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Leaving FA - Fund Transfer Questions
Old 11-18-2016, 07:31 AM   #1
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Leaving FA - Fund Transfer Questions

My DW and I decided to leave our FA after about two years, and this week I have been doing some research into moving our portfolios to either Fidelity or Vanguard. I'm learning that our FA is using 'institutional class shares' of funds for our investments, and if we move to Vanguard, most of the funds will transition 'in-kind', however, once transferred, Vanguard wants to charge us $25 to sell each of those funds. Fidelity on the other hand wants me to liquidate 23 of the 64 positions before moving, and the rest can transfer 'in-kind' and will charge us nothing for selling the rest of them once transferred.

Originally, I was all set to move to everything in-kind to Vanguard, but after learning this information, Fidelity looks like a better choice. Fidelity is also giving us $1200 for moving the accounts to them.

The accounts are comprised of - 2 Roths/2 IRAs/1 aftertax. The majority of the current funds have expenses <1% and average probably .7%. With the current FA, there is no-charge to sell
any of our funds.

Couple questions - I was going to transfer everything in-kind and then after the 1st of the year start transitioning to Fidelity or Vanguard funds. Should I just liquidate everything to cash now before moving (other than the after tax account) to Vanguard of Fidelity ?
Guess, my concern is any dividends or distributions that I may miss
out on by liquidating now versus waiting until next year. Should this be a concern ?

I tried to negotiate with Vanguard to drop their fees, which they won't do. Vanguard is saying their fund expense fees are lower than Fidelity, and I'll recoup the fees after a year. However, since Fidelity has dropped their expenses now, comparable Fidelity funds are actually slightly cheaper.
Why does Vanguard want to stiff me on these fees ?
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Old 11-18-2016, 07:50 AM   #2
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however, once transferred, Vanguard wants to charge us $25 to sell each of those funds.
Why do these funds need to be sold?

It would help you actually list what these funds were with their trading symbols.
This way we don't have to guess and have the most accurate information.

FWIW, I have accounts at both Fidelity and Vanguard, and I am unclear what you are being told.

End of December is year-end distributions for most if not all mutual funds, so yes, it would be better to make any changes in January 2017.
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Old 11-18-2016, 07:57 AM   #3
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Don't worry about loss of distributions or dividends as when those are paid out the share price drops the same amount so you are whole weather you sell before or after .
Would be concerned about liquidating everything at once as you will be out of market at least several days. I would transfer in kind and ask if they can coordinate sale and buy so the Securities both sell and buy are priced same day.
As for the $25 fees I would of coarse look at that but not let that be determining factor. My biggest factor would be who you think can help you get to where you want to go the most.
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Old 11-18-2016, 08:20 AM   #4
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Recap:
Vanguard will transfer these funds, but will charge me a fee to sell them.
Fidelity wants me to sale a portion of these funds before they can transfer the remainder of the account, but charge no fee to actually sale the ones that remain in the account.

Here is a sampling of funds that are in all of our portfolios other than the ones noted.

COAGX
ARBNX
MWTIX
SKSRX
MALOX
DHLSX
MEDIX
ACBYX
VWIAX
PONPX
TGBAX
FPACX
PALPX
CMNIX
OSTIX
GHAYX
DBLTX
SGIIX
DPFFX
WACPX
VIGAX - After Tax Account only
VVIAX - After Tax Account only
VTSAX - After Tax Account only
VWELX - After Tax Account only
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Old 11-18-2016, 08:25 AM   #5
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WARD, that's way too many funds. If the FA doesn't charge a transaction fee I'd consider converting them all to cash, transferring to Vanguard, and putting them into a simple portfolio.
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Old 11-18-2016, 08:30 AM   #6
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Quote:
Originally Posted by rpguy4 View Post
Recap:
Vanguard will transfer these funds, but will charge me a fee to sell them.
Fidelity wants me to sale a portion of these funds before they can transfer the remainder of the account, but charge no fee to actually sale the ones that remain in the account.

Here is a sampling of funds that are in all of our portfolios other than the ones noted.

COAGX
ARBNX
MWTIX
SKSRX
MALOX
DHLSX
MEDIX
ACBYX
VWIAX
PONPX
TGBAX
FPACX
PALPX
CMNIX
OSTIX
GHAYX
DBLTX
SGIIX
DPFFX
WACPX
VIGAX - After Tax Account only
VVIAX - After Tax Account only
VTSAX - After Tax Account only
VWELX - After Tax Account only
Way too many funds.

Too lazy to look up what they are.
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Old 11-18-2016, 08:31 AM   #7
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WARD, that's way too many funds. If the FA doesn't charge a transaction fee I'd consider converting them all to cash, transferring to Vanguard, and putting them into a simple portfolio.
Yeah, that's a TON of funds. You could likely get a similar portfolio makeup using 2-3 funds.

Also, 0.7% is way too high an expense ratio to be paying these days. My 401k is about 1/3rd of that only because of limited selections. My brokerage averages ~0.09% iirc. Those fees are eating your money, get them down for you own sake.
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Old 11-18-2016, 08:35 AM   #8
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WARD, that's way too many funds. If the FA doesn't charge a transaction fee I'd consider converting them all to cash, transferring to Vanguard, and putting them into a simple portfolio.
+1

A great example of the spray and pray (plus charge a fee/commission) approach to investing.

A very wise decision to get away from your FA.
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Old 11-18-2016, 08:50 AM   #9
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I'd be tempted to convert all the pretax accounts into a single fund (like S&P 500 index) that can be exchanged in kind at Fido or Vanguard before you make the move. Then, once safely moved, re-expand it into a couple of funds to get you asset allocation.
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Old 11-18-2016, 05:52 PM   #10
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64 positions? And they're funds? Gotta be a record! Good you're moving on.
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Old 11-18-2016, 06:42 PM   #11
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I'd be tempted to convert all the pretax accounts into a single fund (like S&P 500 index) that can be exchanged in kind at Fido or Vanguard before you make the move. Then, once safely moved, re-expand it into a couple of funds to get you asset allocation.
+1. That's the cleanest way to handle the retirement accounts, since it's easy, would have no tax costs and would reduce any per-fund transaction fees (charged by Vanguard).
Also, I'd check out the actual expense ratios of the exact funds you would be investing in at both Vanguard and Fidelity and add up the total expected costs for the next 10 years. $25 per fund might sound like a lot right now (I didn't know Vanguard had a charge like that), but it might be peanuts in the big picture. Be sure to use the right share class (e.g. Vangiard Admiral shares if your balances meet the criteria). Fidelity does have some low cost funds, even cheaper than Vanguard, but their selection of low-cost funds is not as extensive. So, do some planning and map out the costs before jumping.

You'll definitely want to simplify this rat's nest. What a mess. And you are paying a lot on expenses-- 0.7% is more than 3 times higher than the average Vanguard expense ratio of 0.18% (some funds are less). Assuming you've got substantial funds in these accounts, $25 per transfer will be recouped pretty quickly when you'll be saving over $50 per year per $10K invested just in expense ratios.

Congratulations on dumping your FA, it sounds like a good move.
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Old 11-18-2016, 07:32 PM   #12
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+1

A great example of the spray and pray (plus charge a fee/commission) approach to investing.
A very wise decision to get away from your FA.
+2
You are already paying the fund managers
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Old 11-19-2016, 04:51 AM   #13
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You'll definitely want to simplify this rat's nest. What a mess. And you are paying a lot on expenses.

Congratulations on dumping your FA, it sounds like a good move.
+1 I made a big transfer to Fidelity this year and it went very smoothly, plus the cash bonus. They have reduced fees over the years to be competitive with Vanguard, and you can also go with index ETF's that have even lower fees.
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Old 11-19-2016, 08:57 AM   #14
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rpguy4...You didn't mention this so I will. Your FA firm may charge you $95 per account for ACAT transfer fees. That's $475 for five accounts. Most other institutions will reimburse these fees. When I checked with Fidelity a while back, they don't reimburse these fees but perhaps the 1200 cash bonus helps.
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Old 11-19-2016, 03:58 PM   #15
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I'm thinking the $25 charge you were quoted was for a Vanguard rep to sell the fund, because if you sell a fund yourself in Vanguard it is only ~ $8

But whatever you do, moving somewhere sounds like a great idea.
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Old 11-19-2016, 04:07 PM   #16
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For the tax-deferred accounts, just sell all to cash, transfer the cash to Vanguard and then buy whatever Vanguard funds your heart desires. Since there are no tax implications of liquidating, that would be easiest. At the same time... simplify. You should be able to be very broadly diversified with 4-8 funds.

I presume that you have substantial unrealized gains on the taxable accounts and as a result it would be better to transfer those in-kind. Since they are all Admiral class I would think they can be transferred no problem and that there would be no fees if you later sell. If you don't have substantial unrealized gains then you could do the same as what you would do for the tax-deferred accounts.

No need to worry about dividends or distributions at all... those are all baked into the NAV that you will get when you sell ... in other words assuming the market for the day of the distribution is flat... the NAV goes down by the amount of the distribution since the NAV is the total net assets of the fund divided by the fund's outstanding shares.
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Old 11-19-2016, 05:09 PM   #17
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I would sell everything first then transfer. I like Vanguard but I lean toward Fidelity since they can easily compete with indexing now between their index mutual funds and 75 commission-free ETFs. No fees to sell, plus you get the $1,200 bonus and a better website to work with IMO. And if you really want to hold a Vanguard fund at Fidelity you can buy it with a $75 fee. Kind of expensive but not bad if it's a large enough purchase and you're not going to be buying and selling the fund.
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Old 11-19-2016, 05:11 PM   #18
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Oh, but I wouldn't buy Wellington back in your after tax account unless you're below the 25% tax bracket. Not very tax efficient.

That's another good reason to sell before you transfer... in case Wellington pays out a year-end cap gain distribution. You can avoid that and buy back into an index fund... and maybe buy Wellington back in an IRA where the cap gains don't matter.
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Old 11-20-2016, 08:05 AM   #19
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Appreciate all the feedback. We are meeting with a Fidelity (CFP) advisor tomorrow at a local 'brick and mortar' location to review.
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Old 11-20-2016, 08:38 AM   #20
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Appreciate all the feedback. We are meeting with a Fidelity (CFP) advisor tomorrow at a local 'brick and mortar' location to review.
That will be very helpful.
I meant to suggest earlier in the week, that you do this with a Schwab rep, especially if one is nearby.

And, of course, this requires as much thought and planning as you can give to the move. Taxwise, you know it is complicated. Some moves can probably be made immediately, once you know the tax impact to 2016 vs. waiting until 2017.
Good luck with everything.
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