Fidelity Investments (05-03-24):
Effective June 3, 2024, the transaction fee for Vanguard and Dodge & Cox mutual funds will increase from $75 to $100 per purchase. Also effective June 3, 2024, participants purchasing shares in applicable ETFs will now be subject to a new service fee of up to $100 per purchase. For purchase orders below $2,000, the service fee will be reduced to an amount that is approximately 5% of the purchase value. The complete list of ETFs currently subject to this service fee can be found here, and will be updated periodically.UPDATE 05-09-24: Just got to reading May
MFO Commentary and saw that
@TheShadow had already highlighted the ETF part in
Briefly Noted (05-01-24):
Fidelity Investments is planning to charge a $100 servicing fee when placing buy orders on exchange-traded funds issued by nine firms. The new servicing charge, which may be imposed on ETFs issued by Simplify Asset Management, AXS Investments, Day Hagan, Sterling Capital, Cambiar, Regents Park, Rayliant, Adaptive, and Running Oak, is set to take effect on June 3. The new fee will apply to ETFs that do not participate in a maintenance arrangement with Fidelity. Fidelity may update its “Surcharge-Eligible ETF” list again. It seems like the ETF list had indeed been shortened rather dramatically in just a couple of days, so it might be worth checking the
Fidelity link (same as above) periodically to see if they decide to further reduce or entirely eliminate it.
In the same spirit, I sure hope that they stop at Vanguard and Dodge & Cox with the elevated fees as well. Please post if you see any updates re transaction fee policies on the mutual funds side.
Comments
The ETF list doesn't look onerous yet. I think there will be more resistance if they get carried away with fees.
You will only be charged a transaction fee when you buy a FundsNetwork TF fund, not when you sell one.
So, I am assuming other Vanguard and Dodge fund profiles would include the same language.
I'd call them up and ask to reverse the fees. In my experience, this is pretty easy at Fidelity - especially, in comparison to transferring out an IRA - and your case looks to be pretty straightforward.
The charge wasn't a transaction fee.
Fidelity does not charge a fee when selling any mutual fund - even if there is one for purchasing - unless it is an NTF fund held for less than 60 days.
Bingo. Fidelity doesn't charge transaction fees upon sale; it charges short term redemption fees.
But isn't VWINX a TF fund, and thus exempt from the short term fee?
Not from Fidelity's perspective. It didn't collect a transaction fee when the shares were purchased.
Suppose you purchase shares of a fund NTF at Fidelity on Jan 3. Then on Jan 10, Fidelity changes the fund status to TF. Then when you sell your shares on Jan 11th, that sale will incur a short-term transaction fee. Even though the fund was listed as TF when you sold. You can't go by the current fund status. https://www.fidelity.com/mutual-funds/all-mutual-funds/fees
WABAC's shares of VWINX weren't assigned a status at the time of purchase because they weren't purchased at Fidelity. But when they came in they were tagged as not having been charged a fee, i.e. they were treated as NTF shares. And the reality is that they were purchased without a transaction fee anyway.
But they were (probably) purchased a long time ago. WABAC didn't tell us, so this is a surmise. So why did Fidelity charge a short-term fee?
Some brokerages restart the clock when shares are transferred in. Here are examples from a couple of Canadian brokerages:
https://www.reddit.com/r/PersonalFinanceCanada/comments/lhz2cp/td_mutual_funds_short_term_trading_fee_transfer/
Others waive the short term redemption fee altogether. TIAA writes: "Short-term redemption fee: $50 minimum for shares held less than three months (waived for shares transferred from another brokerage firm or financial institution)"
https://www.tiaa.org/public/pdf/commissions_and_fees.pdf
I'm surmising again, but it sounds like the shares were sold at Fidelity shortly after transferring them in. If that's what happened, then there's no need to transfer the remaining shares "to someplace more hospitable"; just wait out the 60 days at Fidelity.
Definitely check with Fidelity on why the short term fee was charged. I'm just guessing here, and as lawyers would say, "assuming facts not in evidence."
If I get real motivated I'll look at the transaction records to see how things were broken down. But not today.
I haven't actually sold VWINX out of the IRA yet. I'm hoping it will prosper from those rate cuts we keep hearing about. I do believe I have owned it since the 1990's.
There were a few other funds that were sold within about six-eight months of transferring the IRA from Vanguard to Fidelity.
At the present time DODGX, SEQUX, and VWIGX are in a taxable account at Fidelity after gathering them in from the respective fund companies to simplify things. I would just as soon not sell any of those at the present time.
I did miss a window to harvest a loss on SEQUX. Maybe it will reopen in the future. By that time everyone will likely be charging some sort of fee anyway.
To me, the Fidelity text on short term trading fees (STTR) on transferred OEFs is not as clear as Schwab's ("Schwab's short-term redemption fee of $49.95 will be charged on redemption of funds purchased through Schwab's Mutual Fund OneSource service (and certain other funds with no transaction fees) and held for 90 days or less.)") [bold added]
I transferred OEFs to Fidelity a few times and each time I ask Fidelity whether they would charge an STTR if I sold within 60 days of transfer. Each time they tell me "No" but they have not been able to show me a rule to that effect I could read. I write down the name of the rep. I checked on the occasions where I sold and they did not charge me the fees.
I recently asked Schwab the same question, and the answer was "No" STTF. Then I asked if their STTF is on a FIFO basis. I wanted to make sure if I bought more shares at Schwab after, Schwab would use FIFO in applying STTF and not any cost basis method, especially in an IRA. (I think we had a thread dealing with FIFO vs cost basis method for STTF). The Rep said that makes sense but he needs to check and get back to me. Unless a rule is clearly laid out in writing for the situation we are dealing with, it is better to ask the Reps for a confirmation each time one encounters the situation. Of course, there is no guarantee that the Rep's words would be honored if their IT systems are not designed for your situation and the Rep does not override the system, unless the Rep is specifically assigned to your account.
When dealing with big companies, I would not even try to use logic or a derivation of their existing rules to your situation. Just ask for confirmation of what you want and if you have time and patience, then ask for a reconfirmation. It boils down to allocation of time and energy. Recently, Fidelity website did not allow me to place a trade and I called their tel line from my car. The Rep placed a trade and confirmed that there will not be a fees or commission. But I was charged a broker assisted fees. At some point we just say F it and move on.
Thankfully, investing in ETFs is lessening these frictions.
It should be similar for Fido. I trade less at Fido.
STTF applies within 60 days at Fido, 90 days at Schwab.
When I have time, I would like to dig up that previous thread on how a brokerages apply (FIFO vs cost basis) STTF (and short term redemption fees). If it is not here, it would be at Fidelity Community.
Thanks. I am fairly certain it is a Fidelity Community thread where at least one Fidelity Rep participated. I tried to search for that thread using the Community search function but could not locate it. I go there only once a month and as such my search capabilities there are non-existent.
(Just in case, I'd asked what was the issue and was told something about the "interface" the rep was using on Fido's end, but it was not very clear.)
Btw, perhaps I am missing something re STTFs discussion, but when selling shares in an NTF fund where I'd recently added to a position, I simply pick specific lots that have suitably aged and have never had an STTF trigger... Is there more to this, aside from the instance when the funds were transferred in from elsewhere?
For example, if you purchased lots on Jan 3 and Feb 22, and sold the Feb 22 lot on April 12, you would not incur a STTF even though you held those particular shares for less than 60 days.
I had always assumed that when they said "Fidelity charges a short-term trading fee each time you sell or exchange shares of a FundsNetwork NTF fund held less than 60 days." they meant actual share lots. Is there a Fidelity link where the FIFO logic you have outlined is spelled out or is this based on your experience / Fido CS information? (If possible, I'd like to have something for the eventuality when I stop bothering with the lots - which is rather inconvenient - and Fidelity suddenly decides to hit me with a STTF.)
(My italics. No mention of lots.)
"FundsNetwork No Transaction Fee Funds.
All Methods No transaction fee* Most NTF Funds will have no load.
Certain NTF Funds will be available load waived.
Short-term Trading Fees
Fidelity charges a short-term trading fee each time you sell or exchange
shares of a FundsNetwork NTF fund held less than 60 days. This fee does
not apply to Fidelity funds, money market funds, FundsNetwork Transaction
Fee funds, FundsNetwork load funds, funds redeemed through the Personal
Withdrawal Service, or shares purchased through dividend reinvestment... "
It makes sense. Fidelity wants to make sure it profits from holding shares (i.e. makes more in shelf-space fees from the fund than it cost them to execute the trade). So it only needs to hold a share for a couple of months. From this perspective, FIFO works fine. Suppose you buy 100 shares in each of Jan, Feb, and Mar. If you sell 100 in each of April, May, and June, you'll have held for an average of three months - enough time for Fidelity to recoup its costs.
That's all that matters. Fidelity isn't trying to gouge the way some banks did with checking accounts - debiting your largest check first so that they could charge you multiple overdraft fees instead of debiting your smallest checks first so that only the last, big check generated an overdraft.