Reasons not to like Fidelity

[eytonxav]

The Johnson's investments in the article are Private Venture and Pre IPO meaning the average investor doesn't have access but the Fidelity public funds couldn't have access because the company umbrella already owned them.

"If F-Prime (Johnson) controls 5 percent or more of a private company’s voting stock, then that ownership prevents the Fidelity mutual funds from buying the same security before or during an IPO, according to the Investment Company Act of 1940. Fidelity told Reuters that it concurs with that reading of the law, which is enforced by the Securities and Exchange Commission."

Much ado about nothing, so why did you post that link in the first place?

 

[MRG]

Much ado about nothing, so why did you post that link in the first place?

Someone who has a axe to grind. Let's see the article says that no laws or ethics are broken.

So we don't forget how about fund companies that do break laws and ethics to the tune of 1.3 billion in fines.

https://en.m.wikipedia.org/wiki/2003_mutual_fund_scanda

There's many more of these types of issues that arise every year. Many are repeat offenders.

FWIW I've seen folks play with pre-ipo "investments" some made a lot of money. More lost a lot more money.

 

[OverThinkMuch]

Life's not fair, get over it.

In general mocking and spamming a topic isn't fair either. None of your posts cover the subject of the article.

The article focuses on company owners buying a pre-IPO stock, which then prohibits any Fidelity mutual fund from buying that same stock pre-IPO. If you own a total stock market fund, it eventually must buy the IPO.

 

[ERD50]

In general mocking and spamming a topic isn't fair either. None of your posts cover the subject of the article.

The article focuses on company owners buying a pre-IPO stock, which then prohibits any Fidelity mutual fund from buying that same stock pre-IPO. If you own a total stock market fund, it eventually must buy the IPO.

It's not mocking, it is serious. Life's not fair. Some people and groups have access to things that some of us don't.

Pick your battles. I see this as such a tiny issue, it's not even worth a passing comment.

As I said, the big index funds don't deal with IPOs, it's a non-issue. If that IPO eventually grows big enough to be bought by an index, I can't imagine that this initial transaction has any measurable impact at that point. Someone had to buy the IPO.

And it's not like every IPO results in a gain. It might be best for these high risks to be borne by someone outside their other funds. Can you show any evidence that Fidelity active managed funds (which can easily be avoided anyhow, just buy indexes) were measurably hurt by this? Do they under-perform their peers actively managed funds?

I'm with some other posters - much ado about nothing.


-ERD50

 

[calmloki]

Reasons not to like Fidelity

They changed my no annual fee Fidelity Visa and Amex cards from BofA backing to some other bank and changed the card numbers and forced me to change all my auto pays and raised the cash back. It was a real hassle, though they did manage to continue putting 2% of our spending in a Fidelity bank account on a regular basis. Their dull green cards aren't as flashy as other black or gold or silver cards.
Fidelity has been pretty boring - I keep forgetting to transfer the money built up in the Fidelity bank account so it just keeps growing. Think those are the only reasons they p*ss me off.

 

[haha]

One issue is that the Johnson family purchased them and that actively managed funds offered by fidelity could not because of the family fund purchase. Fidelity funds later purchased them at much higher prices when the Johnson fund sold them.

If this is true, it would be a serious charge. Were these sales made directly to the Fidelity Funds, or traded with others in close time relation to the Johnson sales?

Ha

 

[Huston55]

It's not mocking, it is serious. Life's not fair. Some people and groups have access to things that some of us don't.

Pick your battles. I see this as such a tiny issue, it's not even worth a passing comment.

As I said, the big index funds don't deal with IPOs, it's a non-issue. If that IPO eventually grows big enough to be bought by an index, I can't imagine that this initial transaction has any measurable impact at that point. Someone had to buy the IPO.

And it's not like every IPO results in a gain. It might be best for these high risks to be borne by someone outside their other funds. Can you show any evidence that Fidelity active managed funds (which can easily be avoided anyhow, just buy indexes) were measurably hurt by this? Do they under-perform their peers actively managed funds?

I'm with some other posters - much ado about nothing.


-ERD50

Pick your battles indeed.

This is clearly worth expending energy for the OP but, not so much for many others...including me. Seems the 'real' battles worthy of the effort are those listed in the link below.

Someone who has a axe to grind. Let's see the article says that no laws or ethics are broken.

So we don't forget how about fund companies that do break laws and ethics to the tune of 1.3 billion in fines.

https://en.m.wikipedia.org/wiki/2003_mutual_fund_scanda

There's many more of these types of issues that arise every year. Many are repeat offenders.

FWIW I've seen folks play with pre-ipo "investments" some made a lot of money. More lost a lot more money.

I was thinking of a real life analogy that would illustrate where this is on the scale of importance for me because, that's how my funny mind works...

It's very much like I was walking down a major city street and saw a long line waiting behind the velvet ropes to get into the hottest new nightclub; up comes a small group (F-Prime) who cuts in line and is let past the ropes into the club. While I mentally note the inequity of that situation (some people get special treatment), I don't care one bit because, I'm on my way downtown the street to do something completely different, the nightclub has no effect on my activity and, the club is playing a style of music I don't care for anyway.

Meanwhile, down the street there are several gangs (convicted investment banks, et al from 2003) robbing pedestrians. Now that concerns me! But, thankfully, the authorities have discovered them and are making arrests, enabling me to enjoy my activity...End of Story.

Thanks for taking my little adventure with me.

 

[mathjak107]

i use both vanguard and fidelity . i use fidelity about 90% and vanguard 10% .

i am much happier over all with fidelity . been with them almost 30 years .

following the actively managed fidelity insight models ever since 1987 the growth model out performed had i just bought an s&p index fund 10.81% vs 10.10% for the s&p after expenses .

i can't really compare the models to anything else that would be an apples to apples comparison .

 

[sengsational]

I think the biggest "crime" all mutual fund companies commit is how they vote the shares owned by the fund. Another of my many "it'll never happen" ideas, but we should be able to have the mutual fund vote shares based on an investor profile for how we want our proxy votes cast.

For instance, if I were voting my own shares, I'd never enhance executive compensation for people already making multiple millions per year. Those people might think they're doing a better job than anyone else in the world, but I bet hundreds of qualified people could do at least 99% as well (probably better) and be compensated at a rate of 10% of what the current executive is getting. Not only that, they would be very happy to do it, and not have their hand out for more.

 

[OverThinkMuch]

It's not mocking, it is serious. Life's not fair. Some people and groups have access to things that some of us don't.

Pick your battles. I see this as such a tiny issue, it's not even worth a passing comment.

As I said, the big index funds don't deal with IPOs, it's a non-issue. If that IPO eventually grows big enough to be bought by an index, I can't imagine that this initial transaction has any measurable impact at that point. Someone had to buy the IPO.

And it's not like every IPO results in a gain. It might be best for these high risks to be borne by someone outside their other funds. Can you show any evidence that Fidelity active managed funds (which can easily be avoided anyhow, just buy indexes) were measurably hurt by this? Do they under-perform their peers actively managed funds?

I'm with some other posters - much ado about nothing.


-ERD50

The article says nothing about our ability to buy IPOs. The article talks about how the large mutual funds at Fidelity are prohibited by law from buying - because the owners of Fidelity got their buy orders in first. Related companies can't overlap ownership, so the Johnson family is the only Fidelity shareholder that can own pre-IPO shares.

I'm not trying to measure the topic, just thought it deserved discussion. But almost nobody is talking about the topic introduced in the first post, and people who do are discouraged by people who supposedly couldn't care less - but post in the thread anyways.

 

[jazz4cash]

I think the biggest "crime" all mutual fund companies commit is how they vote the shares owned by the fund. Another of my many "it'll never happen" ideas, but we should be able to have the mutual fund vote shares based on an investor profile for how we want our proxy votes cast.

For instance, if I were voting my own shares, I'd never enhance executive compensation for people already making multiple millions per year. Those people might think they're doing a better job than anyone else in the world, but I bet hundreds of qualified people could do at least 99% as well (probably better) and be compensated at a rate of 10% of what the current executive is getting. Not only that, they would be very happy to do it, and not have their hand out for more.

+1
Companies have become beholden to the mutual funds and not the people that put up the money. That's not Fido's fault.


Sent from my iPhone using Early Retirement Forum

 

[MRG]

+1
Companies have become beholden to the mutual funds and not the people that put up the money. That's not Fido's fault.


Sent from my iPhone using Early Retirement Forum

Blame technology. Doing the accounting for the requirement is extreme. Likely met when SQL can effectively query tables spanning Yoda bytes of data, storage is all on chips and nightly cycles are 48 hours long.

Seriously it's enormous expenditure that benefits only a few, if any. Most of us don't own enough to move proxy votes at all. I watched a coworker learn the lesson of the distribution of account ownership the hard way.

 

[devans0]

I switched from Vanguard to Fidelity. Better information available, more user friendly, but mainly that I get choices for indexed ETFs that are not available at competitive prices at Vanguard. I have made more because of my move. I made this years SWR since Brexit solely from Fidelity (which is when I switched).

Service from both were always great. I have nothing bad to say about Vanguard. I don't buy IPOs, nor do I plan to.

I don't ask for any broker advice. I research and then I make my decisions. One fund family may be better than the other in broker advice, I wouldn't know.

 

[sengsational]

Blame technology. Doing the accounting for the requirement is extreme. Likely met when SQL can effectively query tables spanning Yoda bytes of data, storage is all on chips and nightly cycles are 48 hours long.

Improvement could be done with very little processing...each owner would answer one survey, one time, that had a few dozen questions that provide a feel for how they'd likely vote on real proxy questions. When it was time for the fund to vote shares, they'd run a report against the surveys of current owners. Maybe the report would say that 72% of the owners of the mutual fund said "hell no" on executive compensation, then vote that way. It's not "air tight" (would require interpretation), and that's why it'll never happen. Perfection being the enemy of an improvement over doing nothing, and all that.

Seriously it's enormous expenditure that benefits only a few, if any. Most of us don't own enough to move proxy votes at all. I watched a coworker learn the lesson of the distribution of account ownership the hard way.

You MUST be talking about owning individual shares of stock. Then, I agree. But collectively, there is a metric f-ton of leverage in the proxies that are voted by mutual fund companies. All that leverage is wasted, and it's the "crime" I mentioned in my (admittedly thread hijacked) comment.

 

[MRG]

Maybe the report would say that 72% of the owners of the mutual fund said "hell no" on executive compensation, then vote that way. It's not "air tight" (would require interpretation), and that's why it'll never happen. Perfection being the enemy of an improvement over doing nothing, and all that.

You MUST be talking about owning individual shares of stock. Then, I agree. But collectively, there is a metric f-ton of leverage in the proxies that are voted by mutual fund companies. All that leverage is wasted, and it's the "crime" I mentioned in my (admittedly thread hijacked) comment.

That's the funny thing about fund processing and proxies, they don't let you guess or not be airtight. Real numbers, not maybe.

The comments apply to both equally. The bulk of shares of either belong to a very few investors, who individually will vote their shares the same. So while I agree that it would be great to do it that way, I'd be shocked to see any different outcome. Of course as DW says I'm frequently wrong.

 

[MooreBonds]

That's the funny thing about fund processing and proxies, they don't let you guess or not be airtight. Real numbers, not maybe.

The comments apply to both equally. The bulk of shares of either belong to a very few investors, who individually will vote their shares the same. So while I agree that it would be great to do it that way, I'd be shocked to see any different outcome. Of course as DW says I'm frequently wrong.

Then add another level of complexity for any 401k accounts! Imagine the HR company person getting inundated by literally millions of clueless investors asking "What's this? How should I vote? What does this mean? What does that mean?" even if the HR personnel put tape on their mouths to avoid getting sued for "giving voting advice", it will still be a massive headache for them, in addition to the 401k providers (who aren't getting paid enough to handle all of the intermediate recordkeeping and correspondence of such a voting effort).

Also, it would require boards to accept partial voting from each shareholder! I don't know of any company that allows this, other than some that allow you to vote individually on the board of directors. If the companies allow ETFs and mutual funds to vote partially with shares, then they would be required (I expect) to allow all other stockholders to vote partially with their shares. So now they have to have calculations on every vote for every shareholder on how many were cast "Yea", "Nay" and "Abstain", for every proposal.

Perhaps the only vote of consequence for nearly every election is the compensation of executives - and that is only an advisory vote that has no weight. So barring any truly important vote, I honestly don't see much benefit. It's not like people can actually vote on the compensation and have a real impact. So what if 90% of the people vote "no" on the compensation level - has any board actually changed anything as a result of it?

 

[sengsational]

...add another level of complexity for any 401k accounts! Imagine the HR company person getting inundated by literally millions of clueless investors asking "What's this? How should I vote? What does this mean? What does that mean?" even if the HR personnel put tape on their mouths to avoid getting sued for "giving voting advice"

That would be a problem, but we know how good megacorps are at not dealing with problems, lol! Here's a book on corporate governance...figure it out.

As to the "real numbers", obviously the mutual fund holds X shares and they all are voted today. I don't know how they decide how to vote them. Based on the whims of the fund manager? Anyway, if the survey said 72% were against additional executive compensation and 3% were for additional executive compensation, that would only leave 25% of the shares to be voted on the whims of the fund manager. Doesn't seem like rocket science to me. All X shares got voted. And from my (admittedly limited) experience with individual shares (through proxyvote.com and those kinds of sites), you can vote agree, disagree, or abstain on every item being considered.

As to if having the actual owners have their preferences reflected would make a difference (the owners that own through mutual funds), that's a different discussion. I would imagine the outcome of these proxy votes must mean something, or why would they bother having a vote?

 

[meierlde]

But let me put a question, how many bother to vote with proxies for shareholder meetings with 100 to 200 shares of a company? I know I don't because I know my vote won't make much of a difference. I did vote once to disapprove the pay at citicorp however. Of course today that is easy with the ability to vote in shareholder votes online.

 

[gerntz]

The point of the thread is that the Johnson family has their own interests at heart and that is a conflict of interest and they shouldn't be able to do that.

It is not a conflict of interest. Their own best interest is to be good for their customers. How hard is that?

VG is owned by its customers. Think it isn't in VG's owners' best interest to look out for its customers?

It's as if profit is a sin.

 

[meierlde]

It is not a conflict of interest. Their own best interest is to be good for their customers. How hard is that?

VG is owned by its customers. Think it isn't in VG's owners' best interest to look out for its customers?

It's as if profit is a sin.

Note that if you stick with broad index funds then the whole issue of IPOs etc becomes mute. Broad index funds won't buy them when they come out since they won't be in say the s&P 500 index for a while at least. If you go actively managed yes they could want to buy into the IPO.
However the whole IPO market is totally screwed up favoring the selling brokers "friends" Why for example does the brokerage house have to hold the IPO stocks even for a few seconds, versus the company selling directly on the market when the brokerage would still get the commissions. The whole idea that the company should get less money than it could because the stock should pop on IPO day is the broker shafting the company going public, but its a universal shafting.

 

[daylatedollarshort]

I think the biggest "crime" all mutual fund companies commit is how they vote the shares owned by the fund.

+1. I don't like the whole mutual fund business model in large part for that reason.

 

[RobbieB]

Yeah, I hate 'em too. All of them and the ETF's.

I vote my shares every year, just like I always have. My advisor buys 'em, but I vote 'em.

 

[MooreBonds]

As to the "real numbers", obviously the mutual fund holds X shares and they all are voted today. I don't know how they decide how to vote them. Based on the whims of the fund manager? Anyway, if the survey said 72% were against additional executive compensation and 3% were for additional executive compensation, that would only leave 25% of the shares to be voted on the whims of the fund manager. Doesn't seem like rocket science to me. All X shares got voted. And from my (admittedly limited) experience with individual shares (through proxyvote.com and those kinds of sites), you can vote agree, disagree, or abstain on every item being considered.

As to if having the actual owners have their preferences reflected would make a difference (the owners that own through mutual funds), that's a different discussion. I would imagine the outcome of these proxy votes must mean something, or why would they bother having a vote?

Two other issues:

1) Rounding - given the numbers involved, when you stop and do the actual math, there would be so much rounding that many people simply wouldn't get even 1 "share" to vote. Then who gets to vote for all of those that had to have their positions rounded down? Answer: The fund manager anyway.

2) Simple overwhelming - so you own an S&P 500 fund. And an international fund. Just 2 funds! Not much to track. But you would have to vote in potentially 1,000 proxy elections! And each vote would be perhaps 2, or maybe 5 shares. That means for just 2 ETFs you hold, you could potentially be hit up with emails asking you to log into your ETF provider and vote on 4 or 5 elections every DAY on average. Do you really think people are going to take the time to vote in 1,000+ elections every single year for just maybe a few shares in each election?

That means a very, very large % of shares are probably not going to be voted to the ETF/Mutual fund companies (While I always vote my shares in my holdings, I honestly wouldn't waste the time to vote the 500 minute partial positions in just my S&P 500 index fund, nor the DOZENS of other ETFs/Mutual Funds I have in various accounts, which would be hundreds more...many of which are duplicated). Which means they spent all that time and money to set up their systems to accept partial voting, when they have to end up voting for a majority of the shares anyway, due to the 2 items above.

 

[sengsational]

I think I see the disconnect. I see votable shares for the entire fund. Say a fund has 10,000 shares of IBM stock. The fund might have 100,000 different holders of mutual fund shares, but the vote is still just voting those 10,000 shares. If half of the 100,000 people filled out the survey, then 5,000 shares would be voted based on the fund manager preference. The other 5,000 would be voted based on the preferences of the survey. Yes, it would require some rounding, but if it worked out to voting 4567 shares against some item versus 4568 shares against, I don't think that's something to lose sleep over.

As to being overwhelmed, yes, if you had to consider every vote individually. But the idea was to design a one-time survey that could be used to determine your voting preferences. Yes, some items up for vote may not be covered by the survey, and those items would need to revert to the fund manager. But many of the things getting voted on are fairly predictable and repetitive, so the survey would give a clear indication of voting preferences.

 

[meierlde]

Re #74. But to take up the issue raised executive compensation your position might well vary from year to year. The major issues every year are really the directors election, approval of the auditor and recently the exec comp resolution. The share holder proposals unless a big proxy fight is on don't amount to a hill of beans.
Until director elections change from soviet style elections to real elections there really is not much choice there. (It takes a proxy fight to give a choice).