Author Topic: switching brokerage firms  (Read 5556 times)

4tify

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switching brokerage firms
« on: April 05, 2015, 09:41:13 PM »
Hi all

I have been studying for some time now about self directed investments and I'm ready to take the plunge. However before coming to the FI world I invested with an advisor who charges 1%. The investments are a mix of stocks & etfs generally, including vanguard and ishares. but they are sort of all over the map, appx 80/20 stocks/bonds. most of this is in a taxable account btw.

My question is, how to I transfer these assets to Vanguard in the most tax efficient and cheapest manner? Do I simply liquidate and move everything into VTSAX or what?

Any advice is much appreciated!
thanks!

MDM

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Re: switching brokerage firms
« Reply #1 on: April 05, 2015, 09:49:39 PM »
My question is, how to I transfer these assets to Vanguard in the most tax efficient and cheapest manner? Do I simply liquidate and move everything into VTSAX or what?

Liquidating would not be tax efficient.  It may or may not, however, be a good idea.

The simplest thing is to fire the advisor and leave everything as is.  That will save you the 1% fee.

Then you can evaluate the capital gains tax it would cost to move to whatever asset allocation you desire with low-fee funds. 

chasesfish

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Re: switching brokerage firms
« Reply #2 on: April 06, 2015, 06:53:58 AM »
I would open an account with Fidelity and do a transfer of assets request.  That should move the whole portfolio without creating any tax events

MDM

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Re: switching brokerage firms
« Reply #3 on: April 06, 2015, 07:11:46 AM »
I would open an account with Fidelity and do a transfer of assets request.  That should move the whole portfolio without creating any tax events
OP already has some Vanguard funds and wants to move everything to Vanguard.  Just curious why Fidelity is suggested here instead...?

wtjbatman

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Re: switching brokerage firms
« Reply #4 on: April 06, 2015, 07:18:09 AM »
You can (and likely should, with your taxable account at least) do an "in kind" transfer to Vanguard. There is more information on their website, or feel free to give them a call and ask about it. They will gladly help you with the process over the phone. This will avoid an immediate taxable event, while getting you away from any excess adviser fees until you figure out what exactly you want to do.

4tify

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Re: switching brokerage firms
« Reply #5 on: April 06, 2015, 08:39:16 AM »
thanks everyone, appreciate the input. i think i'll do the in kind transfer and then work it out. i just spoke to Vanguard and they said i'll need to talk to my tax advisor about how to manage all the individual stocks. there are quite a few! and i'm no stock picker ;)

best
t.

Better Change

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Re: switching brokerage firms
« Reply #6 on: April 06, 2015, 08:47:10 AM »
I did this a few months ago.  It kind of depends what you want to do.

I transferred all of my mutual funds in kind to Vanguard.  But all of my funds had high expense ratios, and I planned on exchanging them for Vanguard ETFs.  I had an exorbitant number of mutual funds (> 35), and to buy Vanguard funds, I had to liquidate all of my old funds.  It's $20/sale for non-Vanguard funds, so I was looking at multiple hundreds of dollars just to dump them.  I did not check on the fees for liquidation at Edward Jones.  So you may want to check that if your plan is to exchange your funds for more Vanguard funds.

The Class A funds were easier to dispose of, as those are free (because of heavy up front loads).  I kept the mutual funds that were less than a year old to minimize my tax burden as much as I could.  The rest I liquidated at Vanguard.  I'll pay a decent amount in capital gains tax this year, but I'm free from the THOUSANDS of dollars in fees.  Hooray!

4tify

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Re: switching brokerage firms
« Reply #7 on: April 08, 2015, 10:15:34 PM »
wow. ya that's what i'm worried about. when i went to Personal Cap i knew they invested in "some individual stocks" but it's way more than that. luckily there's a lot of vanguard ETFs in the mix, so that should help.

i guess i just have to bite the bullet and take the trade and tax hit to save in the long run. i do wonder though if it's better to wait for a market downturn to make the shift. any thoughts on that?


Frankies Girl

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Re: switching brokerage firms
« Reply #8 on: April 08, 2015, 10:36:47 PM »
wow. ya that's what i'm worried about. when i went to Personal Cap i knew they invested in "some individual stocks" but it's way more than that. luckily there's a lot of vanguard ETFs in the mix, so that should help.

i guess i just have to bite the bullet and take the trade and tax hit to save in the long run. i do wonder though if it's better to wait for a market downturn to make the shift. any thoughts on that?

If you're lucky the transfer will happen in a week. If not, it can take up to three weeks. I wouldn't bother with waiting for a down day if you're wanting to move things over.

Spondulix

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Re: switching brokerage firms
« Reply #9 on: April 08, 2015, 10:43:41 PM »
I did this about 6 months ago - I just had to mail in a signed form and Vanguard took care of the rest. I had no control over when it would actually take place, and it took about 2 weeks.

ClaycordJCA

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Re: switching brokerage firms
« Reply #10 on: April 08, 2015, 10:45:31 PM »
Assuming there are no fees or advisor commissions for selling the funds in your current taxable account, you could consider doing so and then transfer the account to Vanguard. You can also consider selling in your current account, transferring the proceeds to your bank account and then writing Vanguard a check.

Spondulix

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Re: switching brokerage firms
« Reply #11 on: April 09, 2015, 01:50:39 AM »
Assuming there are no fees or advisor commissions for selling the funds in your current taxable account, you could consider doing so and then transfer the account to Vanguard. You can also consider selling in your current account, transferring the proceeds to your bank account and then writing Vanguard a check.
Selling/transferring to your own bank/writing a check takes your money out of the system for a period, and it just leaves room for errors come tax time. I don't see a reason to do it if Vanguard is willing to do the work (and does it well)

bdbrooks

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Re: switching brokerage firms
« Reply #12 on: April 09, 2015, 06:59:04 AM »
+1 for the "in kind" transfer. That simply means that you transfer the shares of stock without liquidating them. Liquidating them would be a unnecessary taxable event. Some brokerages require fees to transfer in or out assets in kind (some are about $75 per security). Check to see if this applies to your brokerage. If the fees do apply and are high, it may be worth it to liquidate and move (that would be if you had a small amount of unrealized gains. If you have $500 in unrealized gains and can liquidated 5 positions for $10 apiece, that would cost $150 (assuming 20% capital gains). This would be cheaper than paying $375 to transfer (75*5) in kind. The math will probably work out to transfer it in kind.

4tify

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Re: switching brokerage firms
« Reply #13 on: April 12, 2015, 10:07:38 AM »
thanks everyone. i think i'm going to just do the in-kind transfer. then my question becomes this:

as an index investor, how to i manage all the individual stocks? i.e., at what point to i sell them and transfer the assets to an index?


Spondulix

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Re: switching brokerage firms
« Reply #14 on: April 15, 2015, 03:33:48 AM »
thanks everyone. i think i'm going to just do the in-kind transfer. then my question becomes this:

as an index investor, how to i manage all the individual stocks? i.e., at what point to i sell them and transfer the assets to an index?
Were any of these individual stocks purchased in the last year? I'd say just make sure you don't have any short term capital gains and just pull the trigger.

rmendpara

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Re: switching brokerage firms
« Reply #15 on: April 15, 2015, 03:40:41 PM »
Hi all

I have been studying for some time now about self directed investments and I'm ready to take the plunge. However before coming to the FI world I invested with an advisor who charges 1%. The investments are a mix of stocks & etfs generally, including vanguard and ishares. but they are sort of all over the map, appx 80/20 stocks/bonds. most of this is in a taxable account btw.

My question is, how to I transfer these assets to Vanguard in the most tax efficient and cheapest manner? Do I simply liquidate and move everything into VTSAX or what?

Any advice is much appreciated!
thanks!

Seems to have been mentioned above, but you can do a "transfer" where they will just move your assets from one place to another. You'll have to dig deeper and maybe get on the phone to find out what type of fees, if any, the current and future brokerages may charge you to do that.

Depending on if you have a lot of assets in certain fund types (Vanguard, i-shares), you could also do a partial transfer to each Vanguard and Fidelity so you can get free trades for those funds in the future.

As for the individual stocks, you can transfer those now, and not pay any taxes, but will have to liquidate eventually if you want to rebalance into funds.

Another thing to ask about is how partial share transfers will work (in case you reinvested dividends and purchased partial shares before) since some places will make you liquidate the partial shares in order to move the assets.

G. Thomas

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Re: switching brokerage firms
« Reply #16 on: April 16, 2015, 06:36:44 PM »
I would open an account with Fidelity and do a transfer of assets request.  That should move the whole portfolio without creating any tax events

I was about to post this same question.  Do you recommend Fidelity because they will most likely offer all the same products that the funds are currently in at a lesser cost? You would not get hit with taxes?

It might be foolish to liquidate everything to purchase (insert low cost index)?  You would get hit with taxes?