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Fidelity Top Choice for IRA Rollovers

Investors who recently rolled over their 401(k) plan to an IRA chose Fidelity more than any other brokerage firm, according to a recent survey by Millionaire Corner/Spectrem Group. Fidelity was named by 30% of respondents, followed by Vanguard (11%), American Funds (9.2%), Edward Jones (7.1%) and Morgan Stanley Smith Barney (6.6%).

(Fidelity also ranked high in our 2010 Online Discount Broker Survey. AAII members gave it the third-highest score, trailing only Scottrade and Charles Schwab.)

The Millionaire Corner/Spectrem Group study found three primary factors that affect the decision of where to roll a 401(k) over to. The first is advice provided by an investor’s financial advisor. Advisors will often suggest an account with their own firm, which may help explain the popularity of American Funds. (American Funds is often sold by independent advisors.) The second is low investment fees, which both Fidelity and Vanguard offer. The third is customer service, particularly the ability to speak to a person as opposed to working through a voice-response system on a phone.

Choosing a brokerage firm is a personal decision, and a good firm for one individual may not be the best firm for another. Cost, convenience, research tools and guidance are all important factors.

When evaluating a brokerage firm—whether it’s for an IRA rollover or another type of brokerage account—ask yourself what specific services you will need. An investor who simply needs a brokerage firm to execute trades at a low cost may find Scottrade to be very suitable. Conversely, an investor who wants guidance or has a complex financial situation may find working with an independent advisor or a full-service brokerage firm such as Morgan Stanley more suitable. Choose the best option for your needs.

Keep an eye on costs, since every dollar saved is a dollar that will earn a compound rate of return in the future. Costs should also be weighed against the perceived value of the services tendered. Paying a little extra for advice may be justified if it helps you better manage your financial situation.

Source: “Firms Most Likely to Capture IRA Accounts,” Spectrem’s Millionaire Corner; AAII 2010 On-Line Discount Broker Survey, www.aaii.com/brokersurvey.


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