED FLAG #2
LACK OF DISCLOSURE OF OWNERSHIP
FYI I am not a securities attorney, or an attorney at all for that matter… I am raising questions in reviewing this plan on behalf of a client.
After reviewing the Fund Profile Fact Sheets I wonder WHY is Prudential’s ownership interest not disclosed on ALL fund fact sheets it has an ownership interest in???

Core Bond Enhanced Index/PGIM Fund – Why doesn’t the Fund Fact Sheet DISCLOSE that PGIM is an indirect, wholly owned subsidiary of Prudential Financial, Inc.???

QMA Large Cap Quantitative Core Equity Fund – Why doesn’t the Fund Fact Sheet DISCLOSE that QMA is a PGIM company and therefore Prudential has an interest In QMA???

QMA Mid Cap Quantitative Core Equity Fund – Why doesn’t the Fund Fact Sheet DISCLOSE that QMA is a PGIM company and therefore Prudential has an interest In QMA???

Please note that I am not inferring anything. I am merely asking questions.

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