The tax season is over. I also get a break from the deluge of questions via emails and comments on my tax-related articles. A common theme goes like this:
I read your article, but when I called [Fidelity, Vanguard, fill in the blank] they told me [something contradictory].
I’m surprised that customer service reps at Fidelity, Vanguard, and other financial institutions are giving tax information. It’s not their role. Customer service reps are in an execution role. If you want to do X, they will do X for you. They are not in a position to tell you whether you should do X in the first place or what the tax consequences are if you do X.
“They told me if I contribute non-deductible to a traditional IRA and then convert it to Roth it would not be taxed.” Wrong. They don’t know what other IRAs you have.
“They told me I have to convert to Roth before April 15.” Wrong. April 15 has nothing to do with it.
I don’t blame the customer service reps. Customer service reps are great people doing a difficult job. Knowledge and training vary among the large number of reps. If you ask them questions, they feel compelled to give you an answer. They answer so many calls. Mistakes happen. If you don’t want to get misinformation, it’s better if you know what types of questions you should ask customer service and what types of questions you shouldn’t.
Ask them whether they offer X or how to do X at that institution. Research and decide on your own whether you can or should do X. You reduce your chance of getting bad information if you don’t ask them the wrong questions in the first place.
On the other hand, the whether and how questions are best handled by customer service. Policies and procedures change. Customer service is the best source if you can’t find the information you need on the institution’s website. Customer service is part of the package you are already paying for. Don’t be shy about using customer service. It will help you decide whether you want to continue using that institution.
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Mark Zoril says
How timely. I was talking with a client last week who had an experience with Vanguard just like you are describing. The rep was providing tax guidance that I thought was beyond the scope of their job. It was nothing too complex and the advice he received was accurate, but i was very surprised that he got it when calling in to their customer service department.
Sam Seattle says
Good point.
Many of the customer service call center are overseas. They speak with an accent that is hard to understand. There is cultural differences, too.
I don’t like that.
That makes it more important for me to ask the right types of questions when calling them.
Wai Yip Tung says
What is the proper resource for “can or should” question then? I have some equity compensation questions. I feel comfortable filling out tax form using software and figure out how all the rules work. But I want some advice on the strategy to use. What sort of professional can do that?
Harry Sit says
CPAs who are familiar with equity compensation. The book Consider Your Options: Get the Most from Your Equity Compensation by Kaye Thomas covers restricted stock, ISO and NQ options, ESPP, and additional consideration for private and pre-IPO companies. I would start from there.
Scott R says
Hey, I’m famous. I think these quotes were taken straight out of the emails I recently sent Harry.
I will say, though, that I somewhat disagree with Harry’s position here. If I call Vanguard and work with a rep to open up a new backdoor Roth IRA, I think it’s reasonable to expect that the reps should know the correct answers to some basic questions, and when they don’t, they should be able to get a more experienced rep on the line who will know the answer. If it’s something complicated, they shouldn’t give you an answer if they’re not 100% certain that it’s correct. Call me crazy, but I think it’s reasonable to expect a higher level of expertise from a Vanguard rep than the person answering the McDonald’s 800 number.
I’m thinking specifically about the advice I was given by the Vanguard rep that I needed to complete my backdoor Roth *conversion* before 4/15. The Vanguard website has pages discussing what the backdoor method is, and it’s something that they no doubt assist customers in setting up, so it’s reasonable to expect them to know some basic facts about the timing aspects of it, and it’s concerning when they don’t.
Steve says
What’s frustrating is when the reps give incorrect responses to whether and how questions. They might be the only source of that information, so when they give you wrong information, you are basically SOL.