How to sell individual Municipals and Preferred stock

JB · 09-12-2007, 11:57 AM

Hello,

An elderly relative recently died and left a portfolio of ny municipal bonds and preferred stocks. They are held by a few large brokerages. I'm helping the executor settle the estate.

I looked at the trading volumes on these securities and they are very low. We would like to sell in a way that maximizes the value.

The executor called one of the brokerages and asked them what the commission will be to liquidate the bonds. The broker said there are no commissions and that the securities are very liquid. I'm concerned that if we just tell the broker to liquidate that we will end up selling at terms that aren't favorable. What's the best way to handle this? Can we negotiate terms with the brokers?

Thanks.

twaddle · 09-12-2007, 06:34 PM

Brokers are sneaky. There may be no explicit commisions, but they make their money from the bid/ask spread, and that can vary widely. Ask them what the spead is, and they *might* tell you. You can try shopping around, but it would entail transfering the assets in-kind to another brokerage and the price/yield could change while you wait.

Volumes are generally low on individual issues, but the market is efficient and prices are a function of current yield.

JB · 09-13-2007, 10:43 AM

Thanks Twaddle. I'll ask about that.

boutros · 09-14-2007, 12:53 PM

pfd stocks usually trade on the market and you can sell them just like a stock. For munis sold retail expect to take a1-4% haircut on the sale. This will be in the form of a spread not commission.

JB · 12-27-2007, 03:02 PM

We ended up transferring the most bonds and preferreds over to Schwab. The full service brokers' bond mark-up was around 1/4 - 3/4 %. Schwab claims a fixed free of 1/10th + $25. I was able to verify that they charged this fee if the bonds were sold immediately (Investing In Bonds). There's no telling what they mark up if they take the bonds into their inventory but I'm confident it's better than the full service brokers. In any case I was satisfied with Schwab. Thanks for your help.

clifp · 12-27-2007, 03:28 PM

Thanks for the follow up. I've got most of my mom's assets consolidated between Schwab and Vanguard,. For the remain I was a little apprehensive about try to transfer assets when you are the executor.

09-12-2007, 11:57 AM	#1
JB Full time employment: Posting here. Join Date: Apr 2005 Posts: 524	How to sell individual Municipals and Preferred stock Hello, An elderly relative recently died and left a portfolio of ny municipal bonds and preferred stocks. They are held by a few large brokerages. I'm helping the executor settle the estate. I looked at the trading volumes on these securities and they are very low. We would like to sell in a way that maximizes the value. The executor called one of the brokerages and asked them what the commission will be to liquidate the bonds. The broker said there are no commissions and that the securities are very liquid. I'm concerned that if we just tell the broker to liquidate that we will end up selling at terms that aren't favorable. What's the best way to handle this? Can we negotiate terms with the brokers? Thanks.

09-12-2007, 06:34 PM	#2
twaddle Thinks s/he gets paid by the post Join Date: Jun 2006 Posts: 1,377	Brokers are sneaky. There may be no explicit commisions, but they make their money from the bid/ask spread, and that can vary widely. Ask them what the spead is, and they might tell you. You can try shopping around, but it would entail transfering the assets in-kind to another brokerage and the price/yield could change while you wait. Volumes are generally low on individual issues, but the market is efficient and prices are a function of current yield. __________________ Favorite ERF quote: "I'm not going to waste my time on someone who's more interested in being stubborn or obtuse or intolerant." -- Nords Favorite ERF error message: "Sorry Nords is a moderator/admin and you are not allowed to ignore him or her."

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09-13-2007, 10:43 AM	#3
JB Full time employment: Posting here. Join Date: Apr 2005 Posts: 524	Thanks Twaddle. I'll ask about that.

09-14-2007, 12:53 PM	#4
boutros Recycles dryer sheets Join Date: Jul 2005 Posts: 108	pfd stocks usually trade on the market and you can sell them just like a stock. For munis sold retail expect to take a1-4% haircut on the sale. This will be in the form of a spread not commission.

12-27-2007, 03:02 PM	#5
JB Full time employment: Posting here. Join Date: Apr 2005 Posts: 524	We ended up transferring the most bonds and preferreds over to Schwab. The full service brokers' bond mark-up was around 1/4 - 3/4 %. Schwab claims a fixed free of 1/10th + $25. I was able to verify that they charged this fee if the bonds were sold immediately (Investing In Bonds). There's no telling what they mark up if they take the bonds into their inventory but I'm confident it's better than the full service brokers. In any case I was satisfied with Schwab. Thanks for your help.

12-27-2007, 03:28 PM	#6
clifp Thinks s/he gets paid by the post Join Date: Oct 2006 Posts: 2,177	Thanks for the follow up. I've got most of my mom's assets consolidated between Schwab and Vanguard,. For the remain I was a little apprehensive about try to transfer assets when you are the executor.

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