‘Dumb Starbucks’ and Your 403(b)

Have you ever seen the TV show ‘Nathan For You’ on Comedy Central?  If you haven’t it’s a show about a comedian, Nathan Fielder, that “helps” small businesses with their marketing tactics.

However, Fielder’s suggestions aren’t exactly traditional, and are almost always very, very bad (albeit funny) ideas.  The business owners don’t know that Fielder is purposely feeding them ridiculous ideas.

I came across one of the episodes in which he outlines the idea for a coffee shop called ‘Dumb Starbucks’.  The idea is to use the exact same logo, color scheme, and branding of Starbucks, but put the word ‘Dumb’ in front of it. That way people will come into the store thinking it’s a real Starbucks and buy more coffee.

By putting the word ‘Dumb’ in front of Starbucks, it was safe from legal action under parody law because they were clearly making fun of Starbucks.

(The same way Saturday Night Live can use company logos and brands by clearly making fun of them)

The store was technically classified as an art gallery, not a restaurant and therefore didn’t have to adhere to the same rules and health code regulations that an actual Starbucks did.  When asked what happens if a customer gets sick, funny enough Fielder replied, “we don’t want any of our customers to get sick, but if they DO, technically it’s part of the artistic experience”.

However, when the store opened it quickly gained international mainstream media attention.  Many folks were calling it an artistic protest of the large corporate coffee chains and a “statement on consumerism”.  Some went as far to say that it was the street work of famous street-artist and political activist Banksy.

Hundreds of people lined up outside the shop and waited in line to come in and get cups of their coffee and baked goods (most of which were on-sale items from the local grocery store).

The amount of buzz and attention surrounding this coffee store was truly amazing.

You can watch a quick 5-minute clip from the show detailing it’s media coverage and craze HERE. (I recommend it!)

After I got done laughing at the ridiculousness of the episode, a disappointing connection to the investing world set in for me.

I had just finished interviewing Dina Isola of Ritholtz Wealth Management for a future episode of the podcast.  A large portion of the interview, and of Dina’s work, deals with 403(b) plans for teachers.

One point that got under my skin was when Dina brought up the fact that 403(b) plans for K-12th grade teachers are exempt from ERISA standards.  This means that 403(b) plans for those participants have to make less disclosures to the participants about the investments, and the employer does NOT have the fiduciary responsibility to vet the investments offered within that specific 403(b) plan.  This has led to a disproportionate amount of assets within 403(b)’s being allocated (sold) into annuities that cost investors significantly more in fees that add up over the years, and have high surrender charges to get out of.

Like the way ‘Dumb Starbucks’ was technically organized as an art gallery and was not responsible for the health of their customers, these 403(b) plans being non-ERISA are not responsible for making sure properly vetted investments, up to the fiduciary standard of care, are offered in the plan.

In the case of ‘Dumb Starbucks’, it was ultimately a funny experiment that made for a few days of news, and a lot of laughs from the TV audience.

In the case of non-ERISA 403(b) plans, it’s a lot more depressing to see the anger and shock when teachers find out their retirement plan at work isn’t what they thought it was.

In a portion of the episode that aired (featured in the video above), Fielder had a quote that struck a chord with me.

He said: “It was cool that people could draw their own meaning from a business that was just there to make money.”

It was funny to think about all the different meanings people put behind this ‘Dumb Starbucks’, when it was just there to make money off of them.

It’s not funny to think about the 403(b) plans that prey on unsuspecting teachers who think their retirement plan is there to help them, when in reality it’s ALSO trying to make money off of them.

Things need to change within a large portion of the 403(b) space.  If you’d like to hear more from Dina Isola and the work she and her husband Tony are doing to change the 403(b) space, I suggest starting with THIS VIDEO.

Be sure to check back next Thursday for Episode 75 of the podcast when I talk in depth with Dina about this issue.

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