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Being a financial reporter doesn’t make you immune from banking headaches

Jeremy Simon

Working as a reporter for offers a lot of perks — caviar dispensers in the break room, private flights to international finance conferences and casual dress every Friday — but improved banking relationships aren’t included. My recent headaches prove that point.

My story begins several months ago: Inspired by the calendar change to 2010, I resolved to strengthen and streamline my personal finances. After all, even personal finance reporters aren’t perfect. Some of the changes included closing an old Wachovia account, which included (in my mind) underperforming IRAs — Roth and traditional — and moving that money to my existing Chase bank account, since that’s where my direct deposit goes each month. Unfortunately, my plan had costs — in both time and money — that I didn’t expect.

As a first step, I visited a local Wachovia bank branch to put my remaining checking account funds into my Roth IRA. (Wachovia merged with Wells Fargo in 2008, and while my bank statements are from Wells, I needed to conduct transactions at a Wachovia branch.) Then I visited a nearby Chase bank branch, where I waited for a banker certified to help me open IRA accounts. Once he arrived, I explained that my goal involved finding a target date (or life cycle) retirement fund with no annual fees and very low costs. Although the Chase banker encouraged me to consider more expensive funds, telling me that essentially “you get what you pay for” in terms of fund management, I had already made my mind up and stayed firm on my commitment to a particularly low-cost fund from Vanguard. After signing some documents, he told me I could expect to receive a mailed confirmation that the IRAs had been moved to Chase. Once I got those forms, we would meet again to finalize my investment choices. It all sounded pretty straightforward.

Of course, shortly thereafter, things got complicated:

  • Wachovia’s investment adviser called me directly to say that an error at the local branch had resulted in not one but two transactions from my checking account into my Roth IRA — meaning they had made an investment with money I didn’t actually have. What I was supposed to do about the situation? I still don’t know. They eventually resolved the issue by crediting my account so that I wasn’t left owing them money for a mistake that wasn’t mine. Thanks, guys.
  • When I compared my final IRA statements from Wachovia with the new ones from Chase, I noticed there was less money in the Chase retirement account. When I called Wachovia to check on this, I learned that they charge nearly $100 to move accounts to another financial institution — a bank policy that they couldn’t reverse for me.
  • Chase told me that my traditional IRA with Wachovia had been invested in a fund made up of “B” shares, a form of stock which can’t be transferred before a set number of years without a financial penalty. In my case, that would be eight years from the time the IRA was established. This was another fact that hadn’t been disclosed when I opened the IRA and before a less jaded version of myself knew better than to assume.
  • Chase confirmed I would pay no annual fees for my newly established IRAs. However, they acknowledged near the end of the process that they would be charging me $50 for each investment in my target date fund. That charge would essentially erase a major portion of my planned monthly contributions. Why hadn’t I been told this earlier? Apparently, the Chase banker who was helping me wasn’t aware of this added expense.

Why do banks do these types of things to their customers? “Many banks are ‘fee machines’,” says Michael Rubin, author of “Beyond Paycheck to Paycheck.” “People are likely to be much happier — and wealthier — working with one of the many low cost investment houses like Charles Schwab, Vanguard or Fidelity.” My experience apparently wasn’t unusual. “The fees you incurred are just the tip of the iceberg and come with no assurance of better customer service, let alone superior investment performance,” Rubin tells me in an e-mail.

According to Rubin, customers at big banks typically have two options to avoid paying unnecessarily: Be wealthy or be wise.

“While you may have some success having such fees waived, many of the fees you described are typically only reduced with a stronger banking relationship (i.e., more investable assets) — one you may not be able to create at the beginning of your career,” Rubin says.”Far better to eliminate the need to have fees waived by asking about them in advance — as you have done — and then selecting a competitor who doesn’t charge them. If the quality is identical, why pay for something that someone else will give you for free?”

See related: When it’s OK to fund your IRA with a credit card

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  • francis levangie

    1-use a credit union such as …..
    2-a “bricks and mortar” outfit like Fidelity is great…. $7.95/trade now and some iShares are commission free now…
    3- I use PRPFX in my taxable account and VWINX + lots of GLD in my I.R.A.
    4- dealing with banks in general is the same as dealing with your local godfather…. believe it!
    5-life cycle funds suck…

  • Mehmet Saatcioglu

    Chase Visa had hidden charges on foreign transactions. What does it mean? I think Visa is an international card. Why Chase is charging EXTRA on the foreign $ transactions? You should pick another bank…

  • I use to be a bank examiner before going to grad school. At that time, we called these fees “Unearned Income” (it was the official term we used). As banks and others do nothing to earn them. But, these fees is also why, over the last two decades, that banks have been consolidating – not to increase reach but to increase their ability to charge and collect fees. They make the rules – either follow them, pay the fees or move your accounts. Great article.