Partial fund transfer from Fidelity to VG

[bbbamI]

DH has an IRA with Fidelity. At this point the money is in a mm account.

We want to take part of the money in this account and invest it in VG Wellesley. When we were on Fidelity's website the other day, we were able to pull up VG's VWIAX. It appeared we could transfer money to that account on Fidelity's website. We didn't do anything as I have the following questions:

Are there problems/extra charges initiating a transfer of funds on Fidelity's website to a VG account?

If not, since this money will be coming out of an IRA, can we do the transfer online? I need to make sure we don't pay taxes at this time since we need both accounts to be IRAs.

I know we can contact them next week, but wondered if anyone had experience with this. Thanks...

[LOL!]

Just to clarify: There is a difference between account and fund.

Are you buying VWIAX in your Fidelity IRA? That is, you can buy the fund, but not have a Vanguard account. Fidelity will charge you a commission to buy a Vanguard fund.

If you wish to open a Vanguard account, you have to do that at Vanguard. To do this without tax consequences, call up Vanguard and get them to pull the money over in a custodian-to-custodian transfer.

If you have no accounts already at Vanguard, you may not wish to open a relationship with a second financial institution. OTOH, if all the money in the Fidelity is going to go into VWIAX, then you might as well transfer out of Fidelity completely and use Vanguard directly.

[youbet]

I agree with LOL. You are confusing "account" with "fund."

I own the Vanguard fund VWIAX in my IRA held at Schwab (a Schwab IRA account). I just purchased it and paid a small commission. Reinvestment of divs and CG's are free at Schwab and I suspect would be at Fidelity as well. So if this is going to be a lump sum purchase, Fidelity's commission to purchase the Vanguard fund won't be an ongoing expense.

[bbbamI]

Yes...I did use the wrong terminology in my OP in regards to funds/accounts.

Since we're only going to invest about a third of the IRA mm to VWIAX, it looks like it will be easier to buy the fund from Fidelity (as long as the ER of the fund remains at .21% and there is just a one time commission fee).

Thanks guys...

[Nords]

Quote:

Originally Posted by bbbamI Since we're only going to invest about a third of the IRA mm to VWIAX, it looks like it will be easier to buy the fund from Fidelity (as long as the ER of the fund remains at .21% and there is just a one time commission fee).

Once we finished our DCA days, this is one of the issues that drove us out of mutual funds and into ETFs.

First there's the question of how much the $75 commission adds to your expense ratio. Not a big deal for a $100K Wellesley purchase but perhaps significant enough at $5K to make it worth starting a Vanguard account.

Next, if you're reinvesting the dividends then you might want to check whether Fidelity does that for free or gets another $75 fee with each distribution.

And finally, I don't think Fidelity currently charges $75 fees to sell Vanguard shares. But they might, and someday they could.

Are there equivalent Fidelity funds to replicate Wellesley at a similar expense ratio? The stodgy ol' Equity-Income or Puritan funds come to mind, but they might be more expensive than Vanguard.

[bbbamI]

Quote:

Originally Posted by Nords Once we finished our DCA days, this is one of the issues that drove us out of mutual funds and into ETFs. First there's the question of how much the $75 commission adds to your expense ratio. Not a big deal for a $100K Wellesley purchase but perhaps significant enough at $5K to make it worth starting a Vanguard account.

This is true..

Quote:

Originally Posted by Nords Next, if you're reinvesting the dividends then you might want to check whether Fidelity does that for free or gets another $75 fee with each distribution.

Good point...looks like I have to make a list.

Quote:

Originally Posted by Nords And finally, I don't think Fidelity currently charges $75 fees to sell Vanguard shares. But they might, and someday they could.

Another truth...

Quote:

Originally Posted by Nords Are there equivalent Fidelity funds to replicate Wellesley at a similar expense ratio? The stodgy ol' Equity-Income or Puritan funds come to mind, but they might be more expensive than Vanguard.

At this point I have no idea. Looks like I'm going to have to do a little more research.

Fidelity administers DH's 401k and pension plan. We took the partial lump sum and smaller annuity election when he retired. Since it was with Fidelity, we just rolled over the partial lump sum into an IRA with them. It's been parked in the mm for some time now and we've got to do something with at least part of it. I've purchased bonds, CDs, and a few individual stocks with after tax money; but what I'm attempting to do now is new to me.

Thanks for your help.

[nwsteve]

Bbbam
Not sure how long you have been at Fido but if you have not explored please look at their research tools. You can use it to find a variety of funds with or w/o transactions fee. Their compare feature allows you to see your alternatives with a great level of detail including such things as duration of bond portfolios and expense ratios. For example, Wellesley is currently over 5 yrs whereas a number of other options are much shorter. Hard to beat Wellessly expense ratio, however.
I have Vanguard funds at Fido and they reinvest dividends at NO charge. I have also sold at no charge.
One other thing to consider is whether a large transfer will change your "status" at Fido or Vanguard that impact your costs. You may also want to consider ETFs at Fido where you can buy for no cost if an Ishare, VG has nothing to match this as far as I know. You could buy comparable ETFs at no cost and be close or below even Wellesley.
Nwsteve

[audreyh1]

Reinvesting dividends does NOT incur a transaction fee from Fidelity.

Selling a portion of a fund also does NOT incur a transaction fee. They dropped the fee for selling when they raised the TFs, so I don't expect them to go back to the "old ways".

It's only buying that incurs the transaction fee. So it's a good idea to buy in big chunks which make the TF negligible, or go directly to the fund company instead.

Some folks in accumulation phase set up a scheduled buying program through Fidelity which costs $5 per buy instead. I'm not sure the exact mechanics - but it should be easy to find out. The Fidelity people are always really helpful over the phone.

You really won't find funds cheaper than the Vanguard funds. So if that's what you will primarily own, it might be best just to go through a Vanguard account.

Note that mutual fund assets can always be transferred between accounts at different brokerages. Once you establish ownership through a Vanguard account, you can always have mutual fund assets transferred "in kind" to a different brokerage such as Fidelity. No tax consequences because you aren't selling anything. You are just transferring an asset between accounts. Brokerages do it all the time and the destination (receiving) brokerage will take care of it for you once you fill out the "transfer of assets" forms.

Audrey

[bbbamI]

Quote:

Originally Posted by nwsteve Bbbam Not sure how long you have been at Fido but if you have not explored please look at their research tools. You can use it to find a variety of funds with or w/o transactions fee. Their compare feature allows you to see your alternatives with a great level of detail including such things as duration of bond portfolios and expense ratios. For example, Wellesley is currently over 5 yrs whereas a number of other options are much shorter. Hard to beat Wellessly expense ratio, however.

I have looked at a few funds, but so far they have not looked as good as Wellesley as I like the stocks listed and the low expense ratio. But I will investigate further before I make a decision.

Quote:

Originally Posted by nwsteve I have Vanguard funds at Fido and they reinvest dividends at NO charge. I have also sold at no charge.

That sounds great to me.

Quote:

Originally Posted by nwsteve One other thing to consider is whether a large transfer will change your "status" at Fido or Vanguard that impact your costs. You may also want to consider ETFs at Fido where you can buy for no cost if an Ishare, VG has nothing to match this as far as I know. You could buy comparable ETFs at no cost and be close or below even Wellesley. Nwsteve

Good point. I don't think it will change our status, but I'll check to make sure. I will look at ETFs.

Thank you for your post...it really helps me.

[bbbamI]

Quote:

Originally Posted by audreyh1 Note that mutual fund assets can always be transferred between accounts at different brokerages. Once you establish ownership through a Vanguard account, you can always have mutual fund assets transferred "in kind" to a different brokerage such as Fidelity. No tax consequences because you aren't selling anything. You are just transferring an asset between accounts. Brokerages do it all the time and the destination (receiving) brokerage will take care of it for you once you fill out the "transfer of assets" forms. Audrey

Thanks for your post Audrey...it's all coming together in my tiny brain.

We have a Fidelity office located near our city and we're going to make an appt to discuss our options with a rep. I will be loaded down with questions and confirmation of what I have learned today. For me, knowing the right questions to ask is half the battle.

Thanks everyone!

[Nords]

Quote:

Originally Posted by bbbamI We have a Fidelity office located near our city and we're going to make an appt to discuss our options with a rep. I will be loaded down with questions and confirmation of what I have learned today. For me, knowing the right questions to ask is half the battle.

My grandfather/father were/are with Fidelity for decades, we've been with them for nearly 25 years, it's been flawless on the first try over 99% of the time, and in a few months our kid will start the fourth generation of Nords family accounts there. Great account-management tools, good record-keeping service, wonderful research tools/planners, knowledgeable staff, decent expenses for the service.

But if you only have a portion of your assets at Fidelity then it might be cheaper to consolidate at Vanguard, especially if it bumps you up a class to a lower expense ratio.

However the coffee at the investor center may be very nice!

[Dawg52]

Quote:

Originally Posted by bbbamI Thanks for your post Audrey...it's all coming together in my tiny brain. We have a Fidelity office located near our city and we're going to make an appt to discuss our options with a rep. I will be loaded down with questions and confirmation of what I have learned today. For me, knowing the right questions to ask is half the battle. Thanks everyone!

Take a stat sheet of the Wellesley fund with you. Tell them you want something that closely replicates this fund without having to pay a $75 fee. It would be interesting to see what they have to say.

[Bestwifeever]

Quote:

Originally Posted by Dawg52 Take a stat sheet of the Wellesley fund with you. Tell them you want something that closely replicates this fund without having to pay a $75 fee. It would be interesting to see what they have to say.

And then come back and tell us

[bbbamI]

Quote:

Originally Posted by Nords However the coffee at the investor center may be very nice!

As a matter of fact the coffee is good...wonder if they'll offer us donuts too...

Quote:

Originally Posted by Dawg52 Take a stat sheet of the Wellesley fund with you. Tell them you want something that closely replicates this fund without having to pay a $75 fee. It would be interesting to see what they have to say.

You know I thought about that...you've talked me into it!

Hmmm...I wonder if they'll take my donuts and coffee away though....

[bbbamI]

Quote:

Originally Posted by Bestwifeever And then come back and tell us

Indeed I will.

[Rustward]

Quote:

Originally Posted by bbbamI As a matter of fact the coffee is good...wonder if they'll offer us donuts too... You know I thought about that...you've talked me into it! Hmmm...I wonder if they'll take my donuts and coffee away though....

Donuts?
Didn't you say that you had resigned your volunteer job at the PD?

[bbbamI]

Quote:

Originally Posted by Rustward Donuts? Didn't you say that you had resigned your volunteer job at the PD?

.....Hey, I gotta find 'em somewhere else don't I?

I'm at the pd now..it's my last day. If I can make it 2 1/2 more hours without getting shot, I'm golden....

[audreyh1]

Why are there transaction fees?

Just in case it gets lost in the discussion - It's good to reiterate why transaction fees exist.

Mutual fund companies that offer funds with low fees such as Vanguard and Dodge and Cox, require transaction fees when their funds are sold through discount brokerages such as Fidelity, Schwab, etc.. This is to insulate their direct customers from the extra expenses involved in selling through the discount brokers. Fair enough.

Now Fidelity's transaction fees may be higher than some others such as Schwab, so it's not all about the mutual fund extra costs (or may Schwab reimburses the mutual fund company some to lower the fee - who knows). But the main reason they exist is to keep reimburse the mutual fund and keep the expense ratio low.

Audrey

P.S. Congrats on your last day!!! Don't joke about that other part - it drives superstitious people like me crazy!

[audreyh1]

If you have just retired, and putting a lump sum in VWIAX, then if the amount is say - $25,000 or more, the $75 transaction fee is a 0.3% one time hit which IMO is almost negligible. This is like adding 0.3 to your first year transaction expenses. You can do the math for smaller amounts. Big hint - $10,000 - the TF represents 0.75 added to ER for first year.

OR

If you have just retired, and want to average into VWIAX over a specific time period - say one or two years (or whatever), you can set this up with Fidelity and incur the $5 per transaction fee.

Otherwise

Open an IRA account at Vanguard, and have them transfer the assets (cash) from Fidelity doing the custodian-to-custodian transfer. You can specify the exact amount. But personally, I would only do this if I were still accumulating and would be buying more of the fund in an unpredictable way.

Audrey

[bbbamI]

So...we met with the Fidelity rep today. That office was VERY busy.

We found out we could buy VWIAX for a fee of $75. There would be no other fees associated with this fund from Vanguard. We can buy any type of fund online with the IRA account and no paperwork has to be filled out. I guess I was used to the old days of paperwork flying around for a month.

We got a bit sidetracked and we didn't discuss VWIAX much, but she did recommend that we take a look at OAKBX, PTTDX and PLDDX. All of these funds hover around .85% er. We're also going to look into ETFs.

As far as 'status' goes, she said that no longer applies to Fidelity.

We have a lot of homework to do.