Mutual Funds vs. ETFs / hard sell from investment firm

[target2019]

Two years down the road from my original post!

I received another call today from my brokerage firm suggesting I move out of Contrafund to a more tax efficient SMA. I realize Contrafund has a high management fee compared to other low cost funds, but I've held it for 25+ years and gains are well over 100%. They never mention any of my other funds such as Total Market Index.

(I take all Contrafund capital gain and dividend distributions each year as cash to help fund a portion of my retirement)

Is it really worthwhile to trade the fund and pay the big capital gains hit just to get to a more tax efficient SMA? (they are suggesting SMAs now, not ETFs.

It's confusing to me that I calls each year to move out of Contra.

Would appreciate your thoughts & comments.

FIREHAPPY,
I think you're getting pushed in a direction that needs a lot more evaluation than the adviser is performing. There is an investing principle component, and the adviser is presenting his narrow view to you. Elements of truth are that Contrafund has a higher expense ratio, and is tax-inefficent to some degree. No one commenting here knows your taxes (or your investment list), so everything is a "maybe" comment.

Until you have a tax analysis of what has occured, and what the future may present. Until someone can quantify and explain to you what the data actually is, I recommend you do nothing. In fact, you may gain the most by transferring out of this adviser agreement. Of course that could be a long affair, and might upset you.

 

[OldShooter]

... you may gain the most by transferring out of this adviser agreement. Of course that could be a long affair, and might upset you.

This.

@FIREHAPPY, it is clear that this advisor is not giving you advice that is in your best interest. So Step 1 is to ditch the advisor, then relax and thoughtfully replan your investment strategy. The fact that you are already holding some broad index funds is a good first step. Your Contrafund position is a bit of a difficulty but you are going to pay those taxes eventually anyway, so it becomes somewhat a problem of tax rate arbitrage, considering today's tax rate against a future possibly lower tax rate. But that's just a piece of the strategy anyway.

Regarding moving the accounts, there is no reason at all that should "upset" you. At its simplest, you just fill out an account transfer form at the new brokerage house and they will do all the work, including reimbursing you for any account closing fees you may be charged. The only potential hitch is if this advisor has sold you something that is proprietary and cannot be transferred. Your new broker can help you decide what to do in this case: sell the asset and take any tax hit or continue to hold the asset at the former broker.

Your instincts are good; you are asking the right questions. Just take the obvious actions. It is simple to ditch this guy as Step 1. Step 2, tuning up the portfolio can be done at leisure with minimum stress.