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Untangling from my financial advisor
Old 07-17-2018, 02:23 PM   #1
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Untangling from my financial advisor

I'm preparing to fire my financial advisor and take control of my own money.

Basic info:
- Financial advisor is a small, independent firm
- Holdings are currently in Pershing Brokerage and are a mix of a variety of holdings from various companies (Vanguard, Fidelity, T Rowe Price)
- 3 accounts total: Roth IRA, IRA, and Indv.

What's the best way (easiest, tax implications, fees, etc.) to get my money from where it is to somewhere I can control it myself?
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Old 07-17-2018, 02:28 PM   #2
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The taxable account is the one that you need to worry about. The new brokerage may be able to arrange to have the taxable account investments transferred "in-kind" so the transfer will not be a taxable event to you.

The tIRA and Roth can either be transferred in-kind or liquidated and cash transferred. Assuming that the holdings don't have an CDSCs or other restrictions then cash would be just as easy.

Discuss it with your new brokerage.
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Old 07-17-2018, 02:36 PM   #3
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You can do this completely through your new brokerage. They will take care of the transfer for you, and if you have them do it in kind, there will be no immediate tax consequences.

It could happen that something really oddball special security won’t transfer (doesn’t sound like your situation), but most stocks and mutual funds should transfer with no problem.
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Old 07-17-2018, 02:42 PM   #4
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Originally Posted by audreyh1 View Post
You can do this completely through your new brokerage. They will take care of the transfer for you, and if you have them do it in kind, there will be no immediate tax consequences.

It could happen that something really oddball special security wonít transfer (doesnít sound like your situation), but most stocks and mutual funds should transfer with no problem.
+1. Let the new firm handle it.
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Old 07-17-2018, 03:18 PM   #5
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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?
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Old 07-17-2018, 03:26 PM   #6
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I would not do that. I just got all my wife's stuff transferred from UBS to FIDO. It was straight across the board. IRA and taxable accounts. There were both mutual funds and individuaal stocks.
BUT make sure you have a document with the original cost basis of everything in your taxable account.

The new firm will not have that data.
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Old 07-17-2018, 03:26 PM   #7
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Originally Posted by lsimpson33 View Post
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?
Do you have a lot of cap gains, short, long? Any loss carry overs?
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Old 07-17-2018, 03:26 PM   #8
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Quote:
Originally Posted by lsimpson33 View Post
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?
don't do what they say. This should be a simple in kind transfer. There are plenty other destinations that would likely not give you bad advice like this.

Ha
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Old 07-17-2018, 03:29 PM   #9
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don't do what they say. This should be a simple in kind transfer. There are plenty other destinations that would likely not give you bad advice like this.

Ha
If you liquidate it, the new broker has all that fat cash to invest. $$$$$fees$$$$
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Old 07-17-2018, 03:33 PM   #10
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There's no cost to the transfer and they'll even reimburse me any close-out fees.

For all three of my accounts, including INDV, the investment mix isn't what I want. So I want to accomplish 2 things:
1) Transfer the accounts - No fees. Will pay any close-out costs
2) Rebalance my portfolio entirely. So, for the INDV, this could mean capital gains/losses because I'm selling investments and buying into new ones. This is where I'll incur costs.
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Old 07-17-2018, 03:33 PM   #11
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I would make sure I know my cost basis in the taxable account before initiating any type of transfer.

You will need this info to prepare your tax return to report any capital gains when you actually sell the securities (either now or some time down the road). I think the IRS rule is that if you don't know you cost basis, then you must use $0.

I often see this scenario at our volunteer tax prep site.

-gauss
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Old 07-17-2018, 03:37 PM   #12
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Originally Posted by gauss View Post
I would make sure I know my cost basis in the taxable account before initiating any type of transfer.

You will need this info to prepare your tax return to report any capital gains when you actually sell the securities (either now or some time down the road). I think the IRS rule is that if you don't know you cost basis, then you must use $0.

I often see this scenario at our volunteer tax prep site.

-gauss
I agree. I downloaded all the cost basis information from UBS before making the transfer.
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Old 07-17-2018, 04:18 PM   #13
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Originally Posted by lsimpson33 View Post
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?
This doesn't sound like a good idea at all unless you're unhappy with 100% of your current holdings. As COCheesehead noted, if they start with 100% cash it means they get any up-front fees on whatever they sell you. Do you anticipate that your re-balancing would still keep most of your money in current investments, just move it around? If so, there's no reason to liquidate it all.

I doubt that Pershing will give you tax advice unless they charge extra and bring in a specialist.
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Old 07-17-2018, 04:20 PM   #14
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Yep, I'm unhappy with all of my current holdings, unfortuantely.


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Originally Posted by athena53 View Post
This doesn't sound like a good idea at all unless you're unhappy with 100% of your current holdings. As COCheesehead noted, if they start with 100% cash it means they get any up-front fees on whatever they sell you. Do you anticipate that your re-balancing would still keep most of your money in current investments, just move it around? If so, there's no reason to liquidate it all.

I doubt that Pershing will give you tax advice unless they charge extra and bring in a specialist.
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Old 07-17-2018, 04:28 PM   #15
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I would be very uncomfortable with the new broker due to their advice to liquidate. Granted itís not a big deal if you are changing all your taxable holdings anyway. It just sounds like they are trying to ensure a commission on the replacement securities.
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Old 07-17-2018, 04:35 PM   #16
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Find a new "broker". I moved everything from Janus to Fidelity and it was all in-kind.
You want to do an in-kind transfer.
Then you make changes.
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Old 07-17-2018, 05:04 PM   #17
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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.
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Old 07-17-2018, 05:11 PM   #18
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Find a new "broker". I moved everything from Janus to Fidelity and it was all in-kind.
You want to do an in-kind transfer.
Then you make changes.
+!. Yup. Also, are you sure you want to go to this new FA when this is their advice (cash out, no in-kind) during the dating/honeymoon phase?
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Old 07-17-2018, 05:43 PM   #19
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I can see why the new broker says "liquidate everything first" -> You have essentially told them that you want all new investments and none of the old investments.

The key here is understanding how taxes on investments work. This is explained in IRS Publication 550, but I guess your eyes will glaze over if you ever try to read that publication.

The benefit of liquidating taxable account at current place and not new place: The current place is responsible for sending you a 1099B for 2018 next March. The current place should know exactly all the cost basis and be able to report the gains accurately. The new place won't have to rely on the old place giving them the accurate cost basis. But your records should have a list of every single transaction made over all time in the current account, so that you can figure out the cost basis accurately yourself and confirm to the new firm that it was done right.
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Old 07-17-2018, 05:51 PM   #20
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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!
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