Just?

August 30, 2005 12:47 PM

$95 IRA termination fee (well-known regional bank): legit? unavoidable?

The $95 termination fee which would assessed by Wachovia Securities for moving my very tiny IRA to another bank (non-investment bank) seems a blatant tactic to keep me from moving my money. I'd understand if it took a huge amount of time for them, or if I hadn't been paying annual fees, but really -- is this justified?

Let me know if I'm being a whiny wimp about this. It's only a little unexpected. I'm also going to see if I can find mention of it in my existing paperwork - wouldn't be surprised if it's there, but I'd think I'd remember if I'd come across it.

posted by amtho to work & money (8 comments total)

Unfortunately, a majority of banks/brokers (Wells Fargo, Citibank, American Century just a few examples), have this in their fine print. In fact, in many cases, such termination fees get added on to the account terms and conditions after the account is opened. Unless you read the fine print at that time and move your money immediately before the revised terms and conditions come into effect, they essentially capture you in.

There isn't much you can do, other than try to negotiate with the bank or broker. You would only be able to negotiate with them, if you had another account with a considerable balance and if you were to threaten to close and move that account as well. Otherwise, there is no motivation for them to negotiate with you.
posted by tuxster at 12:57 PM on August 30, 2005

banks are such cheaters. bleh.
posted by delmoi at 1:00 PM on August 30, 2005

Has anyone tried to legally challenge this? It sounds like "bad faith".
posted by amtho at 1:03 PM on August 30, 2005

I'd put this in the same category as cell phone contract termination fees. Hate 'em, live with 'em, don't switch any more frequently than you have to.
posted by alms at 1:06 PM on August 30, 2005

The fee both covers the cost of closing the account (more than you might imagine), as well as gives the firm one last chance to raise some revenue on the way out. Most of these firms don't exactly ascribe to the "If you love something, set it free . . . " theory of maintaining relationships.

That said, you should ask your new financial services provider if they will reimburse you for the closing fee you incurred when you brought your account over. Many will.

This is a good lesson on the necessity of reading the fine print.

*shaking index finger at audience*
posted by Kibbutz at 1:15 PM on August 30, 2005

Government I-bonds are a nice place to put small amounts ($50 to $30,000 a year) of investment money. More than a CD in interest, and no particular banking fees to fool with. I think I read something about inflation going up too.
You buy into a bank's program, you play by the bank's own rules.
posted by buzzman at 1:18 PM on August 30, 2005

Yes, it is legal and despite the "banks are evil" mantra, IRAs are more expensive for a financial institution to manage. With IRAs, the bank or investment company acts as the trustee for your money. Because there are so many tax implications for the individual, there are various reporting documents that are required to be completed by the bank on behalf of the individual.

Typically, there will be annual trustee fees, transaction processing fees and account closing fees associated with an IRA. Having to shell out around $60 or so for closing and transferring your account out of a bank would be pretty standard. However, you said a 'well-known regional bank' and then mention Wachovia Securities, which leads me to believe you're dealing with the investment portion of the company and not the bank portion. Banks and securities companies must be separate, even if they're under the same management umbrella. Securities typically deal with stocks, bonds, mutual funds, etc. and will generally have higher fees than a traditional bank. Something to think about when you invest in the future.

Unfortunately, it's very doubtful that you will be able to negotiate that fee, unless it's made up of several parts, as I mentioned above. Then, you may be able to get them to waive a portion. Check with your servicing center in person, if possible, as they're more likely to waive fees when you're staring them in the face. Good luck!
posted by cyniczny at 1:38 PM on August 30, 2005

$35- $70 is more normal in my experience. $95 is high, not that that changes anything.
posted by small_ruminant at 3:08 PM on August 30, 2005