Fidelity Online Fading Fast
Written: Feb 24 '00
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Product Rating:
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Pros: Well Intentioned
Cons: Fallen Behind Competitors' Offerings
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| finapps_mgr's Full Review: Fidelity Investments |
Through early to mid 1999, Fidelity Online offered clients first-rate service compared to the prevailing market. Their infrastructure has changed very little by February of 2000, and that's the problem. While, its competitors have streamlined operations, Fidelity has "virtually" stood still.
"Timely Execution" is an expensive problem. Transactions routinely take hours to complete. I have entered "buy" orders online for "Select" mutual funds to be purchased with cash already on deposit and watched the market advance (over a hundred points during one trade) before being filled, HOURS later. For as little as a $1000 order, that can be $100 - $200 out of pocket. Exchanging between funds can be even worse when the fund you're selling drops and the one you're buying climbs. The "sell" order is often filled at or near the new "bottom" and the "buy" order is filled at or near the new high, hours later. Again, you can easily loose $100 - $200 on what should be a simple $1000 exchange. Conduct the same transaction with other brokers also handling Fidelity offerings and orders can be filled in minutes even with high volume market activity (see Moringstar's review of a Fidelity Select Fund, like FSPTX for "Technology", for a list of sixteen other brokers handling these shares).
"Strange Fill Prices" occur. You may be charged a purchase price that stretches the imagination. On a day when the NASDAQ has been in negative territory since the open, is down twenty-odd points for the session, and the fund you're buying has steadily lost ground, you may be charged a price three points higher than the fund closed the previous day or ever traded during the current session. Although brokerage accounts trade after hours, up three points just as your trade is executed then immediately back down is statistically nearly impossible, given the circumstances. A possibility made increasingly less likely since effecting the same three point increase in share price over exactly the same range required the 168 point gain in the NASDAQ on February 23rd, as reported by Fidelity. Down twenty-odd points, charged three points over previous close or today's high; Up 168 points, the highest in history, and the fund gains -- about three points over the same range. One of the two is...questionable?
How Can It Happen? For maximum commissions and optimized computer resources, it would be relatively simple to schedule last all the online client orders placed "at market". Hold online "buy" orders (which carry the smallest commission) until the fund's share price has exceeded pending "limit" orders, then execute them at the current market price for a very tidy profit. Similarly, schedule online "sell at market" orders only after "limit" orders are processed and again collect a tidy profit. Buy orders tend to fill "as high as possible" and sell orders trend toward the lowest prices possible.
CRITICALLY, no matter that such an explanation accounts for continuing "poor fills". With Fidelity's outstanding reputation it's probably just not the case. But, with true real-time volume, pricing, and trade execution times not readily available to the online mutual fund trader, you can't tell. It certainly looks bad, and it is frustrating.
Additional Online Concerns:
*Program coding on the website that checks for the client's browser is inaccurate. When the browser is checked after the client login screen, Fidelity thinks Mozilla 4 compliant browsers with the required current security certificate and 128 bit encryption are some version of Netscape (they're not remotely close). If a routine this simple is written inaccurately, how secure is the website? How lucky do you feel?
*Transferring funds between accounts is not available. For instance, to transfer an annual IRA contribution from another account requires selling shares from the first account, having Fidelity forward the proceeds, then, sending them back to Fidelity for deposit -- it takes days, even by wire transfer. It is needlessly contorted.
*Related accounts cannot be viewed together. Consider that four related accounts: a joint account - wros, an IRA, a spousal IRA, and a 401(K) cannot be viewed onscreen at the same time. Just to record the funds' performance every week or two requires logging in to the joint account, stepping through screens to view current positions, selecting the IRA, stepping through screens to view positions, logging out; logging back in to view the spousal IRA, logging back out; selecting a different login screen to get to the 401(K), logging in, and again logging out.
The total account value doesn't appear with "current positions" so double the hardcopy.
*Musical Fund Managers? Morningstar reports three of four top performing "select" funds had their managers replaced between February 2nd and 7th. Shareholders were not notified. By the 23rd of February I could find no mention of the transition even under "select fund manager appointments". Controlling the "select" fund for the red-hot biotechnology sector is a former equity analyst for the appliance, building materials, home building, engineering and construction industries. This may be a great appointment, but the information in Fidelity's announcement reported in Morningstar, does leave one wondering, "great appointment for whom?"
Several of these items may be reason for alarm; others are just inconvenient and frustrating. ALL, however, have been reported to Fidelity and acknowledged by their technical personnel. The most disturbing part is nothing has been done. As of February 23rd, CNN Headline News reported Fidelity announced a partnering agreement with Lycos and IBM to provide website content. Hopefully, the online offering will get a major overhaul -- and soon.
Fidelity has, to date, offered some of the best performing mutual funds in the industry, by telephone they provide excellent service, and maintain a stellar reputation. For which reasons I continue to invest with their firm.
For time sensitive, or comparatively large transactions, or just for peace of mind to eliminate the frustrations, full commission - over the telephone orders - can provide a more sure and often less expensive alternative to advertised "discounted trading fees" and current online offerings.
Recommended:
No
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finapps_mgr
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