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closer to firing financial advisor…

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  • Avatar deanyar 
    Participant
    Status: Physician
    Posts: 26
    Joined: 03/06/2019

    Hello all:

    I am getting closer to firing my financial advisor (hold applause until it happens…My confidence grows with each passing day as I have learned so much in the last several months – I am simply tired of paying the AUM fee!!)

    So, I am planning to switch my taxable brokerage account (in our revoc living trust), Roth + spousal Roth, and 2 custodial accounts for daughters to Vanguard accounts.

    Currently, the advisor has these accounts allocated in several funds, (almost 3 dozen different funds – way too complicated if you ask me!!), including Dodge&Cox, Pimco, Wisdomtree, Fidelity, JPMorgan AMG Yacktman funds, and even small percentages of single stocks, to name a few, thru a Schwab account.

    There is also a Vanguard Total Stock Market Index, which is about 24% of my portfolio (which I had established many years ago before hiring an advisor…the reason why I hired the advisor 10 yrs ago is another story…).

    So, the Vanguard Total Stock Market Index is something that I want to keep and maintain, and has a relatively low cost basis compared to the current value – so I will transfer this in kind – a no-brainer.

    My question is as follows:  What is the best way to approach the whole list of other funds that I want to liquidate and re-allocate into the few Vanguard index funds of my choosing?  Should I try to transfer in kind all of these funds into Vanguard and then sell, and re-allocate? Or should I have these liquidated upon transfer into my Vanguard money market account up front, and then re-allocate?

    Bottom line: Liquidate or in-kind transfer for assets that I want to liquidate anyway?

    I guess the 2 considerations that I can think of are:

    1. Is there a risk that I could lose money if the market goes up during the transition when my money is out, and is one approach more advantageous? Also, any advice to minimize this?

    2. If I transfer all of these funds in kind to Vanguard 1st, will in incur potential fees for non-Vanguard funds and stocks, arguing for having them liquidated upon transfer?

    Thanks for your insights and expertise, fellow colleagues!

    Dean

    #220531 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2844
    Joined: 01/03/2017

     

    My question is as follows: What is the best way to approach the whole list of other funds that I want to liquidate and re-allocate into the few Vanguard index funds of my choosing? Should I try to transfer in kind all of these funds into Vanguard and then sell, and re-allocate? Or should I have these liquidated upon transfer into my Vanguard money market account up front, and then re-allocate?

    Click to expand…

    This seems like a cop out answer but it really depends. It depends which funds you are in, how much you have in short/long-term gains (you probably don’t have much losses at this point), what your capital gains tax rate is, etc.

     

    1. Is there a risk that I could lose money if the market goes up during the transition when my money is out, and is one approach more advantageous? Also, any advice to minimize this?

    Click to expand…

    There is always a risk, however, the risk of loss will be minimal as it’ll only take a few days. On the flip side, there is a chance the market will go down and you’ll get a slight discount. This scenario only applies if you liquidate the accounts.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #220534 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4434
    Joined: 01/08/2016
    My question is as follows:  What is the best way to approach the whole list of other funds that I want to liquidate and re-allocate into the few Vanguard index funds of my choosing?

    Click to expand…

    sell any at a loss immediately.

    sell the gains to offset the loss.

    depending on LT vs ST gains and bracket might just sell and be done with it.

    donate to charity.

    otherwise hold onto indefinitely until able to pare away.

    1. Is there a risk that I could lose money if the market goes up during the transition when my money is out, and is one approach more advantageous? Also, any advice to minimize this?

    Click to expand…

    sure but who cares when your time frame is decades? this is a literal non issue.

    2. If I transfer all of these funds in kind to Vanguard 1st, will in incur potential fees for non-Vanguard funds and stocks, arguing for having them liquidated upon transfer?

    Click to expand…

    youll have to look into that yourself.

     

    also this info only pertains to taxable.

    Roth can be transferred immediately and reallocated without tax consequences.

    #220537 Reply
    Liked by SLC OB
    Avatar SLC OB 
    Participant
    Status: Physician
    Posts: 565
    Joined: 06/23/2018

    When I did this last year, I called Fidelity (where my money was) and the advisor talked me through the fees. Was much cheaper one way… can’t remember which! I’d price compare the cost of selling/buying at Schwab vs. Vanguard and then choose. Agree with CordMcNally that you should look at capital gains and try to minimize those.

    Congrats on getting closer!

    #220539 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 702
    Joined: 06/18/2018

    Transfer in kind. While that’s taking place, get your statements and take inventory of what the capital gains/losses are and if anything is actually well invested that you want to keep as part of your desired asset mix, then sell the rest in the most tax efficient way you can in light of your overall tax situation.

    It’ll be easier to do when you can be in charge of what gets sold when.

    #220571 Reply
    Andrew Musbach Andrew Musbach 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 39
    Joined: 10/19/2017

    The transfer process could take up to a few weeks depending on the custodian you are transferring from. It’s such a short time horizon and you’ll either be lucky or unlucky depending on what the market does over the time period it takes to transfer.

    There will likely be a one-time transfer fee per account and then trading fees to sell out of your existing funds (regardless of if that is at Schwab or Vanguard).

    The more important part to focus on is what your portfolio will look like going forward.

    1) Figure out the investment allocation you ultimately want to have once everything is moved to Vanguard

    2) Look at tax ramifications if you sold everything today to move into target allocation (understand the differences in ST gains v. LT gains). As @peds mentions, no tax consequences with selling anything in your Roth IRAs.

    3) If you’re comfortable with the amount of taxable gains, then you can re-position to your preferred investment allocation (ideally without ST gains). If you’re not comfortable with the amount of taxable gains, which is likely the case if you’ve been investing for 10 years, then you’ll have harder decisions on what’s more important between realizing more in taxes today vs. holding certain investments that may be more tax inefficient, have higher expenses, less diversification or just don’t align with your investment approach. From there, you can create a plan that you’re comfortable with that balances tax consequences with your comfort level of holding the previous investments.

    As @zzz mentions, it will be easier to track all of this and make these decisions when you are in control, which is why I always prefer to transfer in kind.

    I’m sure if you posted your target investment allocation, current investment holdings, unrealized gains/losses and a little on your current tax situation, you’d get several opinions that you could use to help decide on a plan that you’re comfortable with.

    Congrats on the growing confidence and starting to work through this though!

    Andrew Musbach, CFP® | [email protected]
    MD Wealth Management, LLC | http://www.mdwmllc.com

    #220696 Reply

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