Moving broker managed investments to self-managed

[BoredAtWork]

I've been using an investment broker for most of my taxable and deferred tax assets. They've done an ok job, no complaints really. I like a lot of their retirement planner and spending tools. But, as I try to get more serious about approaching retirement I'd really like to shift to self-managing all of my investments to save on fees. The broker fees are ~0.80%, which if I use them for decades in retirement would really add up. Seems like if I want to pivot to self-managing I should unwind the broker relationship.

Maybe I'm making an issue out of this when it isn't one, but if I have attempt to move the taxable investments the broker has made to a self-managed account won't this trigger a sale causing capital gains taxes? Seems like I'd be creating a massive tax event causing lots of inefficiency. Given it is best to sell your highest cost basis / lowest capital gains investment lots first for lower taxes, this would be the opposite of that as most of these broker investments have been growing for years and have some of my largest capital gains. I think the adage is to let your largest gains continue to run for as long as possible.

Maybe I have this wrong. If I am willing to stay in the same investments my broker has put me in, but I just want to self-manage it now, can I roll these positions to my own account and it does not trigger a sale? I think this works for tax deferred accounts like 401k, IRA, Roth as I've done that previously changing employers by rolling over to a new 401k plan for example. Not sure it works though for taxable investment assets.

If I can roll the positions to my self-managed investment account without creating a taxable event, then gradually over many years I guess I can unwind some of these positions and rebalance into investments I want to be in.

Thanks for any feedback!

 

[38Chevy454]

The FA should have your investments held by some brokerage. Can you just keep the investment account at the brokerage, but without the FA services?
If not, I think you can do in kind transfer to a new brokerage, where you keep all the investments the same. Thus no tax consequences from selling.
Do you have a new brokerage account set up?

 

[Golden sunsets]

Yes you can transfer all of your taxable brokerage assets "in kind" to a self directed account and no taxable event will be incurred. The same is true of your tax deferred accounts including your Roth accounts, but you can, if you desire, sell all of the assets in your tax deferred accounts, rollover the accounts to a different institution and reinvest the cash without incurring a taxable event. Taxes on your IRA/401K are triggered by a withdrawal from the account, not a rollover to another institution. I would ask for assistance from the receiving institution on how to complete the paperwork on these transfers to insure that there are no costly errors.

 

[MRG]

When you are ready to move contact the brokerage you want to house the assets and have them pull everything across. As others explained you can transfer in kind and avoid any tax problems. Make sure you specify that you desire to avoid any taxable events, isn’t what everyone wants?

 

[JRon]

You need to transfer your assets DIRECTLY into like accounts to avoid a taxable event. Transfer IRA assets directly into another IRA account, without ever having them in your name personally. It’s done all the time and as Golden sunsets pointed out, the receiving firm should be able to assist you. Good Luck.

 

[PaunchyPirate]

The direct transfer process (without selling anything) described above is indeed the way to go. However, you will want to verify with your chosen new brokerage that they can indeed accept every single one of your investments. Not all brokerages will hold every investment. The major brokers will hold most of the major investments out there, but there may be an odd one or two that they can’t. If they can’t hold it, they won’t transfer it over. You would need to sell it first and transfer the money over. This could be a taxable event.

Call the new broker and go thru the entire list of your investments before proceeding.

 

[Exchme]

It may depend on what the investments are. We had a financial advisor that put us in their funds that could only be owned if you used their advisor, so they would not transfer them. The IRA could be liquidated and moved without taxes, of course, but the taxable account was harder. "Fortunately", our net return was so bad that we sold with no gains. we used the pullback last year to make the move to avoid a bunch of capital gains, but even then they made it very hard, taking a month to get done something that should have happened in a day.

Note that the advisor fee was only the tip of the iceberg. The funds had a fee and they were "funds of funds" so the underlying funds also had fees. So we were paying three layers of fees, adding up to 1.7-1.8%. Of course they never talked about all that.

 

[Franklin]

I have about half of my investments managed with ML. Last year I asked them to set up a sizable portion of that into a "self managed" account. ML took the monies from a managed IRA and the next day placed them in a self managed/self directed IRA. In the newly established account I make all the trades personally and do not pay any fees or AUM. I compare my results against the results ML has generated and use their tools and technology for research and transactions. Next year I'll likely transfer more over but Ive found I don't have the time or expertise to go "all in" on self managed.

 

[OldShooter]

Some of the sleazier operations will charge fees for selling. Lots of good things to be said about transferring in kind and avoiding any surprise fees is one.

You will probably get nicked for some kind of account closing fees from the company losing your business. Ask your new company to cover those. Ask, too, if your new company offers any kind of financial reward for gaining you as a customer.

 

[jazz4cash]

As stated above, it may depend on the specific investments the broker is using in the taxable account. Use transfer in-kind if the investment can be held in the new self managed account.

The tax deferred account is easy. Use direct transfer (trustee to trustee).

When I moved a muni bond in-kind from a regional broker to Fidelity, I submitted the authorization to Fido and they handled everything. The regional broker never had the chance to talk me into staying with them. Fido said they would cover the fee charged by the regional broker and they did but I had to ask for it.

 

[Rocky mtn high]

I have transferred twice with no taxable event. The new brokage account will transfer. Also in the case of fidelity, you can just send a letter basically firing the FA and that’s it. No account change.

 

[MrsHaloFIRE]

Good answers here. My take: 1) shop for where you want your stuff to end up (Scwab, Fidelity, wherever). Call them and tell them you are interested in started a relationship with them and bringing over X amount in investments and what kind fo bonus can they offer. They will often match others so know where you want to go and google brokerage bonuses April 2021 or some such a know what they are. Couple hundred to couple thousand. Then think about what you like to buy and what fees the new brokerage house might harge to buy. If i want to buy vanguard, one hosue wanted to charge me pretty high fees per purchase. SO i negotiated no fees to buy vanguard funds for the lfie of the account. Also, ask about the new brokerage eating any fees the old broker may charge when you leave. I had a friend get that at Schwab. 2) sit back. Let your new brokerage company manage the transition "IN KIND" i move the stocks or funds, do not sell them. You might have a couple weird proprietary somethings that wont move. Fine, suck it up and sell those handfull. SHouldnt be much. You may have to digitally sign or really sign something. THen make sure all your basis figures transfer over to the new place to save tax headaches. They should, but check.

 

[pb4uski]

.... If I can roll the positions to my self-managed investment account without creating a taxable event, then gradually over many years I guess I can unwind some of these positions and rebalance into investments I want to be in.

Thanks for any feedback!

Yes. From what you wrote it sounds like the investments will be with the same broker but will be self-managed rather than managed by the broker?

It might be as simple as just notifying them that you want to cancel their management... in which case the same investments are in the same accounts but they no longer manage them or charge you a fee.

Or, you may need to move them from one account to another, in which case you could do it with the same broker or a different broker. Whether it is the same or a different broker the existing taxable account investments should be able to be transferred 'in-kind" without tax ramification. Be aware that if you are changing brokers that the receiving broker might not be able to accept all the investments in the taxable account, especially if you have some exotic stuff.

The tax deferred account can be transferred in-kind or liquidated, money transferred as either a direct transfer or a rollover, and then reinvested... then the same investments if you wish.

 

[Rocky mtn high]

And yes the new brokerage will usually reimburse any closing/transfer costs the old one charges.

 

[qwerty3656]

Everyone saying you can transfer in kind - I had Roth and Regular IRAs at E-trade and when I moved to Fidelity was forced to sell and move money.

 

[Flyfish1]

Congrats - I did the same thing a few years ago. Called up TD Ameritrade and told them I was firing the FA. They revoked his access and moved me over to a different site. Simple, only took a couple of minutes.
Then the angry phone calls and emails began - but I shut him down fast.
Best move I ever did - only wish I had done it earlier.

 

[mebden]

Did same thing as you Flyfish1

Congrats - I did the same thing a few years ago. Called up TD Ameritrade and told them I was firing the FA. They revoked his access and moved me over to a different site. Simple, only took a couple of minutes.
Then the angry phone calls and emails began - but I shut him down fast.
Best move I ever did - only wish I had done it earlier.

I also called TD and told them to block my FA from my IRA he was managing and have it put in just my name all done over the phone I just had all funds transferred over to a individual IRA and just in my name and all funds transferred over to new account now just my account to manage and no stupid fees to pay FA anymore