Cost of firing my adviser?

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Cost of firing my adviser?

Postby lcrock » Sat Jul 13, 2013 4:12 pm

Hello,
From another post you will know that I am going to fire my adviser. What I am concerned with is the cost of doing so. I understand that there will be tax implications in my taxable account due to selling off the funds (assuming I have to), but what else should I be expecting as far as costs? I know I haven't said what who or where, but I'm hoping to hear what others may have experienced.

I am not sure how I am going to initiate this other than just calling and telling them that I'm done. Beforehand, I plan to call the broker where the accounts are held first (going around the adviser) to just ask general questions about the accounts. I will also talk to my previous broker where I want to transfer everything to, to see what they say as well.

Any other advice?
Thanks for your help.
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Re: Cost of firing my adviser?

Postby CABob » Sat Jul 13, 2013 4:19 pm

It is quite likely that there will be a fee for closing the account. Typically this is in the range of $50 to $100, but, you should check. The information my be on the broker's web site. As you mentioned there will be transaction fees or commissions if you sell some of the positions and this may be a taxable event. That should about cover the costs.
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Re: Cost of firing my adviser?

Postby Bradley » Sat Jul 13, 2013 4:33 pm

lcrock wrote: I understand that there will be tax implications in my taxable account due to selling off the funds (assuming I have to),
Thanks for your help.


No need to sell your positions. Just have your new custodian initiate an "in kind" transfer. This way your current holdings will be transferred to your new account without tax implications. Depending on the size of your account, your new custodian may pay for closing old account and/or give you a hundred free trades. :happy
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Re: Cost of firing my adviser?

Postby Boglenaut » Sat Jul 13, 2013 9:54 pm

Bradley wrote:
lcrock wrote: I understand that there will be tax implications in my taxable account due to selling off the funds (assuming I have to),
Thanks for your help.


No need to sell your positions. Just have your new custodian initiate an "in kind" transfer. This way your current holdings will be transferred to your new account without tax implications. Depending on the size of your account, your new custodian may pay for closing old account and/or give you a hundred free trades. :happy


And even if you do need to sell a fund (say to get out of a terrible high cost fund into a low cost index fund), the cost will only increase the longer you wait.
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Re: Cost of firing my adviser?

Postby MN Finance » Sat Jul 13, 2013 10:50 pm

Best bet is to talk to the gaining firm and ask. They don't work for the losing firm, but they'll know just about everything you need to know and certainly what you'll need to liquidate, if anything. They'll also have the incentive to dig in and help you out.
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Re: Cost of firing my adviser?

Postby pkcrafter » Sat Jul 13, 2013 11:52 pm

Icrock wrote:
I will also talk to my previous broker where I want to transfer everything to, to see what they say as well.


Do you want to give us a hint of who this old broker is? What were you paying there, what types of investments, why did you leave?

Where is your taxable account now?

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Re: Cost of firing my adviser?

Postby noyopacific » Sun Jul 14, 2013 3:14 am

lcrock wrote:Hello,
. . .
I am not sure how I am going to initiate this other than just calling and telling them that I'm done. Beforehand, I plan to call the broker where the accounts are held first (going around the adviser) to just ask general questions about the accounts. I will also talk to my previous broker where I want to transfer everything to, to see what they say as well.
Any other advice?
Thanks for your help.

When we terminated our relationship with an advisor about 20 years ago, our first contact was a certified letter to the account custodian / trustee (First Trust.) In your case, it appears your account is held by a broker. We notified the custodian that all discretionary authority of the advisor as well as access to our account information was immediately terminated. We did this to prevent ourselves from being talked out of our decision to leave and to prevent the advisor from making any changes during the process.
After we received a receipt for the certified letter, I called to confirm that the advisors access and discretion over our account was terminated. Only then, did I write our advisor to inform them we were leaving.
The custodian informed us that that the type of account we had was only for advisory clients and we needed to change it into an regular individual account. We discovered that the custodian had been providing a range of services to the advisor including printing the glorious full-color quarterly statements that we had received. Eliminating these types of services, commonly called "soft money arrangements" resulted in a significant reduction in custodial expenses after we switched to a regular account.
I was a little surprised but we never heard a single word from our former advisor. I don't believe that the advisor billed us for termination and they no longer had our consent to extract fees directly from our accounts. We had liked the local representative on a personal level, it was simply that the cost of the service greatly exceeded its value to us. We were able to make all of the desired changes (to index funds) at a gradual pace and according to our plan. Over the next couple of years, we learned that we could save additional expense by transferring all of the mutual funds in our accounts into new accounts at Vanguard. Our former advisory service (Lowry Investment Disciplines) eventually merged with others and has since disappeared. I suspect that this was done, at least in part, to distance themselves from a very poor performance record. On the other hand, we have done much better than we had ever expected.
Good Luck!
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Re: Cost of firing my adviser?

Postby Default User BR » Sun Jul 14, 2013 1:39 pm

There are some mutual funds that can't transfer to the new custodian, typically because it's one that they don't carry. So anything like that might need to be sold. You'll need to decide whether the remainder or something you want to keep long-term or are planning to get rid of. In the old days I would have suggested moving to WellsTrade to get free mutual fund transactions to do account clean-up. That's not available to new customers anymore.


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Re: Cost of firing my adviser?

Postby inbox788 » Sun Jul 14, 2013 2:34 pm

Assuming they're receiving about 1% for AUM, you'll likely recoup any expenses after the first week or month.
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Re: Cost of firing my adviser?

Postby lcrock » Mon Jul 15, 2013 6:51 pm

Hi All, thanks for the replies. noyopacific, very interesting post.

So here's an update, I called the custodian that is currently carrying the accounts under management. I just need to supply a letter of revocation (written, signed, scanned, emailed), revoking the authority of the adviser to access my accounts and they will be moved out of the institutional space in to the retail space. I will have to liquidate out of any fund that is not carried in retail (or pick a new advisor that can buy those funds). Each transaction (the selling of these funds) is $25. If I plan to move the 3 accounts to some other company, there's a $100 fee for each account. So, that leaves me with a cost of about $500 plus any tax implications. Hard pill to swallow, but that's a small fraction of the annual.

pkcrafter, I'm being intentionally vague at this point, honestly I'm still a little paranoid. I'm sure if they have a decent research/quality department they have got to be scanning these kinds of forums. To answer, I'm paying almost 2% for passive index advising, embarrassing to admit. Once all is settled I may post a comprehensive write-up.

Thanks
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Re: Cost of firing my adviser?

Postby nonnie » Tue Jul 16, 2013 1:24 am

Our funds were with a financial advisor in TD Ameritrade- carried over from a previous financial advisor. We hated TD Ameritrade and decided to switch to Schwab. We stayed with our advisor and he arranged for Schwab to reimburse the $50 per account closing fee that TD Ameritrade charged. We are very happy with Schwab Institutional. Did I say how much I hatedTD Ameritrade both
Institutional and retail?

Our adviser is John Gorlow at Cardiff Park Advisors, a fixed fee advisory firm. We couldn't be more pleased with this firm.

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