Zecco Dividend Reinvestment: More of a Hassle than Convenience

Posted by Sun on January 18, 2008
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I knew Zecco offers free dividend reinvestment, the only problem is I don’t know how to set it up.

When I logged into my account yesterday, I noticed that there’s a $20 dividend from my investment in Blackstone Group (BX) (not that I appreciate the money given how much the stock has dropped since it’s IPO). Since I don’t need to take any cash distribution now, I’d love to see all the dividends, as well as capital gains from mutual funds, reinvested. After clicked all the menu items in my account, I didn’t find anything tell me how to set up dividend reinvestment. That’s kind of weird because as a service, I imagine it should be easily accessible.

So I decided to give Zecco a call and was told that there’s no way I can set up dividend reinvestment myself. To use the service, I have to send them a signed little with instruction on which security, or the whole account, I want to set up the dividend reinvestment. When I asked if they have a form I can fill out, they said no, there’s no such a form and I just have to write a letter myself and either mail or fax it to them.

Later, I found there’s a discussion in Zecco forum on what are needed, including one item I wasn’t told over the phone: a copy of a government issued ID. What do they need that for? They didn’t ask that when I opened the account, but require it to set up a dividend reinvestment plan? And the discrepancy between information given by Zecco sure will mean some back-and-forth before the job is done. Why can’t they provide a template to make everybody’s life a little easier?

BTW, I was told yesterday that only whole shares can be purchased with dividends.

Sorry, no fractional shares for you! And you probably can forget about the whole dividend reinvestment thing if the distribution is too small to even buy a single share.

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4 Comments
January 18, 2008

I had the same issue with Zecco - I was told dividend reinvestment could be done but no one I spoke with there knew exactly how I could set it up (this was a couple months ago). Looks like I could try to set it up again, but without fractional shares you either have to have a significant number of shares or else hope they pay one heck of a dividend.

Posted by Andrew
January 21, 2008

I don’t understand why the average Joe would want dividend reinvestment in a taxable account! Each tiny purchase results in a small batch of shares with a new cost basis that has to be managed separately from the rest of your shares. When you sell stock/ETFs, you have to report to the IRS each cost basis with its associated profit or loss. What a pain!

Unless you’re a tax professional or LOVE maintaining huge volumes of detailed financial records, you should just direct the dividends to a bank account and then invest in bigger chunks when you’re ready. This is also very useful for rebalancing.

Do some research - you may soon understand and appreciate why Zecco makes dividend reinvestment hard.

Posted by Jo
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