Why Fidelity Sucks

Posted by Madison on September 24, 2009

Fidelity Solo 401k

I opened a Solo 401k at Fidelity last year. However, I held off on making our contribution until just this month, so that we would be able to more accurately pinpoint our income.

This is one of the best characteristics of the solo 401k. As long as you establish your plan in the prior calendar year, you don’t need to make your contributions until your tax filing date, including extensions.

Fidelity Rejected My Contributions

Unfortunately, Fidelity sucks. I just sent in our contributions, and they were rejected. Apparently they closed my account, because my name didn’t match their records. I got married six years ago, but I have a different account there that was opened before that.

So let me get this straight, their computer system can’t handle opening a new account for someone who got married and uses their married name? Give me a break. I must be the only person to have ever gotten married and change their name, right?

Fidelity Service Impacts Our Tax Bill

And this is much worse than when Scottrade tried to make me pay fees to change my name! Because they closed my account last year (and did not notify me), I can no longer make my solo 401k contribution for last year.

Since my extension was filed with an assumed solo 401k contribution, I’d be on the hook for additional taxes, including penalties and interest. I spoke with a supervisor about the situation, and he apologized. However, that apology doesn’t pay the tax bill! Thanks Fidelity, you suck!

After spending hours brainstorming, I came up with a back up plan to divert my contribution to my husband since Public Employees can Double-dip on Retirement. Thank goodness we live in a community property state too, otherwise I wouldn’t be able to just switch it like that without other repercussions! Although I’m not happy about it, at least we avoided a large tax bill full of penalties and interest.

Fidelity Loses Our Business

I had planned to move a significant amount of money to Fidelity, using my solo 401k to execute a Roth IRA Conversion Strategy to Avoid Taxes. Looks like they’ll miss out on my business.

Instead, as soon as they cash the check for my husband’s contribution, I’ll be moving my account to a Vanguard solo 401k (which wasn’t available when I opened my solo 401k, but offers fantastic Vanguard Admiral Shares).

I’m sure it won’t matter to them that I’m moving my account. However, I’m a firm believer in taking your business elsewhere to demonstrate unacceptable service. They made a mistake they couldn’t fix. I assured them I’d tell everyone I knew, which is all of you! And for now I’ll be skipping the Fidelity credit card in favor of the Schwab credit card.

Taxes are complicated, so it’s very important to have a service provider you can trust. Unfortunately, Fidelity wasn’t reliable enough. Vanguard, my paperwork will be in the mail shortly!

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Comments to Why Fidelity Sucks

  1. Madison, you ROCK!
    I’m sure they will regret this decision.

    Libby Johnson

  2. that is why I never changed my name. (well, really I never changed my name because it’s an antiquaited tradition based on men’s ownership of women, but ease is a nice byproduct that validates my choice of authenticity and simplicity)


  3. I called Fidelity yesterday. I wanted to transfer money in 2 IRA accounts that were in cash money market reserves to a local bank. The Fidelity Rep. fell back on the technical regulation that only 1 distribution can be made a year from a retirement account. Since I am in my 40’s this is not a distribution, but a roll over. I explained to them that my CPA shows that on the front page of my 1040. My objective was to move the money market reserve funds since the $1 is no longer guaranteed. Yet, they would only cut me a check for distribution from one account.


  4. @ Libby: I sure hope so!

    @ Beth: If only I could have been able to see into the future what a pain it would be! …ok, well I would have still changed it…


  5. @ Lee: What? Seriously? That’s even more of a problem than what happened to me. You get 60 days to complete a rollover, and really, it’s not their responsibility to track the rollover, it’s yours.

    I even went through their 123 pages of IRA disclosures to see if they had some weird provision, but I couldn’t find any.

    Ok, Fidelity, strike two!


  6. I think any articles related to Roll Over IRA would be helpful

    Also if there are any options to take loan against Rollover IRA woudl be really helpful

    I am lookign borrow from my retirment accoutns for down payment for buyign the house


  7. @Beth: wow you’ve really thought about that a lot, for my wife she was EXCITED to GET to take my name so to each their own.

    @Lee: always do direct rollovers to avoid this problem.

    Madison, don’t put the blame solely on Fidelity. In some small part, it’s mostly their problem, it’s your problem too for not updating your name information with EVERYONE you have or have had an account with after you changed it.


  8. @ PK: I agree, if I would have updated my name on everything, I could have avoided this.

    However, that’s much easier than it sounds…

    I actually tried to update my name with Fidelity in the past. But they keep changing my accounts back to my maiden name, insisting that their records are correct. I spent 20 minutes on the phone and they still couldn’t get it right.

    There’s a certain level of customer service that I expect. Spending a ridiculous amount of time, or paying fees to change my name is where I draw the line.

    It’s funny because I was able to change my name on my credit cards with one quick call!


  9. PK: Some institutions do not provide for a direct rollover. Therefore, to move the IRA to those institutions a distribution is necessary to rollover the funds.


  10. ON THE SUBJECT OF FIDELITY: Today I received an Account Profile Confirmation form from Fidelity in the mail dated Sept. 11th. The cover letter that is included states that the SEC requires them to verify the personal and financial information of each Broker and Mutual Fund account owner on a periodic basis. I also use TD AMERITRADE and never received this form from them. Does Fidelity simply use the SEC regs. to qualify their customers? For those that use Vanguard and other MFCs please let me know your experience.


  11. TO MADISON: Have you considered still opening up a SEP? That is what I do for my husband’s company with Fidelity. I am surprised that Fidelity did not suggest a SEP since the extension date has not passed.


  12. @ Lee: Brilliant idea! Why didn’t I think of that? The due date for the establishment and the contributions is the extension date, so we’d be ok. Let me think about this one…


  13. MDP: Really not that brilliant, just a familiar retirement plan for me since we use it. You are really the brilliant one to have this blog that allows for shared experiences! Your blog posted with content are brilliant too. The content provided added value since it is not a cut and paste of other financial articles. Keep it up. Being real helps others!!!!!


  14. I was going to mention the SEP IRA as well, as you can contribute up to the filing deadline (extensions included). The only difference is that you can’t contribute as much to a SEP as you can with a Solo 401k. But it should be enough to help lower your taxes. But if you go that route, I would still recommend opening it at Vanguard.

    By the way, I still haven’t made my full Solo 401k contribution either – I was waiting until I had my taxes finalized, which should be next week. I opened my account at Vanguard, primarily because I already had some taxable accounts with them. But this makes me glad I went that route.


  15. Ahh… the dreaded name change.

    Besides the system being inadequate, I still don’t understand this silly tradition. Most other parts of the world don’t bother with this so why are we?


    Michael – The Fat Loss Authority

  16. Sounds like their was a misunderstanding and you’re just bitter. I have used Fidelity for 10 years and they are awesome. But if I was able to, I’d go Vanguard.


  17. @ Patrick: The SEP was a great idea. However, the more I think about it, it might not work out so well.

    Because we’ve been planning to use the 2010 Roth conversion strategy next year, it might create more trouble for us. The SEP IRA money counts in the basis for the pro rata calculation.

    @ Michael: I guess that’s why traditions are traditions…

    @ Steve: I too loved Fidelity as we’ve happily used them for a long time (in addition to Vanguard).

    And you’re right, it may have been a misunderstanding to figure out which name should have been on the account.

    However, closing the account all together without notifying me, was indeed their mistake. The supervisor (who was very nice) did admit they screwed up and tried to fix it for me. Unfortunately, you can’t go back in time to retroactively open the account.


  18. I have been with Vanguard for 7 years, this past month was a disaster, a simple change to the contribution date and everything was FUBAR. Pointing the finger at the companies while it may be satisfying, I think misses the point. The IRS regulations they must comply with are extraordinary, and I believe these are the root cause of the problems. I almost switched to Fidelity, then I looked at the paperwork involved and saw many more potential problems with transferring my accounts (401k & 529), so I left them in place.


  19. I know this is an old thread and so this may not get a lot of looks, but I just had to vent. I googled “Fidelity Sucks” and found this.

    Just got off the phone with the Fidelity 401K “escalation team” handeling my dispute and have decided I will (every chance I get) let the world know what “Butt Nuggets” the Fidelity 401k people are.

    I’ve got about 200k in my 401k and took out a 15k loan. Shortly afterwards I had to take a leave of absence due to a work related injury and so my loan pymts could not be deducted from my pay check. They send me a coupon book with a bunch of $64 pymt coupons. Since I don’t get paid by disability weekly, but EOW; I wait for a few weeks and pay up and then a little ahead too. BTW, they will not allow me to pay online unless I am paying off the complete balance. What a pain in the ass it is to deal with Fidelity. So, I make a pymt. of $448 in Nov. = One pymt for several wks. Later in Jan I get a notice saying I am behind and owe about $700 (forget the exact amt.) ..so I send out a check for $961 == 15 pymts. which they receive and say they sent back on Feb 16 ..because they only accept certified checks. I never received the notice or check. Funny thing is they accepted my first personal payment which was a check from the same checking account. Consequently they defaulted on my loan on Mar 31. No phone call, letter ..nothing. They say it it not reversable and now it looks like this will cost me about $6500 next tax yr. I know I should have paid more frequently ..but they refused my money then let it go into default without telling me. I have yet to receive the check. I know I sould have noticed the check not clearing, but my banking is usually done through my company CU which is in TX ..I’m in Calif. and so started using my wifes bank to deposit checks and writing checks while on LOA. I just assumed they cashed it and all was alright.

    Now I am preparing a “claims and appeal” letter to Fidelity. Guess I need a lawyer and so will need to contact one as well as see what I can learn from the IRS that might help.

    Any suggetstions ..other than don’t be so lazy next time??

    Oh Yeah, Fidelity Sucks!!! You lost my business Fidelity and I promise I will spread the word.. There. Now I feel so much better. Might start a facebook group and maybe fb page.


  20. I have to admit, in general, it is unwise to change one’s name. I know it is the tradition when getting married, but it is really not necessary and indeed, often detrimental to change your name legally.

    I am an attorney and my wife is an accountant, we have retained our pre-marital names for, well, ease… and avoiding problems. Neither of us has encountered problems, nor professional issues so far.

    Think rationally abou this, ignore the status quo!t

    Unwise to change name

  21. I gotta repeat what many have said. Fidelity sucks. Try a local credit union as an alternative. They offer better service delivered by friendly neighbors, fewer fees, higher return rates, and an overall better client experience. Companies like Fidelity should be regulated out of existence.

    Tom B.

  22. I have to go with Fidelity sucks as well. When I was overseas I opened 529 accounts for my kids in my Mom’s name and put my money in (I transferred it from one of my Fidelity accounts). Now that I am back in the US, they won’t put the accounts in my name “for tax purposes”. So I cashed in all of my Fidelity accounts and transferred the assets (cash). Fidelity then sits on my money for weeks (3-5 weeks according to their web site) so I have no access to my money for over a week so far. What kind of BS is that? You can’t even get your money back from these clowns in a timely manner.


  23. I just received a bulk mail letter addressed to “Dear Valued Customer” that notified me that I had “…updated the delivery method of certain literature through Fidelity Investments website.”

    I’ve never been a Fidelity customer. The letter’s second paragraph goes on to say:
    “We were unable to reach you through your e-mail address. Please verify……through NetBenefits at http://netbenefits.fidelity.com and choosing Mail Preferences from the Your Profile tab.”

    Can this really the way Fidelity gets info on you? If so…well then “Fidelity Sucks” is absolutely true.


  24. I work with 401k Plans and thought I’d add some thoughts. First, if you have a plan document (and you must), it governs your plan not the Fidelity Investment vehicle. If they reject your money, so what. You have a plan document that defines the terms of your plan and it permits the contribution. Just find a trust to accept it (bank is easy solution). SEP not a great solution if you have already adopted your 401k Plan, if you adopt the SEP on IRS Form 5307 (which most people do) it has an exlcusive plan rule, meaning it must be the only retirement plan you sponsor (and you’ve already sponsored a 401k when you adopted the plan) This is proabbly too late to help you but I hope it is informative. Also, when you moved to Vanguard, I hope you amended and restated the Fidelity plan rather than adopted a new one. Otherwise you have two plans in existence.

    One more thing, if you had your husand contribute, he should have had earned income from your company. Plan has to be for the exlcusive benefit of your employees so he has to a bona fide employee.


  25. Unfortunately Fidelity and Vanguard both “suck”. They are in business to collect fees, often hidden, from their clients. These supposed “Solo 401k’s” that they offer are hardly Solo 401k’s. If you want to check out a real Solo 401k, one that allows you to invest in anything that the IRS allows, check out Longboat Retirement Solutions’ website. This is a REAL self directed retirement platform that gives you checkbook control. STOP giving these big banks your money. You do not need to. You can control your retirement savings!


  26. Yeah LARS, Self Directed 401k’s are great if you want to label your returns with IRS AUDIT ME.
    I am assuming that with Checkbook control you are refering to Swanson v. Commissioner, 106 T.C. 76 (1996)…. The IRS does not like these plans since they are usually not run correctly and are often abused.

    Also Vanguard and Fidelity are Brokerage Houses not banks. Neither company will give you a home loan or loan you money other than Margin.

    AS to Fidelity and Vanguard 401ks…. Your Plan picks your investment options and pays for them. They can pay more for more fund options or stick you with the default funds. No One runs a 401k for free. You don’t work for Free… The Plans set the rules. Fidelity and Vanguard are just the flunkies enforcing them. The rules for the plan would be the same no matter where you go.

    Best of Luck


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