The Fidelity rep is apparently mistakenly applying the SECURE Act requirement as if your wife's mother passed after 2019. Had the SECURE Act been in effect in 2018 (it did not come into effect until 2020), the Fidelity rep would be correct and you as successor beneficiary would just complete your wife's RMD requirements.
SEC. 401(b)(5) of the SECURE Act states that the beneficiary of a decedent who died before 2020 is treated as an eligible designated beneficiary (EDB). Therefore your wife is treated as an EDB and Section 401(a)(9)(H)(iii) of the tax code applies:
(iii)Rules upon death of eligible designated beneficiary.—
If an eligible designated beneficiary dies before the portion of the employee’s interest to which this subparagraph applies is entirely distributed, the exception under clause (ii) shall not apply to any beneficiary of such eligible designated beneficiary and the remainder of such portion shall be distributed within 10 years after the death of such eligible designated beneficiary. [Emphasis added]
