For Fund Companies and Brokerages, Plenty of Room for Improvement

Regular visitors to Morningstar.com know that some investors are downright territorial when it comes to their choice of fund company or brokerage. Perhaps it's the firm's investment lineup, low fees, the quality of its customer service, or just the way it does business that produces this favorable impression. But even those who are pleased, overall, with their fund company or brokerage often think there's room for improvement in some regard.  

Last week we asked Morningstar.com readers on our Personal Finance discussion board what they wish their brokerage or fund company did better. Many had positive things to say--after all, if they didn't like the firm, they probably would move their account(s) elsewhere. But even those who said they were satisfied customers had suggestions. You can read the full conversation here.

'Lower Fees Is the Key'
Most of those posting comments discussed their experiences with some of the largest investment firms--which, therefore, took the brunt of the criticism. Several readers took aim at fund expenses and brokerage fees.

"I wish Schwab and Fidelity would offer more low-cost funds without a transaction fee," said Rohit33410.

"I use Vanguard and American Funds in my portfolio," Pavjmv08 wrote. "Great companies. However, American Funds and others: Lower your fees and buyer restrictions. Again, lower fees is the key."

McMontana said s/he wishes that Vanguard would "ditch the six-month brokerage early redemption fee on no-transaction-fee mutual funds."

For moatster, one kind of fee is particularly irritating. "The one thing that fund companies and brokerages could do together is put an end to 12b-1 fees," the poster said. "At best these fees are charging costs to me and others without regard to who causes those costs and at worst they create a conflict of interest for advisors and brokerages who get paid to promote funds rather than provide the best advice. Just as a simple comparison, I may pay a total of $20 to buy and sell a stock over whatever period I hold it, but I pay $25-100 every single year that I hold a $10,000 investment in a mutual fund that charges a 12b-1 fee."

CD73Jayhawk was critical of the high fees one brokerage charges to buy some mutual funds. "Schwab's $76 per transaction to buy into a mutual fund not in their network is unreasonably high, especially if you want to dollar-cost average into the fund," the poster wrote.

Yogiman said he wished Fidelity "would charge less to buy funds outside their network" while dragonpat called for an easier way to identify load-waived, no-transaction-fee funds at Fidelity and Schwab.

Structures, Services Fall Short, Some Say
Another common area of criticism was how fund companies or brokerages structure their investments and account features.

"I wish that Vanguard would standardize and lower its minimum investment requirements for its Admiral Share funds," wrote Pete02. "It currently has at least two different minimum investment requirements: $10,000 for some (e.g. (VFIAX), (VIMAX)) but $50,000 for others (e.g. (VFIJX), (VFIDX), (VFIRX), (VFSUX))."

Shipmad said s/he is unhappy with the fund lineup at American Century, but also pointed to some bright spots. "Product line is dated, with too many mediocre funds. ... A plus is intelligent and coherent telephone service and some nice benefits, such as automatic dollar-cost averaging between funds," shipmad said.

For DBSMichigan, managing accounts across different providers has been challenging. "As part of my overall diversification strategy, I have multiple accounts (Roth, IRA, taxable, charitable trust, etc.) at Fidelity, Schwab, and TD Ameritrade," the poster said. "They all share the same vices of wanting me to consolidate everything with them and selling me on giving them a percentage each year for advisory services."

TinyTuna wishes Vanguard made it easier to rebalance his account. "They don't offer my funds in a column [online] where I could put a percentage next to each fund and it would reconcile overnight. The only option is individual transactions."

Several posters said they wish their brokerage or fund company offered the ability to trade individual bonds, while others found fault with their fund company's rules. GBenhart, for example, uses Fidelity and said he wishes it would allow existing customers to buy its mutual funds that are closed to new investors.

Online Frustration
Company and brokerage websites were a major sore spot for readers.

"I sometimes buy [securities] just as they come out and the Vanguard website will often not recognize the ticker symbol, forcing me to call the order in," said EnvEng.

Readers singled out Fidelity's website, in particular, as problematic.

"Fidelity: Stop changing your website and thinking you're improving it because each time you do you remove some feature of it that I love," wrote Peter5.

"I have my accounts at Fidelity. While they do basic things OK and their fees are reasonable their website is really clunky. And their enhanced website for active traders is even worse," wrote williama22.

But Fidelity wasn't alone among the major fund-company websites readers found disappointing.

"T. Rowe Price has excellent fund offerings in many areas, but their funds marketplace is very clunky compared to Fidelity's," said dawgie. "You have to open a separate brokerage account and can't easily transfer money between T. Rowe Price funds and other company funds."

Website tools were another frequent target. Some said they wished their brokerage or fund company offered better portfolio-tracking tools in particular.

"I have used Merrill Lynch, Scottrade, and Schwab. In all cases I would have liked to have had a more comprehensive and customizable portfolio management tool kit," wrote Selfdirected65.

Meanwhile pcinor said s/he would like some help from his investment providers when it comes to calculating future income.

Pcinor wrote, "I have accounts at both Schwab and Fidelity and have asked both, repeatedly, to add a feature I liked very much at E*Trade. Being dependent upon investment income, it would be enormously helpful to many investors to have a 'Projected Annual Income' feature for an account. Simply total up current distributions of investments (info displayed for individual issues and easily automated) for a portfolio and--especially--an account. Once this is implemented, it would be ideal to have one more field that provides a comparison with 'last year' or 'change (%) from last year.' Seems like an obvious value to most retired clients. Presumably this could even encourage income investors to trade more, become more successful, in order to improve their income. I've requested this feature for several years. Very frustrating!"

Customer Service Gripes
Then there were those who cited problems with good old-fashioned customer service.

"I love Vanguard for so many reasons," wrote Eugene. "But one thing annoys me: Though I have chosen to go entirely paperless, they insist on sending paper confirmations for any kind of account profile changes I make. So I just received in the mail today nine different letters--one for each type of account my wife and I have there--confirming that my address has been changed--which I did online. Ugh!!!!"

Then there was HiIslands, whose long-distance relationship with his/her fund company has been problematic.

"I wish Fidelity had an office in my state" HiIslands wrote. "As it is now, the nearest office is 2,500 miles away from Hawaii. It takes a lot of time and expense to send things that cannot be done electronically back and forth. Even though I am a member of their 'private client services' it's very difficult to talk to a member of 'my team' and so the service I receive from Fidelity is disjointed and inconsistent. I think if a brokerage/fund company is going to do business in a state it should commit resources to serving that state."

But while many readers found room for improvement with their fund company or brokerage, there also were those who were perfectly content.

Bubbygator said s/he wouldn't change a thing, adding "All I expect of my brokerage is to provide online access for quick transactions and keep good online records. I think all major brokerages provide that."

Then there was armagh36, who reported being a satisfied customer of several firms but perhaps less satisfied with his/her own performance.

"My present portfolio consists of nine mutual funds and one stock holding," armagh36 said. "Four of those funds are held with Vanguard, and the remaining five with five different fund families. I use Vanguard as my personal benchmark against which I measure the remaining five in the areas of cost, tax efficiency, clarity, and timeliness of important information, corporate-culture aspects and so forth. All my funds make the cut using that standard. Unfortunately, the weak link in the system is my own frequent ineptitude, failing to conceptualize accurately and, at times, laziness. I need to upgrade my own performance to come closer to matching theirs. "

Comments have been edited for brevity and clarity.