TIAA's Mission-Based Approach Separates Us from the Pack

Roger W. Ferguson
I'm proud to come to work every day with 16,000 men and women1 who are dedicated to helping our clients succeed and making a difference in the world. We are passionate about living our values, achieving our mission and doing the right thing for our clients in education, healthcare and other nonprofit professions. Our consistent investment performance2, prudent risk management3, low costs4 and lifetime income options are in our opinion exactly what the marketplace needs—and what our clients get.
Since Andrew Carnegie founded us in 1918, we have put our clients first. As we have expanded the range of services to meet their needs, our purpose and priorities have never changed. We continue to operate without profit in accordance with our charter. We focus solely on delivering excellent service and enhanced returns5 to our clients. We aren't concerned with public shareholders, because we don't have any. Any earnings we make are returned to our participants or reinvested in the business, which helps us remain strong to meet our future promises.
Like any company successful enough to have weathered the financial storms of the last century, we have changed over the last 100 years. For the better. And we have done so to meet the evolving needs of our customers. We are constantly strengthening our core businesses, expanding into new areas, such as retail banking, improving our operations and enhancing our customer experience. Our clients demand nothing less. As we evolved, we've become one of the highest-rated financial institutions6 in the world. And we've paid more than the guaranteed payouts to our fixed annuity holders every year for more than half a century7.
Our structure and heritage makes TIAA unique. We don't pursue growth at the expense of our clients' best interests. We use holistic financial planning to help our clients move to and through retirement and we don't charge a fee for these planning services. Moreover, our clients don't even need to purchase TIAA-specific products to obtain our financial planning services.
Our compensation practices are aligned with meeting their financial needs. Our advisors are paid a salary plus an annual bonus, which is not based on the profit or revenue to TIAA that any product may deliver, but on neutral factors such as the time required to educate our clients on the benefits of more complex products. When an advisor does recommend a TIAA investment solution, the recommendation is reviewed by a central team to ensure that our clients' interests come before any other consideration.
The new fiduciary rule will require retirement advisors to put their clients' interests first, and prohibits using bonuses or other incentives that would cause them to make recommendations that are not in the best interest of the investor. We don't need new regulations requiring us to put our clients' interests first.  That's the way we have always operated. We were one of the few financial firms to offer our support and ideas for making the proposed fiduciary rule better. We articulated this support in testimony to the Department of Labor and in seven letters of support to the department. We've proven a firm can be successful while putting clients first.
Our product fees are also some of the lowest in the industry8 and our performance is top-rated9. Any apples-to-apples comparison will conclude that our pricing is well-below industry averages. As the widely-recognized and respected independent source Morningstar Direct reports:
  • 81 percent of our mutual funds and variable annuities have expense ratios that are in the bottom quartile of their respective Morningstar categories10.
  • 100 percent of our institutional-class lifecycle funds are rated 4 or 5 stars11.
     
Our honesty, transparency and results speak for themselves. But we are proud that our clients—those who know best how we help their lives—speak as well. More than 90% of our clients have stated that they trust us12. We earn their trust from our actions. Whether a client has $500 or $5 million, we provide personalized financial advice at no additional cost. And according to a recent survey of the not-for-profit market, our participants have the highest average retirement account balances in the industry13.
I recall a letter last year from a family thanking us for our tradition of sending a gift to our participants when they turn 100 and every birthday thereafter. The letter is a powerful reminder of what makes TIAA a different kind of financial services organization.
"Thank you for the beautiful plant to congratulate me on my 102nd birthday anniversary. The pension from TIAA-CREF and other investments enable my wife and me to retire in a very comfortable retirement community. None of our investments mean more to us than TIAA-CREF. My wife, Martha, who will be benefiting from TIAA-CREF if she survives me, and I will be celebrating our 82nd wedding anniversary in less than six weeks. According to Wikipedia on my Apple computer, purchased with CREF funds, only four living couples in the U.S. have been living longer."
Our organization celebrates the history our participants share with us—they are a joy to us all. The simple fact is that our clients' success is our success, and our success today can mean millions of secure retirements tomorrow. We are proud that we paid retirement benefits to 31,000 annuitants over the age of 90 last year14. That is why we exist—to help deliver outstanding financial outcomes to the millions of people and thousands of institutions that we serve.
 

"Difference Makers"

1 https://www.tiaa.org/public/pdf/facts_stats.pdf
2 Winner of the Thompson Lipper Best Overall Large Fund Company award five years in a row. The award is based on a review of 36 companies in 2012, 48 companies in 2013 and 2014, 37 companies in 2015, and 34 companies in 2016 risk-adjusted performance. Past performance is no guarantee of future results. The Lipper Large Fund Award is given to the group with the lowest average decile ranking of three years' Consistent Return for eligible funds over the three-year period with at least five equity, five bond, or three mixed-asset portfolios. Note this award and the other factual statements in this document pertain to mutual funds within the TIAA-CREF group of mutual funds; other funds distributed by Nuveen Securities were not included. From Thomson Reuters Lipper Awards, © 2017 Thomson Reuters. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of this Content without express written permission is prohibited. Past performance does not guarantee future results. Certain funds have fee waivers in effect. Without such waivers ratings could be lower. For current performance, rankings and prospectuses, please visit the Research and Performance section on TIAA.org. TIAA-CREF Individual & Institutional Services, LLC, Members FINRA and SIPC.
3 https://www.tiaa.org/public/why-tiaa/how-we-invest#20000172634152
4 Morningstar Direct as of June 30, 2017.  Data is based on the Institutional Share Class.  Other share class expenses will vary. 
5 Past performance is no guarantee of future results. Any guarantees under annuities issued by TIAA are subject to TIAA's claims-paying ability. TIAA Traditional is a guaranteed insurance contract and not an investment for federal securities law purposes.
6 For stability, claims-paying ability and overall financial strength, Teachers Insurance and Annuity Association of America (TIAA) and TIAA-CREF Life Insurance Company (TIAA Life) are one of only three insurance groups in the United States to currently hold the highest possible rating from three of the four leading insurance company rating agencies: A.M. Best (A++ rating affirmed as of June 2017), Fitch (AAA rating affirmed as of February 2017) and Standard & Poor's (AA+ rating affirmed as of August 2017) and the second-highest possible rating from Moody's Investors Service (Aa1 rating affirmed as of August 2017). There is no guarantee that current ratings will be maintained. Ratings represent a company's ability to meet policyholders' obligations and do not apply to any product or service not fully backed by the issuer's claims-paying ability. The ratings also do not apply to the safety or the performance of the variable accounts or mutual funds, which will fluctuate in value.
7 Past performance is no guarantee of future results. Any guarantees under annuities issued by TIAA are subject to TIAA's claims-paying ability. TIAA Traditional is a guaranteed insurance contract and not an investment for federal securities law purposes.
8 Morningstar Direct, March 31, 2017
9 Winner of the Thompson Lipper Best Overall Large Fund Company award five years in a row. The award is based on a review of 36 companies in 2012, 48 companies in 2013 and 2014, 37 companies in 2015, and 34 companies in 2016 risk-adjusted performance. Past performance is no guarantee of future results. The Lipper Large Fund Award is given to the group with the lowest average decile ranking of three years' Consistent Return for eligible funds over the three-year period with at least five equity, five bond, or three mixed-asset portfolios. Note this award pertains to mutual funds within the TIAA-CREF group of mutual funds; other funds distributed by Nuveen Securities were not included. From Thomson Reuters Lipper Awards, © 2017 Thomson Reuters. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of this Content without express written permission is prohibited. Past performance does not guarantee future results. Certain funds have fee waivers in effect. Without such waivers ratings could be lower. For current performance, rankings and prospectuses, please visit the Research and Performance section on TIAA.org. TIAA-CREF Individual & Institutional Services, LLC, Members FINRA and SIPC.
10 Based on Morningstar Direct (as of 6/30/17) expense comparisons by category, excluding Money Market products.  TIAA-CREF mutual fund and CREF variable annuity products are subject to various fees and expenses, including but not limited to management, administrative, and distribution fees; variable annuity products have an additional mortality and expense risk charge.
11 Lifecycle Funds are subject to the equity and fixed-income risk, as well as asset allocation risk. The target-date for Lifecycle Funds is the approximate date when investors plan to start withdrawing their money.  The principal value of the fund(s) is not guaranteed at any time, including at the target date.  TIAA-CREF has 24 Lifecycle Fund (12 actively managed funds and 12 index funds.)  The Morningstar category for Lifecycle Funds is named Target Date and Morningstar groups funds with the same target date in compiling its individual fund rankings. Source: Morningstar Direct Data as of September 30, 2017.  Morningstar ratings based on the lowest cost share class for each mutual fund, based on U.S. open end mutual funds.  For a fund with multiple share classes and the same pricing, the share class with the longest performance history is used.  Morningstar ratings may be higher or lower on a monthly basis.  Morningstar is an independent service that rates mutual funds.  The top 10% of funds or accounts in an investment category receive five stars, the next 22.5% receive four stars and the next 35% receive three stars.  Morningstar proprietary ratings reflect historical risk-adjusted performance and can change every month.  They are calculated from the fund or the account's three-, five-, and ten-year annual returns in excess of 90-day Treasury bill returns with appropriate fee adjustments, and a risk factor that reflects fund or account performance below 90-day T-bill returns.  The overall star ratings are Morningstar's published ratings, which are weighted averages of its three-, five-, and ten-year year ratings for periods ended September 30, 2017. Past performance cannot guarantee future results. For current performance and rankings, please visit TIAA.org/public/tcfpi/InvestResearch.org/public/tcfpi/InvestResearch.
12 Individual SQMP Survey conducted by research firm GfK Custom Research – December 2016.
13 2017 PLANSPONSOR 403(b)/457 Buyer’s Guide.
14 As of 12/31/16
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