Our 15-year-old has a part-time job tutoring math at a Kumon center. For three years now she's managed to fund her Roth IRA (she'll max it out this year) and she's saved enough to open another (taxable) account. She could buy an index fund with a $500 minimum balance and a $50/month EFT contribution.
Over the years she's watched me explore different investing styles and she's played around the edges. We've talked a lot and she's beginning to realize how financially literate she is compared to her high-school peers (to say nothing of some of the teachers). She understands the concept of buying investments when the blue-light special is flashing and then letting compounding work its magic. Unsurprisingly, like me she's decided that she'd rather have an aggressive asset allocation in low-cost value index funds and leave it there for at least the next five years.
You would think that a mutual-fund company like Fidelity would encourage this type of low-maintenance behavior. You would be wrong.
Fidelity has consistently rebuffed all requests to custody our kid's IRA before she turns 18. (T. Rowe Price eagerly accepted the job.) Not only is Fidelity not interested, they've also said that they're not even planning to do it someday. I've been told this from a number of different reps and from one of the VPs who came out to an investor seminar, so I'm beginning to believe that they really mean it.
This morning I found out that it's the same situation with a "young investor" account. Even if our kid's account number was consolidated with the accounts of spouse & me, Fidelity isn't interested. I don't think they even have a "young investor" marketing program. They might be willing to drop a minimum investment from $1000 to $500, but generally only on actively-managed funds with higher expense ratios. They won't discuss waiving an index fund's minimum balance of $10K to $500. When I pointed out that I could simply transfer $10K to the kid's account and would they then be willing to accept monthly EFTs of $50, they said they couldn't even waive the minimum amount of a monthly (automated) deposit.
It went beyond a "Sorry, can't help". I was also lectured on the impacts of the gift tax, the "dangers" of UTMAs, and generally was treated like an ignorant newbie. (They said they knew who they were talking to. They presumably were able to see the balances of our accounts and their asset allocations.) Despite us owning no mutual funds and being classified as "extremely aggressive" in our profiles, on our kid's behalf I was being steered from index funds with ERs of 0.10% and pointed toward actively-managed funds with much higher expenses. (Their best suggestion for a 15-year-old was a 2040 retirement fund at 0.84%. But maybe they should've had more time to think about it.) The way I was treated on the phone was markedly inconsistent with their previous endearments to us "valued customers" who are considered knowledgeable enough to have margin accounts and to trade options.
Before this call, I'd assumed that when our kid turned 18 she'd transfer her Roth IRA (which would be worth at least $15K) over to Fidelity, switch it to one of their cheap index funds, and consolidate it with our accounts. She'd get the same "member of the family" perks that Fidelity extends to us parents.
But we apparently have no reason to continue being loyal to Fidelity. The transfer-in-kind paperwork could be executed within a few weeks if necessary, although it's a hassle and after 22 years with a fund company I prefer to be lazy.
Anyone had better luck with their own kid's "new investor" accounts? Any recommendations on fund companies that actively pursue a customer who doesn't have a lot of money but who doesn't cost a lot to support?
Over the years she's watched me explore different investing styles and she's played around the edges. We've talked a lot and she's beginning to realize how financially literate she is compared to her high-school peers (to say nothing of some of the teachers). She understands the concept of buying investments when the blue-light special is flashing and then letting compounding work its magic. Unsurprisingly, like me she's decided that she'd rather have an aggressive asset allocation in low-cost value index funds and leave it there for at least the next five years.
You would think that a mutual-fund company like Fidelity would encourage this type of low-maintenance behavior. You would be wrong.
Fidelity has consistently rebuffed all requests to custody our kid's IRA before she turns 18. (T. Rowe Price eagerly accepted the job.) Not only is Fidelity not interested, they've also said that they're not even planning to do it someday. I've been told this from a number of different reps and from one of the VPs who came out to an investor seminar, so I'm beginning to believe that they really mean it.
This morning I found out that it's the same situation with a "young investor" account. Even if our kid's account number was consolidated with the accounts of spouse & me, Fidelity isn't interested. I don't think they even have a "young investor" marketing program. They might be willing to drop a minimum investment from $1000 to $500, but generally only on actively-managed funds with higher expense ratios. They won't discuss waiving an index fund's minimum balance of $10K to $500. When I pointed out that I could simply transfer $10K to the kid's account and would they then be willing to accept monthly EFTs of $50, they said they couldn't even waive the minimum amount of a monthly (automated) deposit.
It went beyond a "Sorry, can't help". I was also lectured on the impacts of the gift tax, the "dangers" of UTMAs, and generally was treated like an ignorant newbie. (They said they knew who they were talking to. They presumably were able to see the balances of our accounts and their asset allocations.) Despite us owning no mutual funds and being classified as "extremely aggressive" in our profiles, on our kid's behalf I was being steered from index funds with ERs of 0.10% and pointed toward actively-managed funds with much higher expenses. (Their best suggestion for a 15-year-old was a 2040 retirement fund at 0.84%. But maybe they should've had more time to think about it.) The way I was treated on the phone was markedly inconsistent with their previous endearments to us "valued customers" who are considered knowledgeable enough to have margin accounts and to trade options.
Before this call, I'd assumed that when our kid turned 18 she'd transfer her Roth IRA (which would be worth at least $15K) over to Fidelity, switch it to one of their cheap index funds, and consolidate it with our accounts. She'd get the same "member of the family" perks that Fidelity extends to us parents.
But we apparently have no reason to continue being loyal to Fidelity. The transfer-in-kind paperwork could be executed within a few weeks if necessary, although it's a hassle and after 22 years with a fund company I prefer to be lazy.
Anyone had better luck with their own kid's "new investor" accounts? Any recommendations on fund companies that actively pursue a customer who doesn't have a lot of money but who doesn't cost a lot to support?
