Untangling from my financial advisor

[OldShooter]

Quote:

Originally Posted by lsimpson33 ... they are encouraging me to liquidate all of my investments to cash and then transfer over. Not a huge deal for the IRA or Roth, but a big deal for the Indv. ...

I have a standard response when someone attempts to make me behave for their convenience:

"I'm getting a little confused here. One of us is the customer and one of us is not the customer. Which one do you think you are?"

Having thus established that I am the customer, we proceed as I direct. In your case, transfer everything in kind and deal with the tax implications at leisure. There is no reason to mix up the account transfer and the investment plan. You're just asking for trouble.

Or, more generally, when I encounter this attitude I take my business elsewhere. YMMV, of course.

[LOL!]

^That's good advice, but once the assets are transferred, then the old financial institution has little incentive to provide the correct cost basis and transaction info to the new financial institution in a timely fashion. So one had better have accurate and complete records in their hand before a transfer-in-kind happens.

[GalaxyBoy]

Perhaps I'm stating the obvious, but since no one else has, here goes. Be sure the IRAs are transferred directly to the new brokerage and you don't get a check that you have to then deposit yourself.

[audreyh1]

Quote:

Originally Posted by lsimpson33 Thanks all! Follow-up question: I called the new brokerage. Since I want to change my investments too, they are encouraging me to liquidate all of my investments to cash and then transfer over. Not a huge deal for the IRA or Roth, but a big deal for the Indv. Who should I consult for the tax implications of this? The current brokerage (Pershing)? A tax accountant?

Why are they encouraging you to liquidate your investments? Don’t do it!

Are you really ready to take on the tax consequences of selling everything at once? Sounds like you need to make a new plan before you sell anything.

[Scuba]

I just left my previous advisor and transferred everything “in kind” to Fidelity. My new Fidelity advisor and I agreed on how to reposition our portfolio with acceptable tax consequences. To fully simplify it will take years as we have six figure gains on some individual stock positions, but we’ve already made tremendous progress.

Your new FA should be able to help you assess tax consequences before you take any action to sell anything.

[DrRoy]

Quote:

I agree with the other advice you've been given. I'd do the following. - Get the cost basis for current holders from old broker. - Figure out what you want to invest in - mutual funds? Active vs Passive? Individual stocks? Bond funds or Individual bonds? Figure out if anything you currently own fits your new asset allocation/plan. But have a clear plan. - Transfer funds in-kind. - Rebalance/Reallocate to your new investment plan. Obviously your new brokerage should match your new plan. If you are looking at mostly vanguard funds, or schwab funds, or fidelity funds - consider going with the company (vanguard or schwab or fidelity) since often there are advantages to buying/selling in house funds in terms of fees or premium (admiral class for example) products. If you want to own a bunch of individual stocks - go with a brokerage that does that well with low trade prices.

+1. You should not be getting pressure from the new financial firm. Perhaps you should pick a different one. When I did this, I went to Fido, and there was no pressure on their part at all. I switched the old investments over a period of several years because I did not want to take a big tax hit all at once.

[lsimpson33]

Thanks again, all!

Ironically, the brokerage that is telling me to liquidate all my assets first is Fidelity.

[pb4uski]

The first thing you need to find out is the basis and unrealized gains for the taxable account and what the tax would be if you did liquidate. Your current broker website should have that information. If the tax is not that significant then that may be a good route.

If you have some significant unrealized gains that you don't want to liquidate and pay taxes on, then TELL the new brokerage that you want those securities transferred in-kind... if they balk, then find a different brokerage.

Once the taxable account transfer has been sorted, then you can liquidate the investments in the tax-deferred and tax-free accounts just prior to the transfer.

[OldShooter]

Quote:

Originally Posted by lsimpson33 Thanks again, all! Ironically, the brokerage that is telling me to liquidate all my assets first is Fidelity.

Funny. But the real world is that companies are made up of people, some good, some not so good.

If you want to stick with Fido I suggest that you talk to the branch manager and ask to be reassigned to another rep. He/she should quiz you on what you want from a rep, what age, what experience, etc. If they do not, just dump it all on them anyway and ask to interview at least two that might be suitable.

[gerntz]

Quote:

Originally Posted by COcheesehead If you liquidate it, the new broker has all that fat cash to invest. $$$$$fees$$$$

OP did say taking control of own money. So I'd assume the new broker is op.

[gerntz]

Quote:

Originally Posted by trumpeting_angel Even if you want to change all the investments in your taxable account, you might not want to do all of it in one tax year. Find a new brokerage who wants to be helpful to you, not just make $$ on you!

My thinking too. Make the changes over several years.

[pb4uski]

Maybe not necessary. If the OP is unhappy with their holdings then there might not be much in gains to fret about but OP won't know until he gets the basis, which should be available from his current broker's website.

[davebarnes]

Quote:

Originally Posted by lsimpson33 Ironically, the brokerage that is telling me to liquidate all my assets first is Fidelity.

Correction
Ironically, the person that is telling me to liquidate all my assets first is at Fidelity.

[Souschef]

Quote:

Originally Posted by davebarnes Correction Ironically, the person that is telling me to liquidate all my assets first is at Fidelity.

Thaat is interesting, because I just moved DW's accounts to FIDO and they said nothing about liquidating HMMM

[MRG]

Quote:

Originally Posted by Souschef Thaat is interesting, because I just moved DW's accounts to FIDO and they said nothing about liquidating HMMM

Fidelity has many employees some are more ethical than others.

[kgtest]

Know what you own, why you own it and why you would sell it (and any tax related consequence).

Once you know that, you won't need a rep, a FA etc. You will then be in control of your money.

Or just keep paying a fee for someone else to guide you.

[kgtest]

Quick Cost Basis lesson. Your Cost ( basis) is the amount of deviance from what you paid, to where the security is today (when you presumably sell...UNLESS you do an in-kind everyone suggests, then it doesn't matter).

But if you sell out of your broker, say AAPL, or whatever you own...and have to re-buy it over at new FIDO Broker as AAPL...then you have just triggered a tax event.

Likely AAPL has increased from your cost basis so that number is POSITIVE, and you will owe tax( depending on how high of tax bracket likely 15% LTCG) on the gains.

IF you bought one share at 100, and now it's worth $150, then you owe tax (15% LTCG on the $50) or $7.50. There might be a fee associated with selling (broker fee) and another fee when re-buying at FIDO (unless they have commission free trades).

So here you are losing $15-22 just moving the money this way... UNLESS you do an in-kind transfer, then you owe nothing and no trigger of any taxable event occurs.

Correct my math if I'm wrong. Welcome to investing, keep your hands and feet inside the ride at all times kiddos!

[Bestwifeever]

Quote:

Originally Posted by lsimpson33 Thanks again, all! Ironically, the brokerage that is telling me to liquidate all my assets first is Fidelity.

Perhaps there’s a reason (not self-serving) that this rep feels you should do this? Maybe the gains aren’t overwhelming, maybe you told him you didn’t like the holdings or that you want a different AA?

[Bryan Barnfellow]

Quote:

Originally Posted by kgtest Quick Cost Basis lesson. Your Cost ( basis) is the amount of deviance from what you paid, to where the security is today (when you presumably sell...UNLESS you do an in-kind everyone suggests, then it doesn't matter). Correct my math if I'm wrong. Welcome to investing, keep your hands and feet inside the ride at all times kiddos!

Actually, I think you mean that the deviance/difference between what you originally paid for a security and what you sell it for is the capital gain or capital loss. The cost basis is what you paid plus or minus any changes, such as a return of capital, for instance over your holding period. No?


-BB

[Bryan Barnfellow]

A couple of thoughts on this:

The new brokerage house, e.g., Fidelity, would collect fees on both the sale of securities in the transferred portfolio and on the purchase of new securities. So, advising that the new client sell everything first and then just deposit the cash sounds to me like the person he talked with simply wants an easy solution for him/herself...less work, even if it makes the brokerage less profit.

Second, I would be sure that I had paper (or well backed up electronic) records on all the transactions in the current portfolio since you opened it. If you are ever audited by the IRS the cost basis numbers you gave your new brokerage firm could be challenged.

Third, there is some really good advice here: don't sell your securities before transfer...who knows, you may end up buying some of them again. Better to transfer them and then plan a tax efficient plan for revamping the portfolio, perhaps over multiple years. Who is to say that selling now is the right plan for every security in the portfolio?

If it were I, I'd call up Schwab or Vanguard or another well regarded brokerage and tell them you are thinking of jumping ship and ask for a consultation. Let them sell you by giving you their best ideas before you "officially" make any decision on staying or jumping.

Best of luck

-BB