Author Topic: Betterment - It's a nightmare to transfer assets OUT  (Read 4035 times)

scrapper

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Betterment - It's a nightmare to transfer assets OUT
« on: July 25, 2018, 06:31:28 PM »
TL;DR - Betterment appears to be putting artificial barriers to customers transferring assets in-kind to another brokerage.  This is a dirty business practice, and it is unique to Betterment.  Wealthfront does not play these games.  I strongly urge any current or potential new Betterment customers to read and understand what you're in for if you ever want to change brokerages. 

Situation:   I established a Betterment account in Nov. 2015.  I currently have approx. $244K in a taxable account.  I recently decided to transfer my assets out to a different brokerage.  I do NOT want to cash out, as the tax bill to do so would be huge.  I want to do an in-kind transfer of my current holdings. 

This *should* be simple - I've done it before with other brokers.  The standard process is an ACATS transfer, you go to the new brokerage, fill out some information about your current account, click submit.  The process is all electronic, and it takes maybe a week or so to complete. 

Betterment does not support the ACATS method.  They use a snail mail process, documented here:  https://help.betterment.com/hc/en-us/articles/115004243163-Withdraw-or-transfer-funds-from-Betterment-to-a-different-institution

Some key points:
  • Betterment wants my new broker to send them "transfer paperwork" to an address in NYC via snail mail.  They do not specify what paperwork they need. 
  • If my account is worth > $250K, they need the transfer paperwork mediallion signature guaranteed.  Thankfully I don't fall into this category.
  • Betterment also needs "a copy of the first page of your most recent Betterment statement, which you can find on your Activity page".   That's right, Betterment wants me to send them a snail mail copy of a statement that I download from them.  Once you stop laughing, ponder this - how am I supposed to combine this statement with the "transfer paperwork" from my broker?  I have no idea.  Maybe my broker is supposed to send them a letter.  Then I send them a letter.  And somebody in NYC combines these two letters so that I have a full transfer request.
  • And finally, "Generally transfers are completed within 3-4 weeks of receiving the paperwork."   The quoted sentence is directly from a response to an email I sent to support@betterment.com.  I wrote to ask them if they can do an ACATS transfer out of Betterment.  They replied with the same information from the link above, plus this little tidbit about transfers taking 3-4 weeks *after* they receive my snail mail(s).

I am beyond pissed.  They are going out of their way to make this process difficult and time consuming.  Apparently, they believe that this will act as a deterrent to switching brokers.  It is a shameful business practice. 

In case you're wondering, Wealthfront makes this process simple and fast using ACATS.  See here: 
https://support.wealthfront.com/hc/en-us/articles/115003462743-How-do-I-transfer-my-account-out-of-Wealthfront-to-another-firm-

I'd like to hear from anyone who has successfully transferred assets in-kind from Betterment. 
I'd also like to discourage anyone from putting their assets into this company. 
Thanks.
« Last Edit: July 27, 2018, 12:36:21 PM by scrapper »

jacoavluha

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #1 on: July 30, 2018, 11:23:40 PM »
I transferred an account in kind from Betterment to M1 finance and it was quick and simple. Actually kinda scary how easy it was. Iím not even sure I signed anything. Note that only whole shares transfer, youíll be left with sfaxtions that Betterment will probably automatically liquidate but I canít recall for sure.

dacalo

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #2 on: August 07, 2018, 06:54:58 PM »
I transferred an account in kind from Betterment to M1 finance and it was quick and simple. Actually kinda scary how easy it was. Iím not even sure I signed anything. Note that only whole shares transfer, youíll be left with sfaxtions that Betterment will probably automatically liquidate but I canít recall for sure.

Hmm, two conflicting stories. I have read somewhere else (Bogleheads) that transfer process was really bad.

chasesfish

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #3 on: August 09, 2018, 09:24:52 AM »
Helping a friend transfer out right now.  The projected tax bite was only $500, so after reading these stories I recommended the cash out and transfer method as she intends on just buying a Fidelity index fund with the proceeds.

chicagobluu

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #4 on: August 13, 2018, 10:56:16 PM »
I transferred an account in kind from Betterment to M1 finance and it was quick and simple. Actually kinda scary how easy it was. Iím not even sure I signed anything. Note that only whole shares transfer, youíll be left with sfaxtions that Betterment will probably automatically liquidate but I canít recall for sure.

This is interesting to hear.  I've maintained a Betterment account for a few years and am mostly happy with them but not crazy about having to pay the management fee.   As far as I can see, M1 Finance will provide the same level of auto balancing without having to pay the fee.   I may try the transfer myself and I'll make sure to update my article that about M1 Finance being a Betterment killer.

Guide2003

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #5 on: October 26, 2018, 04:52:13 AM »
I am in a very similar situation to OP but anticipated pulling out a couple years ago and started arranging my tax situation to accommodate. I went full traditional this year for tax advantaged accounts and lumped 2-3 years worth of itemized deductions into this year to keep me from paying taxes on the gains since I plan to cash out. Still havenít pulled the trigger because im really nervous about how it will pan out. Iím hoping that the capital gains estimator on their withdrawal page is pretty accurate because Iíve ran all my 1040 scenarios off it.

One undervalued aspect of betterment is the charitable giving feature; you can donate your most appreciated shares through a DAF while the shares you sell are alegedly the worst-performing first. Iím not able to offset the gains of selling 100% of my betterment balance this year, so I plan to donate out of that account primarily to drain it going forward. 

Iíll try to update the thread with more info on the ease of my transfer in case future readers find this while searching for info on getting out of betterment like I did. I attempted a full case study for feedback a couple years ago and didnít get much advice on this specific topic (probably asked too wide a variety of questions). I hope Iím not overlooking anything with this transfer, cause I feel like itís really stretching my diy abilities!

chasesfish

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #6 on: October 26, 2018, 05:47:32 AM »
I helped a coworker transfer out of Bettermint.  It went through without a hitch to Fidelity

jacoavluha

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #7 on: October 26, 2018, 06:02:36 AM »
I am in a very similar situation to OP but anticipated pulling out a couple years ago and started arranging my tax situation to accommodate. I went full traditional this year for tax advantaged accounts and lumped 2-3 years worth of itemized deductions into this year to keep me from paying taxes on the gains since I plan to cash out. Still havenít pulled the trigger because im really nervous about how it will pan out. Iím hoping that the capital gains estimator on their withdrawal page is pretty accurate because Iíve ran all my 1040 scenarios off it.

One undervalued aspect of betterment is the charitable giving feature; you can donate your most appreciated shares through a DAF while the shares you sell are alegedly the worst-performing first. Iím not able to offset the gains of selling 100% of my betterment balance this year, so I plan to donate out of that account primarily to drain it going forward. 

Iíll try to update the thread with more info on the ease of my transfer in case future readers find this while searching for info on getting out of betterment like I did. I attempted a full case study for feedback a couple years ago and didnít get much advice on this specific topic (probably asked too wide a variety of questions). I hope Iím not overlooking anything with this transfer, cause I feel like itís really stretching my diy abilities!

Iím confused. Are you transferring out in kind, or liquidating? If transferring in kind you donít have to worry about gains and taxes. Only fractional shares will be sold. If liquidating, then thereís no need to transfer. Just withdraw the cash to your bank account.

Lan Mandragoran

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #8 on: October 26, 2018, 12:30:52 PM »
I just stopped using betterment and decided to just use that money first. Only have a relatively small amount in there though.

Guide2003

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #9 on: October 26, 2018, 01:04:18 PM »
Iím confused. Are you transferring out in kind, or liquidating? If transferring in kind you donít have to worry about gains and taxes. Only fractional shares will be sold. If liquidating, then thereís no need to transfer. Just withdraw the cash to your bank account.
Maybe my terminology wasnít proper. I want to liquidate it to go more towards the lazy portfolio model. Merely withdrawing cash from Betterment seems easy enough. Balancing the capital gains when Iím already close to my tax bracket is much less so for me!

TFT

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #10 on: October 26, 2018, 01:21:19 PM »
Iíll try to update the thread with more info on the ease of my transfer in case future readers find this while searching for info on getting out of betterment like I did. I attempted a full case study for feedback a couple years ago and didnít get much advice on this specific topic (probably asked too wide a variety of questions). I hope Iím not overlooking anything with this transfer, cause I feel like itís really stretching my diy abilities!

That would be great. Would also be awesome to hear from a Wealthfront customer how easy the ACATS transfer process is.

Guide2003

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #11 on: November 16, 2018, 10:54:27 AM »
Finally got up the guts to make the transfer today. When I ran the taxes early this year (prior to seeing anything on the IRS's changes) I estimated I'd be fine with W2 income of $63k, captial gains of 55K, and itemized deductions of $50k. What with the recent market conditions Betterment estimated $47k of capital gains if I liquidated my whole taxable account, so that's good. I had to click through several popups asking if I was leaving because of the market conditions. On their one question exit survey there was no dropdown option for "dissatisfaction with rising fees."

Hopefully the itemizing works out like i hoped; I had a hard time understanding the IRS pubs on that, and those were 2017 ones. Either way, its time to rip the band aid off.

jacoavluha

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #12 on: November 16, 2018, 11:44:26 AM »
Hopefully the itemizing works out like i hoped; I had a hard time understanding the IRS pubs on that, and those were 2017 ones.

If a significant portion of your itemized deductions were state and local taxes (SALT - state income tax, property tax) then you may be disappointed, as SALT deduction is now limited to $10k per year.

Guide2003

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #13 on: December 14, 2018, 04:02:17 PM »
If a significant portion of your itemized deductions were state and local taxes (SALT - state income tax, property tax) then you may be disappointed, as SALT deduction is now limited to $10k per year.

It was mostly charitable donations. Iím a little concerned with the 50% limit stuff cause Iíve never approached that before.

One thing of note with Betterment was that I used their charitable contributions feature to give to the two organizations of my choice through their partnership with a DAF provider (SocialGood). This sounded like a neat feature and if I hadnít have been able to liquidate my taxable account at Betterment I would have contented myself with using it up by dontating over the years. Betterment claims to donate your most appreciated shares first, which I took to generally mean my first purchased shares across all the etfís they had me in. Turns out they only donated from the single etf that appreciated the most (VTI), so by the time I completed the transaction there was an email in my inbox saying my portfolio had been massively rebalanced. Not sure how youíd play that if I was staying in betterment and didnít want to lock in gains in my other holdings.

SocialGood has been pretty responsive and easy to work with, but I feel like I canít get straight answers to even basic questions, almost like itís a really small operation thatís still getting off the ground. Itís required a whole lot of phone calls to figure out who the right person is to answer my questions and whether Iíd be better dispersing 100% of my donations or trying to keep the account open for the future. I donít see myself needing a DAF for at least two years so Iíll probably drain it and forget about it. The answers I get on the phone about fees donít seem to match what their website says so Iíll research that more if I need it again.

It was a little bit of a pain getting the medallion signature guarantee to move the funds for my betterment ira since my closest bank branch is in another state and it seems like you can only get them at banks that you are a member of. Vanguard received that paperwork early this week, so weíll see how long it will take to move the funds over. I had a 90/10 selection that was probably >95% in vanguard etfs at betterment. Prior to asking vanguard to pull the money over, I switched to a 100/0 selection hoping betterment would put me in 100% vanguard etfs to minimize fees when I consolidate but no dice. I had three non vanguard bond etfs that all turned into non vanguard stock etfs.

Kronsey

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #14 on: December 14, 2018, 09:42:38 PM »
Somewhat off topic but figure the story is appropriate for this thread.

I had to get a medallion signature for a direct rollover from a previous employer's 401K plan with Fidelity for.....

...less than $1,000 (not a typo).

I think it is pretty common practice to make you jump through multiple hoops to get your money transferred. Shady practices for sure, but I don't think it is unique to Betterment.

Mighty-Dollar

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #15 on: December 15, 2018, 06:19:16 PM »
I can kind of understand asking for documents to be sure that you're the actual account holder. This helps stop fraud. But 3-4 weeks???? That's ridiculous. Duly noted.

starbuck19

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #16 on: December 15, 2018, 06:41:54 PM »
Re: Fidelity requiring a Medallion signature guarantee for 401k and IRA rollovers, that is not true. Yes that is what they will tell you on the phone to make it as difficult as possible I assume to take your money out of Fidelity, but if you email their CS and ask in writing whether that is true, they will tell you that in fact its not needed (I rolled out two 401Ks and an IRA containing less than $5k this year, no Medallion signature needed for any of them).  That's what I did and after I had it in writing that the Medallion signature was not necessary I called Fidelity again to initiate the IRA rollover, person tried to give me the runaround again and when I told him that I had it in writing from a Fidelity CS representative that 1. no mailed in form was necessary from me  and 2. no Medallion signature was required, he initiated the rollover right away.

Kronsey

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #17 on: December 15, 2018, 07:09:24 PM »
Re: Fidelity requiring a Medallion signature guarantee for 401k and IRA rollovers, that is not true. Yes that is what they will tell you on the phone to make it as difficult as possible I assume to take your money out of Fidelity, but if you email their CS and ask in writing whether that is true, they will tell you that in fact its not needed (I rolled out two 401Ks and an IRA containing less than $5k this year, no Medallion signature needed for any of them).  That's what I did and after I had it in writing that the Medallion signature was not necessary I called Fidelity again to initiate the IRA rollover, person tried to give me the runaround again and when I told him that I had it in writing from a Fidelity CS representative that 1. no mailed in form was necessary from me  and 2. no Medallion signature was required, he initiated the rollover right away.

You are probably right. I didn't investigate further or fight it. I probably wasted an hour going to my bank to get it done.

My point was just that most of these companies try to make it painful to prevent assets leaving.

Indexer

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #18 on: December 15, 2018, 08:52:40 PM »
The likely reason some people have great experiences and some have terrible expenses:  IRA or taxable?

From the stories I've heard & read, transferring an IRA is pretty easy. It doesn't need to go in kind. Transferring a taxable account in kind is where you hear the stories about non-ACAT and requiring paperwork.

I had to get a medallion signature for a direct rollover from a previous employer's 401K plan with Fidelity for.....

401ks and 403b plans can each have their own rules. 100 different plans all through Fidelity could have 100 different sets of rules. Most Fidelity plans will have the same rules, and they are normally very easy to deal with for rollovers.

Guide2003

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #19 on: December 16, 2018, 07:55:14 PM »
I was transferring the IRA from Betterment to Vanguard and Vanguards forms were the ones requiring the medallion signature guarantee. And I couldnít find the option to liquidate and transfer as cash, only an In kind transfer of the dozen etfs that Betterment has me in. Did I miss something somewhere?

Guide2003

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Re: Betterment - It's a nightmare to transfer assets OUT
« Reply #20 on: December 21, 2018, 09:04:36 PM »
Updating for those who may be trying to gracefully exit Betterment as well.

When I asked Vanguard to move my Roth over, I got the impression from them it would come in kind, and therefore I was hoping to get it in Vanguard funds as much as possible. When Betterment got the notification from Vanguard, they sent me an email that included the following:

ďPlease note that all transfer requests for taxable accounts will be processed in kind and typically take 10 business days from the date of this email to reach the destination institution. With the initiation of this transfer, you are authorizing Betterment to provide cost basis information about the transferred assets to your destination institution, upon request of the institution.

All transfer requests for non-taxable accounts (Traditional, Roth, and SEP IRAs) will be processed by liquidating the account and sending a check to the destination institution. Those transfer requests typically take 12 to 15 business days. Please note that transfers within Betterment follow the same process and timing.Ē