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Moving Roth's to Vanguard
Old 11-13-2020, 08:35 AM   #1
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Moving Roth's to Vanguard

DW and I each have Roth's with FA, about $160k each. The FA has us in a "Advisory Managed" portfolio of about 75 individual stocks through Charles Schwabb.

It has underperformed the S&P 500 every year for the last 5 years, plus there is a 1% annual fee. I plan on selling all the stocks immediately and investing it with Vanguard in 2 stock index funds per our current asset allocation. Since these are Roth's there will be no tax consequences.

My question is this. Should I liquidate the Charles Schwabb stocks while they are still at Charles Schwabb through the FA then roll it over to Vanguard ? or, should I roll the account over to Vanguard and do it myself once the stocks are there ? I would prefer the latter, my FA hasn't contacted me in 5 years but I know that I want to avoid the sales pitch to stay if I call in and make this request. I know I can do everything online myself.

The reason I ask is that I just rolled DD's Roth IRA from this FA to Vanguard. She was in 8 mutual funds, also at Schwabb. When I rolled them to VG we sold them and bought 2 VG index funds. There was a flat $20 fee from each fund to sell them once at VG. I would like to avoid this when DW and I move over. It wasn't a big deal for DD since she had 8 funds (she'll save the $160 in fees in no time), but DW and I each have about 75 individual stocks and I'm concerned what the sales fee might be.

Anyone have any experience selling CS stocks held at Vanguard ? Thanks for sharing your thoughts.
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Old 11-13-2020, 08:43 AM   #2
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If you sell them at Schwab is there any fee? If not, I would sell them all and do it via online access rather than through the FA if possible... and then move the money to VG. If FA objects, just use an absent authority as an excuse... "DW is resolute about this and the decision has been made".

I'm somewhat surprised that Vanguard charges $20 per fund to sell... most brokerages ar $0 commission these days.

Also, talk with Vanguard about the "best" way to make the transfer.. if they recommend transfer and then sell ask about fees and if they can waive any fees in whole or in part.

But you each have $160k across 70 tickers? That's crazy!
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Old 11-13-2020, 09:34 AM   #3
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You'll fill out a VG form where you select whether the assets are to be transferred "in kind" or whether the assets are to be sold and the proceeds transferred. Select the second alternative and you're done.

Many brokers charge a fee to transfer assets and close an account. Usually not a lot. But be sure to ask VG to pick up any fee that you are charged.
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Old 11-13-2020, 09:50 AM   #4
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... But you each have $160k across 70 tickers? That's crazy!
Au contraire, monsieur. It makes perfect sense. ... For the FA.

70 stocks is far too diversified for a stock-picker since one or even a few winners won't affect the account total very much. But it is a decent number for a "closet indexer." The strategy here is to buy enough stocks to make the account highly correlated to a total stock market fund. The FA knows that he/she is never going to outperform, but he/she also knows with certainly that they are never going to fall on their nose. Any brokerage will have for their brokers a canned list of stocks that accomplish this. I have heard it called a "sleeve." So there's really no work involved for the FA. And, from the client's viewpoint the FA will deliver results roughly equal to the market less the FA fee. In truth that is above-average performance for FA-managed portfolios. My experience at least.

The other thing that closet indexing does is to make investing look complicated. Buying VGTSX and VTSMX and holding them year after year will cause the client(s) to wonder what they are paying for.

I am actually involved in a portfolio review right now, about $20M mostly in equities at RBC. Over 200 stocks! (I got bored and stopped counting.) This is closet indexing with panache. The good news is that RBC is charging 39bps FA fee and no trading costs. So the client is probably saving nine or ten bps on fund expenses, leaving a net 30bps paying the FA. Which is really not bad and not something that I really object to. If the FA wants to fly from New York to Chicago via Mumbai at no additional cost to the client, so what?
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Old 11-13-2020, 12:36 PM   #5
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When I moved DM's accounts from a conventional broker to Fidelity we moved some accounts in-kind and had to let the original broker sell some stuff that Fidelity couldn't handle. It was tons easier to tell the original broker to sell everything. I had to spend a few days selling the remaining individual stocks, most of which I'd never heard of, and wonder if I was getting decent prices or not. The stuff the broker sold just disappeared and left cash in the account. Of course I did all my sales with limit orders above the bid prices and the broker probably just took whatever the bid price was at the time. So maybe I did better, or maybe I did worse, but it did take a lot of my time.
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Old 11-13-2020, 12:53 PM   #6
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I moved my 401k earlier this year and had to sell first. The funds went from Vanguard to ETrade. I had several days where balance was in cash and I could not access it. Market moved up during that time. I gambled and did some stock picking of my own to beat the market and earn back what I essentially lost. Took me several months and the Pfizer vaccine news bump recently to accomplish that goal. Now invested essentially in three fund portfolio again. Was stressful and frustrating.

Consider that a con against selling first. Of course, if the market had gone down then I would have looked smart with my timing.
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Old 11-13-2020, 01:36 PM   #7
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The other thing that closet indexing does is to make investing look complicated. Buying VGTSX and VTSMX and holding them year after year will cause the client(s) to wonder what they are paying for.

I'm going to put the money in Vanguard Total Stock Index and Balanced Fund, about 60-40. We plan on drawing in about 6 years.

And yes...it took me 10 years of investing on my own at VG to realize that I can do much better net of fees on my own. In fact even without the fees my 3 fund VG portfolio has beaten my FA handily, and I have about 30 bond exposure, the FA has none. I won't even mention the performance of the VA he put me in
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Old 11-13-2020, 01:45 PM   #8
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Quote:
Originally Posted by Stormy Kromer View Post
... I'm going to put the money in Vanguard Total Stock Index and Balanced Fund, about 60-40. We plan on drawing in about 6 years. ...
Wise. You might benefit from looking at this, though: Vanguard "Global equity investing:The benefits of diversification and sizing your allocation" https://www.vanguard.com/pdf/ISGGEB.pdf
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Old 11-13-2020, 02:06 PM   #9
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Id be shocked if the FA called to beg for your business if you have t heard from him in 5 yrs. I think Id call management and request compensation for all those years of underperformance.
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Old 11-13-2020, 02:25 PM   #10
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If I were you I would move the account to Fidelity, not Vanguard. If after things settle down you can move it to Vanguard if you think you will get better returns.

I have found Fidelity customer service much better, they don't charge for selling stocks. Also, their survivor options are not as limiting. I have been at both, prefer Fidelity.
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Old 11-13-2020, 02:50 PM   #11
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Wise. You might benefit from looking at this, though: Vanguard "Global equity investing:The benefits of diversification and sizing your allocation" https://www.vanguard.com/pdf/ISGGEB.pdf
My core holdings outside my IRA has an asset allocation of:

60% VTSAX
15% VTIAX
25% VBIAX

I've been pleased through the ups and downs over the last 10 years. I have been disappointed in the Int'l returns in general and was going to leave it out of the Roth's once they're at VG, maybe I should reconsider.
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Old 11-13-2020, 02:55 PM   #12
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... I have been disappointed in the Int'l returns in general and was going to leave it out of the Roth's once they're at VG, maybe I should reconsider.
It's a question of how you feel about diversification. Sectors rise and fall. Prior 10 years Intl was good, lately not so good. @pb4 will argue against holding any. DW and I hold VTWAX which is the cap-weighted world stock market. So no favorite sectors of any kind.

Reversion to the mean and the likely decline of the dollar as the world's reserve currency could make one especially optimistic for internationals in the next decade, but nobody know nuthin'. So that's why DW and I are not tilted for or against.

Whatever you try, it will take 5-10 years to tell the outcome.
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Old 11-13-2020, 03:22 PM   #13
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If you aren't over 59.5, then I'd ask Vanguard to do a rollover ROTH IRA. Be sure to keep track of your original cost basis, in the event you want to withdraw any of the original 'principal' tax-free prior to 59.5.

If you so direct, they can simply place the funds in their money market fund, then you can choose which index funds to invest in later. I would not liquidate the assets for fear of incurring an un-needed tax bill.
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Old 11-13-2020, 03:41 PM   #14
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If you aren't over 59.5, then I'd ask Vanguard to do a rollover ROTH IRA. Be sure to keep track of your original cost basis, in the event you want to withdraw any of the original 'principal' tax-free prior to 59.5.

If you so direct, they can simply place the funds in their money market fund, then you can choose which index funds to invest in later. I would not liquidate the assets for fear of incurring an un-needed tax bill.
Hitchhiking on HI Bill's remark above, I suggest going one step further and be sure you have from your existing brokerage account all basis information on a brokerage report. If you do, you will be able to both verify correct data being entered by Vanguard as well as a backup should VG fail to get the information.
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