Author Topic: Leaving financial advisor best way to minimize tax implications  (Read 2598 times)

Kimm

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I decided after 4 years to dump my financial advisor.  He was helpful when I knew nothing but now the 1% fee for him to earn each year while I'm not really in need of changing anything seems silly. Wish I would have known about index funds earlier on but oh well. I'm Ready to go it alone but I'm trying to figure out the best way to move my taxable account. I have about 228,000 in the account  and approximately 62,000 in unrealized gains.

Do I:
1) sell things slowly over the next few years and move to index funds (how do I decide what to sell and do I use vanguard)?
2) sell it all and move to index funds (vanguard)?
3) move it to another brokage firm and keep the same investments and just pay the mutual fund expense fees ( which brokage firm would be best vanguard/Schwab)?

I have
PENNX 34,000 (6300 unrealized gains) expense ratio 0.91%
PEEAX 51,000 (17400 unrealized gains) expense ratio 1.05%
OIGYX 29,300 (2800 unrealized gains) expense ratio 0.89%
FINFX 58,400 (18,895 unrealized gains) expense ratio 0.40%
AMAGX 55,000 (17000 unrealized gains) expense ratio 1.09%

I'm in the 28% tax bracket so capital gains will be 15%.

« Last Edit: May 24, 2015, 11:28:19 AM by Kimm »

forummm

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #1 on: May 24, 2015, 09:22:06 AM »
What are the expense ratios for those funds?

If they are low and you want to keep them, you can do an in-kind transfer to Vanguard or another brokerage account. Then you won't owe any taxes. But if the fees are high, you would be better off selling and taking the hit now in exchange for lower costs over time.

Kimm

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #2 on: May 24, 2015, 09:31:22 AM »
Added the expense ratios

forummm

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #3 on: May 24, 2015, 10:17:09 AM »
Yeah, you have been hurt by the advice. 2% including the advisor's cut is killer.

I know you said $62k unrealized gains, but I only see about $47k here. I think for $7k in taxes, I would just sell it all and put it all in low-cost Vanguard funds. The rule of thumb is a 10-year return. And these fees are definitely more than $7k in taxes over 10 years. Payback would be about 3 years.

Kimm

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #4 on: May 24, 2015, 11:30:51 AM »
Oops missed a zero on the last mutual fund 17,000 unrealized gains not 1,700. Thanks for the feedback that was the analytical answer I was looking for, what's the payback etc..I haven't talked to vanguard yet but that's the route I'm looking to go.

thedayisbrave

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #5 on: May 24, 2015, 11:32:12 AM »
Are these all long term gains? If so I'd go ahead and sell them now.

forummm

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #6 on: May 24, 2015, 11:59:21 AM »
Oops missed a zero on the last mutual fund 17,000 unrealized gains not 1,700. Thanks for the feedback that was the analytical answer I was looking for, what's the payback etc..I haven't talked to vanguard yet but that's the route I'm looking to go.

OK, the payback is a year or two longer then. I would still do it if it were my money.

Will selling the whole thing push you up to a higher bracket for the LT CGs? If so, you might sell however much will keep you in the 15% LT CG rate, and then sell the rest on January 2nd.

All you need to do is sell your funds from your old brokerage and have the money put into your checking account. Whenever the money hits your account, you can just go to vanguard.com and open up an account there online, and have them pull the funds directly from your checking account. Easy.

Just figure out what funds you want to own in the mean time.

forummm

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #7 on: May 24, 2015, 12:01:44 PM »
Vanguard Target Retirement Fund for the year you turn 65 is a good choice. Or you can just put your stock portion in 50% VTSAX, 50% VTIAX, and your bond portion in VBTLX. There are a lot of options, but simple is good.

https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT
https://personal.vanguard.com/us/funds/snapshot?FundId=0569&FundIntExt=INT
https://personal.vanguard.com/us/funds/snapshot?FundId=0584&FundIntExt=INT

danny9m

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #8 on: May 26, 2015, 01:36:44 AM »
Finfx looks to be a currency trading account, is this correct?  If so this is a big red flag in that this a purely speculative investment where massive leverage can be used.  By massive leverage I'm talking 50 to one. There was a article in Bloomberg markets recently on  currency trading that provided a very negative view on this type of investment. I've never seen this type of investment in an account such as yours.

If this is a forex or currency trading account I'd look to sell this asap., and ask questions later. I'd transfer the rest to vanguard in kind and sell some or all depending on your tax hit.  You may want to sell on jan 1st as someone has suggested.


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forummm

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #9 on: May 26, 2015, 05:51:26 AM »
Currency trading has no business being in the typical person's 401k.

uwp

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Re: Leaving financial advisor best way to minimize tax implications
« Reply #10 on: May 26, 2015, 10:29:55 AM »
FINFX is not a forex trading account, it's just a large cap fund.  Really not that bad of a fund.

Overall, that portfolio isn't horrible in the scheme of things.  Compares decently with a 75/25 Total Stock/Total Intl index (if that's what he was going for).
With those sorts of gains, it at least seems like you have had those funds for a while.  So hopefully he wasn't making transactions just to look busy.

But yeah, paying the advisor on top of the fund fees can be a real drag on performance.