Untangling from my financial advisor

[lsimpson33]

I'm preparing to fire my financial advisor and take control of my own money.

Basic info:
- Financial advisor is a small, independent firm
- Holdings are currently in Pershing Brokerage and are a mix of a variety of holdings from various companies (Vanguard, Fidelity, T Rowe Price)
- 3 accounts total: Roth IRA, IRA, and Indv.

What's the best way (easiest, tax implications, fees, etc.) to get my money from where it is to somewhere I can control it myself?

 

[pb4uski]

The taxable account is the one that you need to worry about. The new brokerage may be able to arrange to have the taxable account investments transferred "in-kind" so the transfer will not be a taxable event to you.

The tIRA and Roth can either be transferred in-kind or liquidated and cash transferred. Assuming that the holdings don't have an CDSCs or other restrictions then cash would be just as easy.

Discuss it with your new brokerage.

 

[audreyh1]

You can do this completely through your new brokerage. They will take care of the transfer for you, and if you have them do it in kind, there will be no immediate tax consequences.

It could happen that something really oddball special security won’t transfer (doesn’t sound like your situation), but most stocks and mutual funds should transfer with no problem.

 

[COcheesehead]

You can do this completely through your new brokerage. They will take care of the transfer for you, and if you have them do it in kind, there will be no immediate tax consequences.

It could happen that something really oddball special security won’t transfer (doesn’t sound like your situation), but most stocks and mutual funds should transfer with no problem.

+1. Let the new firm handle it.

 

[lsimpson33]

Thanks all!

Follow-up question: I called the new brokerage. Since I want to change my investments too, they are encouraging me to liquidate all of my investments to cash and then transfer over. Not a huge deal for the IRA or Roth, but a big deal for the Indv.

Who should I consult for the tax implications of this? The current brokerage (Pershing)? A tax accountant?

 

[Souschef]

I would not do that. I just got all my wife's stuff transferred from UBS to FIDO. It was straight across the board. IRA and taxable accounts. There were both mutual funds and individuaal stocks.
BUT make sure you have a document with the original cost basis of everything in your taxable account.

The new firm will not have that data.

 

[COcheesehead]

Thanks all!

Follow-up question: I called the new brokerage. Since I want to change my investments too, they are encouraging me to liquidate all of my investments to cash and then transfer over. Not a huge deal for the IRA or Roth, but a big deal for the Indv.

Who should I consult for the tax implications of this? The current brokerage (Pershing)? A tax accountant?

Do you have a lot of cap gains, short, long? Any loss carry overs?

 

[haha]

Thanks all!

Follow-up question: I called the new brokerage. Since I want to change my investments too, they are encouraging me to liquidate all of my investments to cash and then transfer over. Not a huge deal for the IRA or Roth, but a big deal for the Indv.

Who should I consult for the tax implications of this? The current brokerage (Pershing)? A tax accountant?

don't do what they say. This should be a simple in kind transfer. There are plenty other destinations that would likely not give you bad advice like this.

Ha

 

[COcheesehead]

don't do what they say. This should be a simple in kind transfer. There are plenty other destinations that would likely not give you bad advice like this.

Ha

If you liquidate it, the new broker has all that fat cash to invest. $$$$$fees$$$$

 

[lsimpson33]

There's no cost to the transfer and they'll even reimburse me any close-out fees.

For all three of my accounts, including INDV, the investment mix isn't what I want. So I want to accomplish 2 things:
1) Transfer the accounts - No fees. Will pay any close-out costs
2) Rebalance my portfolio entirely. So, for the INDV, this could mean capital gains/losses because I'm selling investments and buying into new ones. This is where I'll incur costs.

 

[gauss]

I would make sure I know my cost basis in the taxable account before initiating any type of transfer.

You will need this info to prepare your tax return to report any capital gains when you actually sell the securities (either now or some time down the road). I think the IRS rule is that if you don't know you cost basis, then you must use $0.

I often see this scenario at our volunteer tax prep site.

-gauss

 

[Souschef]

I would make sure I know my cost basis in the taxable account before initiating any type of transfer.

You will need this info to prepare your tax return to report any capital gains when you actually sell the securities (either now or some time down the road). I think the IRS rule is that if you don't know you cost basis, then you must use $0.

I often see this scenario at our volunteer tax prep site.

-gauss

I agree. I downloaded all the cost basis information from UBS before making the transfer.

 

[athena53]

Thanks all!

Follow-up question: I called the new brokerage. Since I want to change my investments too, they are encouraging me to liquidate all of my investments to cash and then transfer over. Not a huge deal for the IRA or Roth, but a big deal for the Indv.

Who should I consult for the tax implications of this? The current brokerage (Pershing)? A tax accountant?

This doesn't sound like a good idea at all unless you're unhappy with 100% of your current holdings. As COCheesehead noted, if they start with 100% cash it means they get any up-front fees on whatever they sell you. Do you anticipate that your re-balancing would still keep most of your money in current investments, just move it around? If so, there's no reason to liquidate it all.

I doubt that Pershing will give you tax advice unless they charge extra and bring in a specialist.

 

[lsimpson33]

Yep, I'm unhappy with all of my current holdings, unfortuantely.

This doesn't sound like a good idea at all unless you're unhappy with 100% of your current holdings. As COCheesehead noted, if they start with 100% cash it means they get any up-front fees on whatever they sell you. Do you anticipate that your re-balancing would still keep most of your money in current investments, just move it around? If so, there's no reason to liquidate it all.

I doubt that Pershing will give you tax advice unless they charge extra and bring in a specialist.

 

[jazz4cash]

I would be very uncomfortable with the new broker due to their advice to liquidate. Granted it’s not a big deal if you are changing all your taxable holdings anyway. It just sounds like they are trying to ensure a commission on the replacement securities.

 

[davebarnes]

Find a new "broker". I moved everything from Janus to Fidelity and it was all in-kind.
You want to do an in-kind transfer.
Then you make changes.

 

[rodi]

I agree with the other advice you've been given. I'd do the following.

- Get the cost basis for current holders from old broker.
- Figure out what you want to invest in - mutual funds? Active vs Passive? Individual stocks? Bond funds or Individual bonds? Figure out if anything you currently own fits your new asset allocation/plan. But have a clear plan.
- Transfer funds in-kind.
- Rebalance/Reallocate to your new investment plan.

Obviously your new brokerage should match your new plan. If you are looking at mostly vanguard funds, or schwab funds, or fidelity funds - consider going with the company (vanguard or schwab or fidelity) since often there are advantages to buying/selling in house funds in terms of fees or premium (admiral class for example) products. If you want to own a bunch of individual stocks - go with a brokerage that does that well with low trade prices.

 

[Red Badger]

Find a new "broker". I moved everything from Janus to Fidelity and it was all in-kind.
You want to do an in-kind transfer.
Then you make changes.

+!. Yup. Also, are you sure you want to go to this new FA when this is their advice (cash out, no in-kind) during the dating/honeymoon phase?

 

[LOL!]

I can see why the new broker says "liquidate everything first" -> You have essentially told them that you want all new investments and none of the old investments.

The key here is understanding how taxes on investments work. This is explained in IRS Publication 550, but I guess your eyes will glaze over if you ever try to read that publication.

The benefit of liquidating taxable account at current place and not new place: The current place is responsible for sending you a 1099B for 2018 next March. The current place should know exactly all the cost basis and be able to report the gains accurately. The new place won't have to rely on the old place giving them the accurate cost basis. But your records should have a list of every single transaction made over all time in the current account, so that you can figure out the cost basis accurately yourself and confirm to the new firm that it was done right.

 

[trumpeting_angel]

Even if you want to change all the investments in your taxable account, you might not want to do all of it in one tax year. Find a new brokerage who wants to be helpful to you, not just make $$ on you!

 

[OldShooter]

... they are encouraging me to liquidate all of my investments to cash and then transfer over. Not a huge deal for the IRA or Roth, but a big deal for the Indv. ...

I have a standard response when someone attempts to make me behave for their convenience:

"I'm getting a little confused here. One of us is the customer and one of us is not the customer. Which one do you think you are?"

Having thus established that I am the customer, we proceed as I direct. In your case, transfer everything in kind and deal with the tax implications at leisure. There is no reason to mix up the account transfer and the investment plan. You're just asking for trouble.

Or, more generally, when I encounter this attitude I take my business elsewhere. YMMV, of course.

 

[LOL!]

^That's good advice, but once the assets are transferred, then the old financial institution has little incentive to provide the correct cost basis and transaction info to the new financial institution in a timely fashion. So one had better have accurate and complete records in their hand before a transfer-in-kind happens.

 

[GalaxyBoy]

Perhaps I'm stating the obvious, but since no one else has, here goes. Be sure the IRAs are transferred directly to the new brokerage and you don't get a check that you have to then deposit yourself.

 

[audreyh1]

Thanks all!

Follow-up question: I called the new brokerage. Since I want to change my investments too, they are encouraging me to liquidate all of my investments to cash and then transfer over. Not a huge deal for the IRA or Roth, but a big deal for the Indv.

Who should I consult for the tax implications of this? The current brokerage (Pershing)? A tax accountant?

Why are they encouraging you to liquidate your investments? Don’t do it!

Are you really ready to take on the tax consequences of selling everything at once? Sounds like you need to make a new plan before you sell anything.

 

[Scuba]

I just left my previous advisor and transferred everything “in kind” to Fidelity. My new Fidelity advisor and I agreed on how to reposition our portfolio with acceptable tax consequences. To fully simplify it will take years as we have six figure gains on some individual stock positions, but we’ve already made tremendous progress.

Your new FA should be able to help you assess tax consequences before you take any action to sell anything.