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Reimbursing IRA acat / toa fees

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Apr 26, 2010 5:37 pm

When I open an IRA (or Roth IRA) account for a client and transfer in their existing IRA in by acat, it is customary for the delivering broker to charge an outgoing TOA fee of up to $100 or so. Annual IRA fees may also be charged before they deliver the acat. Then the IRA account often arrives at my firm with a debit balance, which must be addressed.

My former broker allowed my clients to pay these fees out of pocket, rather than being subject to contribution limits. All I needed was a statement or other proof from the delivering broker showing the fees charged, along with a client check for the total amount, made payable to my clearing firm.

My current firm, however, is taking the stance that such fees, whether they are annual IRA maintenance fees or outgoing transfer fees, can only be paid through them by an IRA contribution and therefore subject to contribution limits.

IRS Publication 590 (2009), Chapter 1, page 10 makes the IRS's opinion very clear, at least to me, under Trustee's fees. "Trustees' administrative fees are not subject to the contribution limit."

My firm is essentially telling me to ask the client to pay such fees at their old firm and then the acat team will follow up to transfer them into the clients account with my firm accordingly. So, when a client walks into my office and indicates dissatisfaction with their existing advisor/broker relationship, I am to tell them to contact old broker regarding payment of fees they are being charges for leaving them? That's not very client - focused, is it?

What has been your experience with this and how can I get my firm to change their ways to a more client friendly approach to this issue?



Apr 26, 2010 9:15 pm

sounds crappy to me. 

Apr 27, 2010 1:33 pm

We can reimburse them as a charge to commissions if we want.

However, your B/D may be right if the client wants to pay them at your firm.  They are not considered fees, just debit balances in their account (even though it was the result of a fee at the old firm).  So unless they want to liquidate something to pay for the debit balance internal to the IRA, they would need to add a contribution.

Apr 27, 2010 2:42 pm

Anyone from Wells Fargo Advisors able to weigh in on your firm's policy on this issue? I am curious because my clearing firm, with whom I am having this struggle over policy, is now "An Affiliate of Wells Fargo & Company". Therefore, in essence, I'm asking to see if the right hand knows what the left hand is doing, so to speak. Many thanks. Brian

Apr 28, 2010 12:32 am

I am at Wells and haven't had this situation since the merger with Wach/Wells.  Sorry.......

This can't be the case since what if they were no longer eligible to make an IRA contribution such as they had no earned income. 

Apr 28, 2010 5:03 pm

Actually, at WFA you can use a certain code when depositing a check into an IRA to denote that it is to cover fees / debits that won't apply it towards the annual contribution. 

May 3, 2010 5:01 pm

Hi folks,

I am legend is completely right. If the person was over 70 1/2 they could not make a contribution to their regular / traditional IRA. Then what, we sell something to pay it off?

I believe my clearing firm is taking the lazy way out, yes of course there is a code to bring in payment as fees, thank you kindly Greeniis, but the firm seems too busy thinking of other things to charge clients for instead of improving their own customer service.

All client-focused firms allow these types of fees to be paid out of pocket by clients, in my experience, provided they have proof of the delivering broker having charged them as fees (such as a statement copy detailing the fees charged).

Now, exactly why are my clients paying $50 annual fees to my clearing firm for, substandard service?