Clunky system at Oakmark

[Gumby]

I retired last June and, because I will not be collecting social security until next year, this year we have the AGI room to engage in some tax maneuvering. I have a taxable account at Oakmark (OAKBX) and calculated that if I sold and immediately repurchased the fund, I could recognize capital gains at a 0% tax rate and reset the basis in the shares. So I called Oakmark customer service to effect my plan.

Sadly, they cannot do something that simple. I have to sell the fund, have the cash sent to my local bank account and then repurchase the fund. There will necessarily be a few days delay between buying and selling while the money moves back and forth. Even worse, I can only sell $100,000 per day, so I'll have to sell the rest tomorrow (good thing it's under $200k or it would take three days). Then, probably next Monday, I can buy back in. Such a pain for something that should be so simple.

I'm considering just sending all the money to Vanguard instead and buying VWELX.

[NW-Bound]

How about exchanging that fund with another fund at Oakmark? That is still a sales and causes you to recognize the cap gain.

I am surprised that Oakmark does not have a money market fund for you to park your money, if you do not want to temporarily park it in another stock fund.

[Gumby]

Quote:

Originally Posted by NW-Bound How about exchanging that fund with another fund at Oakmark? That is still a sales and causes you to recognize the cap gain. I am surprised that Oakmark does not have a money market fund for you to park your money, if you do not want to temporarily park it in another stock fund.

I was surprised too and asked about just that. But they don't do it that way. If you sell, they send you the money.

[W2R]

Quote:

Originally Posted by Gumby I'm considering just sending all the money to Vanguard instead and buying VWELX.

Do it! That's a great idea. I don't know anything about OAKBX, but Wellesley has been a terrific fund for me to have in retirement.

[leftyfrizzell1963]

Isn't that the Wolf of Wall Street's firm? Oh, wait, that is Oakmount.

Seriously, I had some money in their funds a long time ago, but sold them. I can't remember why.

[MRG]

Can you exchange it to another Oakmark fund and exchange it back in 1-3 days? Most fund companies can do that.

Oh I see that's already a no go. That's a helluva way to run a railroad.

[swakyaby]

I recall owning Oakmark Select fund many years ago. When I eventually sold my shares, I recall they deducted a fee for closing my account with them.

[Another Reader]

I stopped doing business with Oakmark several years ago. Fund performance was weak and the customer service outdated. Funds were therefore sold. I held on to the international fund which I had in one of my Fidelity accounts. It was focused on Europe, and seemed to hold some decent companies. Finally sold late last year, as it never did anything.

[Scrapr]

Doesn't this plan run into wash sales restrictions?

[pb4uski]

Having to send the money to the bank and then back to exchange funds doesn't pass the sniff test. I've never heard of a mutual fund company doing it that way. Call and ask for a supervisor.

[NW-Bound]

Quote:

Originally Posted by Scrapr Doesn't this plan run into wash sales restrictions?

With a wash sales, you are not allowed to claim a loss for a deduction for tax benefit.

In this case, the OP has a gain, which he will declare on his tax form. It then turns out that the gain is tax-free due to the total income being in a lower bracket, now that he is retired.

PS. People should do this all the time, whenever their income permits. You reset the basis to a higher value, such that the gains are tax-free, and are just as good as being inside a Roth. Sweet!

[MRG]

Quote:

Originally Posted by pb4uski Having to send the money to the bank and then back to exchange funds doesn't pass the sniff test. I've never heard of a mutual fund company doing it that way. Call and ask for a supervisor.

+1

It's laughable. They don't want you to have your money back because you might get other ideas like Vanguard or a boat.

[Gumby]

Quote:

Originally Posted by MRG +1 It's laughable. They don't want you to have your money back because you might get other ideas like Vanguard or a boat.

I was thinking this very same thing. Why would they let the money escape their system like this? I was very clear with the customer service representative about precisely what I was trying to accomplish. The $100k transaction per day limit also annoys me because I'll have two lots of shares with different sales prices (although I'm using average basis,so that should be the same for both lots).

[MichaelB]

It may not be Oakmark. Many of these mutual fund companies contract out the front end account interface and management, so the Oakmark customer service rep may be employed by a different company and they’re making that call to didsallow the transaction.

In other words, it’s possible the people at Oakmark would agree to do this transaction but they’re not involved.

[NW-Bound]

Perhaps their computer system does not have a way to handle this (dumb programmers did not allow for this), and the customer rep has no way to enter in an order to do what the OP desired. Nowadays, everything is done by the computer, and the human operator only has a screen to enter in the details of the order. If it is not on the menu, it "cannot be done".

One year, I waited too long at the year end to make a withdrawal from my son's educational account. After I entered in the withdrawal order myself on Schwab's Web site, I realized that an order to sell equities and transfer the proceeds normally took a few days to clear. That would put it past Dec 31st, and I would have to claim this withdrawal for the next year and not the current year.

Out of desperation, I called Schwab. They understood my predicament, and said that for a fee they could "expedite" the order and have the transfer made the next day. The fee for this manual processing was $15 or something like that. Of course, I was glad to pay this fee.

Does any other broker do that? I suspect very few could. I need very little service from my brokers as my accounts are all self-managed (Schwab, Ameriprise, Vanguard, Scottrade, Merrill Edge), and I never have problems with Schwab, while the other brokers' service often left something to be desired.

[MRG]

Quote:

Originally Posted by MichaelB It may not be Oakmark. Many of these mutual fund companies contract out the front end account interface and management, so the Oakmark customer service rep may be employed by a different company and they’re making that call to didsallow the transaction. In other words, it’s possible the people at Oakmark would agree to do this transaction but they’re not involved.

+1
Outsourcing to third parties is very common for fund companies. What I don't understand is why would Oakmark disallow an exchange, to put a live check back to the customer? The third party works on Oakmark's behalf, you are not supposed to know they exist.

[FANOFJESUS]

You could transfer it to Vanguard they carry Oakmark funds.

[audreyh1]

Transfer the shares in kind to a brokerage like Fidelity and do it there. You’ll be able to repurchase the shares the next day.

You’re running into the constraints of owning directly at a mutual fund company. It’s much easier to deal with a brokerage.

[audreyh1]

Quote:

Originally Posted by MichaelB It may not be Oakmark. Many of these mutual fund companies contract out the front end account interface and management, so the Oakmark customer service rep may be employed by a different company and they’re making that call to didsallow the transaction. In other words, it’s possible the people at Oakmark would agree to do this transaction but they’re not involved.

I think it’s simply that a mutual fund company does not handle banking or core cash accounts on behalf of a customer. You need a brokerage to do this.