New legislation set to take effect in 2010 removes the $100,000 MAGI limit for Roth IRA conversions, greatly expanding eligibility. Beginning in 2010, people can convert to a Roth IRA regardless of their income... but many investors may not have even known about it if they relied on information from their brokers alone. We simply have not seen many brokerage firms addressing this issue, until recently that is.
Our Merrill Lynch broker recently sent us an email with a couple of Q&A guides from the firm regarding the expanded Roth IRA conversion eligibility and this is the first time, in fact, that any of our brokers have addressed the issue. The upcoming change is a result of a provision in the Tax Increase Prevention and Reconciliation Act (TIPRA) of 2005.
This is certainly a big deal because Roth IRAs have a number of benefits not available in Traditional IRAs, and with the income restriction removed, many more individuals can take advantage of them. This is something that brokerage firms should promote, since it can be a better retirement savings option for some clients. It makes sense that we have not seen this highted heavily up to this point, since it does not go into effect for another four months. But as we get closer to the end of the year, we expect to see this become more front-and-center when firms talk about retirement savings.
With the introduction of Chase's new Ultimate Rewards program in July, we decided to switch our coverage from the firm's legacy (and no longer promoted) Flex Rewards card to the Ultimate Rewards-affiliated Freedom card. The easiest way to do this, we assumed, would be to call a customer service representative (CSR), tell them we currently have a card account, and see if they could help us switch the account over to the new rewards program. When we actually called Chase, however, we hit a wall of confusion.
While the rep did his best to help us, he was not familiar with the new Ultimate Rewards program, and instead tried to sell us on switching to the Freedom Cash card, a product that feeds into cash back rewards, not the new rewards program. After a few minutes of going around in circles on the phone, we decided to thank the CSR for his time, hang up the phone and reconsider our options.
Instead of applying separately for the updated Freedom card online, which was one of the phone CSR's possible remedies, we instead turned to Chase's private site secure messaging service. Like most firms covered by Credit Card Monitor, Chase's online messaging allows card holders to trade messages -- essentially emails -- with CSRs from within the private site. Firms typically tell card holders to expect to receive a response within a 48-72 hour time frame, though most messages are answered faster than that. In the past, we've often found it easier to make account maintenance requests to issuers via online messaging rather than over the phone. Once again this proved true, as an online CSR responded to our message about upgrading to the Freedom card quickly and with clear knowledge of both the Ultimate Rewards program and the process for moving from one rewards card to another.
The private site message from the online rep included a run down of the changes that would occur if we switched our card from the Flex Rewards program to Ultimate Rewards, which included a clearly stated 4% rise in our APR. We were able to keep the same account number; to execute the transition to the new program, all we needed to do was reply to the message thread saying that we had read and understood the changes, and that we were still interested. Once we replied in the affirmative, the process of transferring our account began within 24 hours, and by the next business day we had access to the Ultimate Rewards online site.
This experience once again confirmed our faith in online messaging as the best way resolve a problem or get an answer from a card issuer if you do not need immediate assistance (e.g., lost or stolen card.) While it's not clear why online messaging seems more effective, we are pretty sure that we would still be stuck on hold with a phone CSR trying to transfer our account without the help of the private site message center.
TD Ameritrade has a history of acquisitions, and of taking a long time to integrate acquired companies into its operations. It took nearly five years for National Discount Brokers clients to be moved to Ameritrade.com. Likewise, it took over two and a half years for Ameritrade customers to reap the full benefit of the firm's 2002 merger with Datek. The mid-2005 merger of Ameritrade and TD Waterhouse followed a similar pattern, taking two+ years to dissolve TD Waterhouse and form what is TD Ameritrade today.
When TD Ameritrade announced its purchase of thinkorswim in January 2009, we expected a repeat of this historical pattern. And to date, things have been very quiet. The merger has had no impact on thinkorswim clients, a good thing from their perspective; they continue to trade on the same platforms and speak to the same client service reps that they're accustomed to. TD Ameritrade clients also haven't experienced any interruptions or overhauls in service. That said, changes are clearly afoot, and sooner than we expected.
It's no secret that the TOS trading software is far more robust than anything offered by TD Ameritrade. It was clearly a driving force behind the acquisition. Many suspected that the TOS technology would eventually be incorporated into TD Ameritrade and perhaps replace platforms like Command Center 2.0 outright. So we weren't completely surprised when, in early August, the firm launched thinkorswim from TD AMERITRADE, a replica of the thinkorswim thinkDesktop platform repackaged with the TD Ameritrade brand. What did surprise us was how quickly TD was able to make this happen given past history.
The platform has not yet been introduced to all TD Ameritrade clients but the firm has been marketing it to its most active traders. Email invitations were sent out to select clients encouraging them to log into the TD website to learn more about the platform and download it. The firm even went low-tech and mailed out post cards to active traders encouraging them to register for full-day workshops focusing on the thinkorswim from TD AMERITRADE platform.
We applaud these moves by TD Ameritrade - it makes perfect sense to first roll out the thinkorswim technology to select clients and to teach users how to get the most from it. The platform isn't without a learning curve, so these workshops could be instrumental to the success of this new platform introduction. The key question will be whether TD Ameritrade continues to promote and develop legacy features like Command Center 2.0. Pound for pound, thinkDesktop has a lot more power than most (if not all) TD active trader tools, but the platform may not be appropriate for all Apex clients. Many TD Waterhouse clients complained of the complexity of the Ameritrade website when they were moved to it. Something similar could happen if the existing TD platforms are quickly retired in favor of thinkDesktop.
July was a time for getting back to basics, it seems, as a number of firms introduced simplified or stripped-down versions of products. Credit card firms lead the way with changes from Bank of America, Wachovia and Wells Fargo.
Credit Card Rewards ModifiedBank of America released two versions of the pre-existing BankAmericard Power Rewards Visa – BankAmericard Visa and BankAmericard Cash Rewards Visa Signature. The BankAmericard Visa is a basic card that does not include a rewards program, while the Cash Rewards Signature card allows card holders to redeem rewards for a check, direct deposit, account credit or to pay down a Bank of America mortgage account.
Wells Fargo unveiled a revamped rewards site, offering a new Earn More Mall and new rewards categories. The new online shopping portal allows customers to earn up to 16 bonus points per dollar spent on featured merchants. Wachovia also made changes to its rewards program. The firm informed clients that in order to standardize its rewards program, it will decrease the amount of points customers earn per net dollar by a factor of four. Additionally, customers will no longer be able to combine multiple Rewards accounts into one account.
Basic Annuity Offerings and Bicycles
Annuities sometimes receive a bad rap for being fee-heavy and containing several confusing components. To combat these perceptions, firms are introducing new fixed and variable annuities that are cost-effective and easy to understand. John Hancock released the JH Essential Income fixed annuity and the AnnuityNote Series of variable annuities, which are designed to withstand market fluctuations but deliver a steady stream of income throughout retirement.
Though an eighth first-place finish was just out of reach at the 2009 Tour de France, Lance Armstrong’s LIVESTRONG cancer benefit continues to achieve top recognition for its fundraising and cancer initiatives. This month, American Century added a brand new sitelet devoted to the 20th anniversary American Century Championship (July 17 – 19), with proceeds benefiting the Lance Armstrong cancer foundation.
In Other News:
• Personalizing Plastic – American Express continues the trend among industry firms to allow credit card personalization. Cardholders can now upload a photo to be used as a card template for a fee of $6.95 per card.
• Comments Welcome – Vanguard now allows comments to be posted to its blog, Vanguardblog.com. The firm lists a set of guidelines for posting comments, including staying on topic and not offering investment advice.
Fresh on the heels of our Mutual Fund Monitor Reporton Online Security comes word out of the Black Hat security conference that ubiquitous page verification technology SSL (Secure Sockets Layer) may have some loopholes in the way it functions with Internet browsers.
Mutual fund firms will clearly wince at this news, as our report found that all 18 MFM companies employ SSL for security. The good news is that potential breaches such as these were discovered before they were nefariously implemented, so it gives security and browser developers a head start in plugging the holes.
One of the Black Hat security researchers (a hacker on payroll to identify threats) named Moxie Marlinspike – whose name did not detract from the seriousness of his finds – showed a trick called “null-termination certificate” that can create a phony digital identity to be used in bait-and-switch phishing scams. Elevating the stakes, Marlinspike explained how hackers can intercept a browser’s auto-update function (which relies on SSL), allowing him to modify the browser, “so that anytime you submit something to a site, it sends me a copy,” he said.
On the same day the Black Hat conference was making headlines, VeriSign put out a reassuring press release announcing that all of its systems are already safe from these new SSL threats. The firm even spun this as a selling point, stating that, "Until client software vendors can fix these vulnerabilities in their applications and operating systems, solutions like VeriSign EV SSL provide effective and reliable protection against these potential threats.” VeriSign is one of the most common certificate authorities (firms that issue digital security certificates to verify the identity of websites), and according to our Security Report, used by 72% of MFM firms.
The threats are largely hypothetical at this point, but all browser companies are racing to release safeguards. Firefox 3.5 is already immune to these threats, and developers have released a fix for the majority of users with version 3.0. Microsoft is reportedly close to releasing an update for its Internet Explorer. No word as of yet on the Google blogs regarding their Chrome browser.