Ending Advisor Relationship & Getting Cost Basis

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Shilo777
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Joined: Thu Jan 31, 2013 11:36 pm

Ending Advisor Relationship & Getting Cost Basis

Post by Shilo777 » Mon Mar 18, 2013 10:24 pm

Hello all....

After lurking, learning, posting and discussing the very messy details of our Ameriprise portfolio, my husband and I have decided to move everything over to Vanguard. Before we actually start the process we have two concerns. I am hoping for some advice from you experts.

1. Because of the personal relationship we've had with our current advisor, we are at a loss as to the best way to end the relationship. Yes, I know, it's best to leave the emotions out of investing, but..... We still want to do it with integrity. We share in the responsibility of what occurred for the last several years as we allowed it to happen. That was our bad!

2. Because we have so many funds, we are very concerned about getting the cost basis info for future income tax purposes. Before we sever ties, we would like to obtain this info. I can't imagine having to go through 8 years of statements trying to figure it out. Yikes!!!

Any suggestions???

Thanks!

livesoft
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by livesoft » Mon Mar 18, 2013 10:48 pm

I suggest that you will have to double-check any numbers that your advisor comes up with anyways, so pick one (1) fund and go through the 8 years of year-end statements and figure out the cost basis. Then ask advisor to do the same. Do your numbers match?

In reality, 8 years of statements should not be hard. If you like, you can even enter 8 years of transactions into a program like Quicken or MSMoney and have it calculate the cost basis for you. You can probably do 2 funds every weekend for the next few weeks and be done with it. Or you can pay somebody to do this for you if your current advisor won't.
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john94549
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by john94549 » Tue Mar 19, 2013 12:33 am

As I noted in another thread, I have a fund going back 45 years and the fund manager had to reconstruct my history by hand. I suspect what you are looking for is average basis. The math is fairly straight-forward.

Example: Year One buy 1000 shares of XYZ Corp. at $100/share. Assume buy late in year; no dividend.*
Year Two: 2% dividend ($2000) which bought 20 shares (at $100/share).
Year Three: 2% dividend ($2040) which bought 18.5 shares (at $110/share).

Calculation: Total cost: $100,000 (initial purchase) + $4040 (dividends) = $104,040.
Shares owned: 1038.5
Average basis: $104,040/1038.5 = $100.18 (rounded to nearest penny)

You can refine this calculation as precisely as desired, for example, by using dividend periodicity. For most stocks and stock funds, this might be quarterly. For bond funds, perhaps monthly.

I do believe there are more efficient ways to calculate, as others have noted, but calculating average cost basis is a wonderful exercise for a rainy day.

*Should you have a purchase (front) load, or fees, they would be added and reflected in "total cost". Should you have any redemptions (sales), reduce "total cost" by the amount of your investment (not cap gain, if any) recovered.
Last edited by john94549 on Tue Mar 19, 2013 9:04 am, edited 2 times in total.

Sidney
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by Sidney » Tue Mar 19, 2013 2:13 am

I agree with Livesoft. going through only 8 years of statements might be tedious but not onerous. With Quicken or even a reasonable spreadsheet you can compile this. I suspect that once you get started, it won't be that onerous. It will also be a good exercise in getting to know what you have and why you might want to simplify it going forward.
I always wanted to be a procrastinator.

dickenjb
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by dickenjb » Tue Mar 19, 2013 7:32 am

I helped a couple cut loose from an advisor who had the portfolio custodied with Schwab.

When Vanguard pulled it over, the basis came over with it.

You have your choice of telling the advisor you are leaving, or initiateding a "pull" from Vanguard and not speaking with the advisor.

Don46
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by Don46 » Tue Mar 19, 2013 8:41 am

Does Ameriprise, or the individual funds you own, not provide the cost basis? I would try to make it their problem or call and ask for advice before going through a bunch of paperwork.
I am facing a similar situation. I signed on with a Schwab network adviser. We like him and he's done well by us.
I'm just looking at how much is going to him, about .85 percent for management fees on a 2.3 million portfolio.
In a year or two I'm wanting to put another 1.3 million into these portfolios.
My idea is simply to leave the money in the existing Schwab accounts, and tell the adviser we want to try this on our own now.
This is the downside of having a personal money manager. You want the personal attention, but when you want to move on, it makes it harder to break up!
I had this problem when I was single I remember!
My concern right now is whether I want to go it alone, especially with fixed income investments, and whether I want to spend the time worrying about my portfolio.
Please let us know how it goes.

NHRATA01
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by NHRATA01 » Tue Mar 19, 2013 9:36 am

dickenjb wrote:I helped a couple cut loose from an advisor who had the portfolio custodied with Schwab.

When Vanguard pulled it over, the basis came over with it.

You have your choice of telling the advisor you are leaving, or initiateding a "pull" from Vanguard and not speaking with the advisor.
My Roth IRA "advisor" was my mother's old principal when she was a teacher. I wasn't all that close with him, though he knew me when I was quite young and was nice enough in person.

I found the easiest thing to do was initiate the exchange through Vanguard, and they handled everything short of my obtaining a medallion guarantee from my local bank. Frankly my account was probably small enough (~60K) that I doubt he ever noticed.

carolinaman
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by carolinaman » Tue Mar 19, 2013 10:04 am

Shilo777 wrote:Hello all....

After lurking, learning, posting and discussing the very messy details of our Ameriprise portfolio, my husband and I have decided to move everything over to Vanguard. Before we actually start the process we have two concerns. I am hoping for some advice from you experts.

1. Because of the personal relationship we've had with our current advisor, we are at a loss as to the best way to end the relationship. Yes, I know, it's best to leave the emotions out of investing, but..... We still want to do it with integrity. We share in the responsibility of what occurred for the last several years as we allowed it to happen. That was our bad!


You are making a decision that you believe is in your best interests. It is a business decision, not personal. Just explain it as such to your adviser and part on amicable terms. Probably best done in person.

RabbMD
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by RabbMD » Tue Mar 19, 2013 10:25 am

I think you could ask the advisor to calculate the cost basis for you because you are thinking about selling some bc you need the money, and you want to know what the tax cost would be. Then you could check one of the eight funds yourself to verify his accuracy. Advisors have to do something right? Then just move the money to vanguard via a vanguard pull.

ddunca1944
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by ddunca1944 » Tue Mar 19, 2013 1:22 pm

We did this a couple of years ago. I initated the process with Vanguard and let them handle it. I also sent an email to the advisor just saying that we appreciated his work for us, but that we could no longer afford the fees and had decided to make the change. I closed saying that we'd be happy to refer him to friends who might be looking cor an advisor.

Shilo777
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Joined: Thu Jan 31, 2013 11:36 pm

Re: Ending Advisor Relationship & Getting Cost Basis

Post by Shilo777 » Tue Mar 19, 2013 9:43 pm

Thanks so much for your replies. Looks like we will start working on a spreadsheet and preparing a nice email to our advisor. :wink:

Thanks!

dbr
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by dbr » Wed Mar 20, 2013 9:27 am

ddunca1944 wrote:We did this a couple of years ago. I initated the process with Vanguard and let them handle it. I also sent an email to the advisor just saying that we appreciated his work for us, but that we could no longer afford the fees and had decided to make the change. I closed saying that we'd be happy to refer him to friends who might be looking cor an advisor.
I think giving the reason that one "cannot afford the fees" is an excellent suggestion for how to finesse this. No blame is placed; the need of the advisor to earn a living is acknowledged; and the right of the customer to seek his own best interest is justification for the change.

The offer to refer friends I would not make unless you honestly think the fees are advisable for the friends involved. Recommending that friends do things that most opinion of investment management fees would think is a bad idea is a . . . . bad idea.

NateW
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by NateW » Wed Mar 20, 2013 10:34 am

I was in this situation about five years ago. I simply sent the financial adviser a short, polite letter stating my wife and I decided to manage our own investments and therefore were ending our relationship with the financial advisor. I thanked the advisor for her services. My wife and I signed the letter.

Our acounts with the adviser consisted of my wife's rollover IRA, small Roth IRAs and a $60,000 taxable acount, total assets were about $200,000. Decision to end the relationship was because we did not want to pay about 1.5% fund expene ratios AND a 1.5% asset management fee to the advisor. This was about a month after I began reading the Bogleheads forum :sharebeer

I then contacted Vanguard and asked that they manage the collection of funds and to let us know if they needed any further information.

I don't recall the funds' cost basis being an issue. I imagine you could look at statements to see what the fund share purchase prices were.

One thing I noticed right away was that I was free to tax loss harvest when I had control of the funds. Five minutes, exchange funds online, done. With the adviser I imagine if I really wanted to do it, I'd have to schedule an appointment and pay $100 and take 2+ hours off of work. I don't even know if financial advisors will tax loss harvest for you. Do they? If you are up to the job, why use an adviser?

Leaving the adviser was one of the best decisions my wife and I have made.

--Nate

dbr
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by dbr » Wed Mar 20, 2013 2:14 pm

NateW wrote: One thing I noticed right away was that I was free to tax loss harvest when I had control of the funds. Five minutes, exchange funds online, done. With the adviser I imagine if I really wanted to do it, I'd have to schedule an appointment and pay $100 and take 2+ hours off of work. I don't even know if financial advisors will tax loss harvest for you. Do they? If you are up to the job, why use an adviser?
That would have been expecting an investment adviser to be an investment manager which most advisers probably are not. Tax loss harvesting in particular is part of tax accounting and should not be professionally advised except by a tax accountant, who also probably almost never would do such a thing since it is also part of investing. There are also investment managers who do not advise nor are tax accountants but probably do tax loss harvest. Having never engaged any of the above, except occasionally a tax accountant, I am not completely sure how one would arrange comprehensively for all those things.

I think the issue here is getting a comprehensive explanation from the advisor regarding exactly what services are provided and what the cost is for whatever exactly is described.

marci2013
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by marci2013 » Wed Mar 27, 2013 10:15 pm

Cost basis reporting applications can calculate cost basis for you. Make it easy on yourself and use one. Just plug into Yahoo search engine and you will find them. For less than twenty dollars per transaction (at least for the one I used a couple months ago) with transaction meaning per stock or fund, you can get it accurate and fast....

ending a relationship of any kind is stressful ....but it's your money and you need to do what is right for you....stop beating yourself up about it and do what you have to do. good luck.... relationships are one thing....money is quite another. :)

Shilo777
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by Shilo777 » Thu Mar 28, 2013 1:56 am

Thanks again for all of your comments and suggestions. We are feeling much better about our decision. Within the next week we should be making the formal announcement to our advisor. The last few days, we've been gathering info about the non-traded REITS we have. Yikes! What a mess....and some of the fees are outrageous! :oops: We're going to have to figure out what to do with them since they can't be moved to Vanguard.

In regards to our cost basis, I was told the other day that for the funds we have in our IRA accounts, we shouldn't need the cost basis. I'm hoping they are right. This would certainly make things much easier. Does anyone know, by chance, if this is correct?

livesoft
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by livesoft » Thu Mar 28, 2013 5:37 am

There have been lawsuits about non-traded REITs which you may wish to investigate. Just use a search engine with "non-traded REITs lawsuit" to get a whole bunch of things to read.
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JW-Retired
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by JW-Retired » Thu Mar 28, 2013 7:26 am

Shilo777 wrote:
In regards to our cost basis, I was told the other day that for the funds we have in our IRA accounts, we shouldn't need the cost basis. I'm hoping they are right. This would certainly make things much easier. Does anyone know, by chance, if this is correct?
Correct. No cost basis needed since you always pay at regular income tax rates on IRA withdrawels. You never pay at cap gains tax rates so no need for cost basis.
JW
Retired at Last

JW-Retired
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by JW-Retired » Thu Mar 28, 2013 7:49 am

Don46 wrote: I am facing a similar situation. I signed on with a Schwab network adviser. We like him and he's done well by us.
I'm just looking at how much is going to him, about .85 percent for management fees on a 2.3 million portfolio.
In a year or two I'm wanting to put another 1.3 million into these portfolios.
My idea is simply to leave the money in the existing Schwab accounts, and tell the adviser we want to try this on our own now.
$20,000/year on management fees....... to go to $30,000/year in couple of years! That could add up. :happy

IMO, good idea to try things on your own. However, you say he has done well by you. How well? Everyone with equities has done well in the last 4 years. Maybe he was lucky and did a little better. Question? Did he do the one thing that makes an advisor worth his weight in gold....... that is, when you called him in December 2008 yelling "sell everything now", he talked you out of it? If he had to do that I would think carefully before ditching him.
JW
Retired at Last

beachplum
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Re: Ending Advisor Relationship & Getting Cost Basis

Post by beachplum » Thu Mar 28, 2013 12:25 pm

As difficult as it seemed at the time to break away from an advisor I had for many years, I made it easy on myself by just emailing him and instructing him to sell all our stocks and send the cost basis for each. It was his job to comply with my request and give me the cost basis. I did not waste time figuring any of that out and trusted him in that respect from years of experience. By the time this occurred he knew we had other money to invest, and I had started asking a lot of questions, so it didn't come as a shock out of the blue. When I had that ah ha moment and realized how much money we had lost with him, I got over hurting his feelings very quickly.

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