Lazy Man and Money

Rants: Coverdells, Paper, Faxes, USAA, Fidelity, and TD Ameritrade

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Ever have one of those tasks that seems like it should be simple and then turns into a mess that eats up hours and days of your time? For the last month, I’ve been trying to do something really simple…

… open a Coverdell account for my oldest son.

Opening one for my youngest son took my wife under an hour with USAA. They have exactly the same circumstances, just different names and Social Security numbers. So you’d think you could simply say, “Open one for the oldest son too.”

For some unknown reason USAA’s system got stuck in the application process. We reached a screen where we supposed to have a drop-down of the oldest’s and the youngest’s name. However, it displayed a blank entry and the youngest’s name. After hours and three calls into USAA, they admitted there was a problem, but they weren’t able to fix it. We could probably have spent many more hours and many more calls getting it fixed, but it seemed easier to just move to a different bank. After all we were able to get the youngest set up in an hour with USAA… another bank should be as efficient.

My wife next went to a local Navy Federal which can set them up. Unfortunately the Coverdell person only works one day a week and we were busy that day. We didn’t want to lose another week as we have to get the account set up before tax day to make the contributions for the 2015 tax year.

I told my wife that I’d take the task over. (In hindsight, it might not have been my best idea.)

My first thought was to go to Fidelity. I already have a Solo 401k with them and as one of the biggest banks, they seemed like the best bet. A Coverdell isn’t very common nowadays. In most cases, a 529 plan is a better option. Well, it seems that Fidelity believes that Coverdells are completely useless, because they no longer offer them.

Fortunately, as a personal finance blogger, I know what sites I can trust and Jonathan from My Money Blog has a list of best brokers for Coverdells. I noticed TD Ameritrade on the list. Since I have a Roth IRA with them dating back to 2002 when they bought Datek, I figured I’d give them a shot.

I went to the website and followed all the prompts to open a new Coverdell. I was expecting it to work like USAA where I’d open it all online, especially since I’m an existing customer. Unfortunately, TD Ameritrade seems to work by creating a PDF form that you have send to them. While they claimed that they could pre-fill my application from my existing information, they could only produce a blank PDF application.

I spent an hour filling out the application. It’s a typical application except for the page on trading options. Trading options in a Coverdell seems weird to me. The contributions are limited to $2000 a year and the purpose, to fund an education, does seem to lend itself to making such speculative investments. It really doesn’t seem like it should be a significant portion of the application, but it was. I think they should assume that people don’t want to trade options unless they specifically choose to fill out additional paperwork and send that in.

I printed out the application, wrote a check (with an additional contribution form), and put it in something called an envelope with “postage” for it to be delivered very slowly to TD Ameritrade for their review.

I was happy to finally cross it off my list because I was going on vacation (which is why you didn’t too many posts from me last week).

Halfway through the vacation I got notice from TD Ameritrade that it wasn’t able to open the account due to a missing signature. I think I signed everything, but there’s a chance that I only signed the options agreement and not the main application. That’s my fault, but honestly I’m surprised that’s the only error they found as it was an extensive application with no error checking that you’d get if they simply did it online like USAA.

While on vacation, I didn’t have easy access to printing documents like I do at home. I was away from the hotel for about 16 hours of the day which would have been a natural solution (albeit at a likely high expense).

I tried to convince TD Ameritrade to process it since they at least had my signature in one place, but they wouldn’t budge. You’d think that in 2016, we’d have a digital signature solution that very big financial companies could use… especially if you already have an account with that very big financial company.

I decided to wait until I got back from vacation. Today is the first business day since I’ve been back, so it was time to pick it up and give it another shot.

Fortunately, I had saved the PDF with all the information, so it was just a matter of printing it, signing it, and faxing it. Mailing isn’t really an option, because we’re now down to one week until the tax day deadline. I’ve never been able to get faxing to work with our VOIP phone. I decided it would be easiest to go to the local Kinko’s FedEx Office and use their fax. TD Ameritrade’s fax is toll-free so it doesn’t cost anything other than overhead for FedEx to send it. They really don’t need an employee since I’d be doing the faxing myself.

Unfortunately the cost was about $1.50 a page. I’m sure some people would have paid the $12 just to the end this headache, but I couldn’t support that pricing on principle. One page was just fine print and I would have been tempted to save the $1.50 to leave it off, but I couldn’t risk wasting $10.50 for an incomplete application only to have TD Amertitrade tell me that I need to fax the complete thing again.

I left and went home to look for other options. I was able to scan the signed as a PDF and use a free service from MyFax.com to send it. They needed my email address which probably means that I’ll be spammed forever (I used my junk email account), but it got the job done…

… or at least I think it did. We’ll see if TD Ameritrade will finally open the account and deposit the check that I sent now nearly two weeks ago.

Why a Coverdell?

Some of you might be asking why I would open a Coverdell in the first place. Coverdells can be used for a wider variety of educational expenses such as computers. Also, they can be used for private high school where 529s can not. Who knows if that’s in the cards for our kids… they are only 2 and 3 years old. However, it seems like smart idea to have the option. We can always use it for college if that doesn’t pan out.

If you are still reading this rant, you are some kind of saint. I usually don’t like to complain, but I had to get this out of my system. I’m allowed a few financial rants a year, right?

I’ll write about Coverdells more in the future. If this had gone smoothly, I would have been writing about them today.

Goodbye Bank of America, Hello USAA

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If the title wasn’t exactly clear, I’m changing my banks. This post is actually quite a bit overdue. I had been gradually doing it for a couple of years now. I would have written about it earlier, but I didn’t realize it until recently. That’s how gradual the change has been.

It’s not that Bank of America has done anything in particular to lose me as a customer. I know many were upset by their announcement to charging fees on debit card purchases (though Bank of America changed its mind on the fees). I wouldn’t have been affected by it since I rarely use my card as a debit card. It comes down to the fact that USAA is a better fit for me and my family.

What sets USAA Apart

The first thing that comes to mind is customer service. I know everyone has their favorite companies when it comes to customer service, but in almost every case it seems anecdotal. I could show you ten bloggers and each of them would have a favorite web hosting service – and a lot what they’d talk about would be the customer service. With USAA, it close to unanimous that their customer service is the best. What I like the most is that when I call I get the person’s direct extension in case I need to call back or follow up.

The other thing that sets USAA apart is that they actually give you money back at the end of the year if they have any left over. I know that sounds odd. I don’t have the full explanation unless it is this Wikipedia entry, but my wife has multiple times gotten a check back at the end of the year. (Since she is the sponsor of the account, more on this later, I don’t have the full details of what they sent for the both of us. When it’s money in my favor, I tend not to ask too many questions.)

It’s taken me a little while to embrace USAA. When I first looked into it, I was curious about the brokerage accounts. I compared them to Zecco who had been offering free trades at the time. I didn’t see their rates as being competitive. However, Zecco has since started to charge for most (if not all) trades now. The gap has closed to where the customer service and the ability to have my savings, checking, insurance, brokerage, and IRAs in one place far outweighs a couple of dollars a year I pay in putting my Roth IRA money to work in an ETF.

Recently, I was able to consolidate the 401ks from three old jobs into one Rollover IRA. I can’t tell you how much simpler it is to be able to log into one web site and see it all.

Why I may keep Bank of America

While USAA is great for any number of reasons, I still see a need for my Bank of America account. It’s not that I have any allegiance to Bank of America, but that I feel the need to have a bank in the real world – one with branches and people who I can talk to face-to-face. There are a couple times where this has come handy – usually when I need to have a certified check of some sort.

In some ways my banking has become a little microcosm of my business. It is 90% done through the Internet, but 10% done in the real world. I don’t see that changing any time soon. USAA gives me a bank that has the online tools that match my business.

So Bank of America, this isn’t really good bye like I said in the title. We can still be friends. I am just looking for more out of my banking relationship.

(Though it might seem that USAA sponsored this post. They have not. I just really like them and I think you will too. That is if you meet the eligibility requirements which typically require some military connection.)

Should You Invest in the Top Fund of the Decade?

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I’m a member of bank that you may or may not know. It is an exclusive bank typically only available to the military… USAA. I am eligible for member because my wife is in the military. (If you are not in the military, please don’t give up on this article.) USAA is one of my favorite banks. The customer service far surpasses anything I’ve previously experienced with a bank. For basic savings and checking accounts, I don’t think they can be beat.

However… for investing… let’s just say that I don’t have any investments under their management. When I last looked at their brokerage commissions they were not competitive. Their mutual funds didn’t seem to be any better than Vanguard or Fidelity. Or are they? Recently they sent us a letter about their mutual funds. Here were the selling points of a group of funds… something to keep in mind here is that the rankings below are not explained (in any way I can tell from the marketing material)

  • USAA Tax Exempt Intermediate Term Bond Fund (USATX) – That mouth-full of a mutual fund seems to have ranked 1 out 157 funds over the last year… it is 11 of 74 over the last ten-years. Impressive, but I’m not sure how many people consider tax-exempt intermediate term bonds as a core holding.
  • USAA Money Market Fund (USAXX) – This performed 2 out of 296 funds in the last year and 14 out of 202 in the ten years… which is impressive again, but as we know money market funds don’t perform well. The marketing material doesn’t say how much better it is than the average, but I’m guessing you would have earned a few dollars at most.
  • USAA Balance Strategy Fund (USBSX) – This placed 4th of 506 fund in the last year… but over the last ten years it is just 63 of 148. A balanced fund is something that doesn’t typically garner much interest from the market. I like to think that most of my readers can balance their own portfolio without looking at this middle of the road option.

I found all the above really interesting, but it was the fund on its whole page that got my attention. USAA happens to have the Top-Performing Fund of the Decade (at least at the time of the mailing) and they more than happy to tell the world about it. What is that fund? Glad you asked… It is the USAA Precious Metals and Minerals Fund. That fund has averaged 24.44% over the last ten-years… a great return for anyone who invested.

My concern here is that USAA is marketing the “hot fund.” In my opinion, and in the opinion of many smart finance gurus, precious metals and minerals should not necessarily be a core holding. These gurus are smart, not educated from an online school, or full of BS. I think most financial experts would rather see their clients invest in a mix of US and International stocks and bonds. It is troubling that they are marketing this very niche mutual fund, but more troubling is its performance since it’s inception… and it’s expense ratio. Since August of 1984 the mutual fund has returned 7.47%… with a ginormous expense ratio of 1.31%.

I’m not saying that marketing mutual funds is wrong… but I think this is a clear case of caveat emptor. This looks to me to be a specialty fund with a high expense ratio and I wouldn’t count on it to perform for over the long haul.

I’d wish USAA would dial back the marketing and not promote, “USAA has the #1 Performing Fund of the Decade.” I imagine more than a few soldiers will be suckered in by this only to get in a mutual fund that might not be the best fit for their financial situation.