Transferring IRA to a new broker - do I cash out first?

[Brook2]

My ultimate plan is to set up a second brokerage account and split half my assets between the two. Transferring an IRA fund seemed like the easiest, tax-efficient way to do this.

I'm planning on transferring one fund in my sep ira from Vanguard to Fidelity.

My idea was to sell the Vanguard Total Stock Market, then move it to the Fidelity and buy an equivalent fund Fidelity (perhaps Zero Total Market).

The other option is to transfer the actual Vanguard fund, cash it out under Fidelity umbrella - but I can't see any advantage of doing that, and in fact I think there are fees charged for bringing in an outside fund.

Your thoughts? Is there anything else I should be aware of before I do a transfer like this?

 

[Sunset]

The only reason I would cash out the Vanguard fund was if the other brokerage charged a fee to sell various Vanguard ones.
I know I read at sometime this happened for buying Vanguard funds.

I have often opened a new account at a new brokerage, then transferred in a few of my stocks and funds (ETF's) from the original brokerage to the new one. Later once I'm happy I transfer the rest. If I'm not happy I can transfer back.

 

[njhowie]

Your thoughts are correct. Life will be easier if you sold the Vanguard funds, had everything as cash, let Fidelity handle the transfer, then purchase what you want under the Fidelity umbrella.

 

[Al18]

I would contact Fidelity first for their advice. Sometimes Fidelity can transfer the fund.

 

[njhowie]

I would contact Fidelity first for their advice. Sometimes Fidelity can transfer the fund.

Dealing with Vanguard funds at Fidelity will cost you.

For VTSAX, as an example, transaction fees apply - $75 to make a single purchase of VTSAX:

1.Transaction Fee:

A transaction fee is similar to a brokerage fee or commission which you pay when you buy or sell a stock. For some funds available through Fidelity you are required to pay a transaction fee. However, you will not pay a sales load on Transaction Fee (TF) funds. You will only be charged a transaction fee when you buy a FundsNetwork TF fund, not when you sell one. All other fees and expenses described in a fund's prospectus still apply. You can choose to buy or sell shares directly from the fund itself or its principal underwriter or distributor without paying a transaction fee to Fidelity.

Online Transaction Fees: $49.95 for most funds. Certain funds will have a transaction fee of $75. To identify any applicable transaction fees associated with the purchase of a given fund, please refer to the "Fees and Distributions" tab.

Fidelity Automated Service Telephone (FAST): 25% off representative-assisted rates, Maximum: $187.50, Minimum:$75
Representative-Assisted: 0.75% of principal, Maximum: $250, Minimum: $100
Automatic Investment: $5 per transaction, after the initial investment.

Sales load:

A sales charge added to the price of the fund. Funds have different sales charge structures, including front-end loads, back-end loads (deferred), and no loads. Sales loads can either be charged when a fund is purchased, commonly known as a front-end load, or when a fund is sold, known as a deferred load. Not all funds charge a load. Refer to the Loads, Expense and Minimums section of the fund's prospectus for details on these amounts. Although no load funds do not have a front-end or deferred load, they may incur other fees, such as a 12b-1 fee.

 

[Gee1234]

Been learning on this site for years, finally can maybe help someone with my experience last November.

I already had an HSA at Fidelity and I wanted to consolidate many mutual funds purchased decades ago (Early 90's before I learned about Vanguard. Remember Scudder's never a charge for an IRA promise?) Called Fidelity a few years ago to ask if they can transfer the funds "as is" and for five of the mutual funds the answer was yes but one was no. Procrastinated until last Nov 2022. Called again and this time all the funds were eligible for "as is" transfers, including one Vanguard mutual fund. So it was a go now that I didn't have to sell funds with almost 100% gains. These were all after tax money. Roth info below...

Their 1-800 phone person put me in touch with a local branch rep, and after checking out his history I gave him a call. Everything was handled by his two person "team", some over the phone and some via email at FirstLastName.TEAM@fidelity.com. Also there was a "client vault" where I uploaded my latest statements so the team had the account numbers and approx values. Everything went perfectly as they contacted the mutual fund companies and transferred all the funds over. I did not talk to the old mutual fund companies. No fees for transferring in the outside funds.

To your specific question, I did transfer one Roth IRA from Vanguard to Fidelity at the same time and that went perfectly as well. Nothing for me to do at Vanguard. I opened a Roth IRA brokerage account in my name at Fidelity online with $0 and they just transferred the Vanguard mutual fund into the new Roth brokerage fund. Still the same Vanguard mutual fund in the Fidelity Roth.

Regarding the reply from njhowie, I did see the charges for using outside funds, specifically "You will only be charged a transaction fee when you buy a FundsNetwork TF fund, not when you sell one." line. I do not intend to ever add to the Vanguard fund so was only interested in the no charge when you sell. This is what you meant by "umbrella"?

One more comment, the Vanguard mutual fund must be in a "brokerage" type account before they can make the transfer, not the old style "mutual fund" account. Ran into this last week when I wanted to transfer my daughters minor Roth from Vanguard to Fidelity. Had to transfer that account from the old fashion mutual fund minor account to a brokerage account first while still at Vanguard. Reviewing you question before I post I see you have a SEP IRA, I'm guessing same applies as the Roth.

Hope this helps. I had no issues transferring in kind, but I have not tried selling non-Fidelity funds yet. In a nutshell...

- Not all mutual funds can be transferred to Fidelity "in kind". You will need to call and ask for your particular fund.
- I had no fees for transferring in the outside funds.
- Fidelity handled everything, I didn't have to contact any mutual fund company.
- Vanguard account needed to be a brokerage account not the old fashion mutual fund type.
- I had no problem transferring a Vanguard Roth IRA "in kind" to Fidelity. Hopefully same for your SEP.