My 74 year old parents and their LPL account

[Bella]

The conversation began with my Dad asking me about a MF in his portfolio. Since then, I have dug deep into their accounts and met with their FA.
The bottom line is their current portfolio is ~260k,of which ~150k is in two accounts broken out by:

Mix of Optimum funds about 50/50 AA with ~1% mgmt fees

Mix of BlackRock, Hartford, Franklin, and Calamos funds about 20/80 stocks to bonds AA with avg .75% mgmt fees

These two accounts incur a 1.4 and 1.5% advisory fee. Last year they paid out $2400 in adivsory fees.

The remaining 110k is in cash and a Lord Abbett Bond fund, split between an IRA and a taxable account which is where the LA fund is.

My parents will do what I suggest and I have done some research already. My questions to the bogleheads are:

1. Since I can't move the Optimum funds over to Vanguard or FIDO, is it best to liquidate then move over and invest in the 3 fund port with proper AA?
2. If I can move the other funds over as is, what's the prudent approach to selling them off or exchanging into the 3 fund portfolio?

I want to make sure I do what's right for them and making sure they stop the fee bleeding is important, but I also don't want to do something that would result in them losing money. I figure at their ages, it's mostly about capital preservation as they won't have time to recover from any significant downturns.

Thank you in advance for your suggestions.

[Duckie]

1. Since I can't move the Optimum funds over to Vanguard or FIDO, is it best to liquidate then move over and invest in the 3 fund port with proper AA?
2. If I can move the other funds over as is, what's the prudent approach to selling them off or exchanging into the 3 fund portfolio?

Are either of these two accounts tax-sheltered like an IRA or are they taxable? It makes a huge difference when selling.

[CAsage]

If they are in an IRA, you can sell without any tax consequences (and of course you have verified that they are taking the correct RMD). If they are in a taxable account, find out how much the capital gains are on the account. If they are in the 15% tax bracket, you could sell up to the limit of that bracket and pay (I think...) only 10% on the long term capital gains (check that!). Run some test scenarios through tax software or look at the IRS tax tables, to determine what the tax hit would be. You could split it across more than one year. Also, bond and cash type things may not have a lot of capital gains - the Financial person should be able to answer that. Note that any assets that you inherit get a step-up in capital gains, but hopefully your parents will live a long time and spend it themselves!

[snowshoes]

AFAIK, LPL Financial is a new implementation & operation of Susan Kaplans old BOS radio spot called "The Money Show". I'd suggest you research both her and LPL, I recall bad press. Its now a publicly traded family business of retirement focused sales support staff & RIAs selling load funds, no doubt w/commissioned and/or AUM fund offerings.
You should be able to have another custodian, consider VG, transfer everything "in kind", w/no tax bite, i'd guess, you look it up. I'd suspect D.E might have less S.E.C oversight for some reason thats probably why their based there. A brief cursory glance at the Optimum funds site portrays simplicity w/few funds, but showing ERs that are very expensive imo. Good luck!

[Bella]

Thanks for the replies. I should have mentioned, both those accounts are IRAs.

Optimum Funds are just subavised products of other MFs. It seems like such a scam.

[David Jay]

Thanks for the replies. I should have mentioned, both those accounts are IRAs.

Optimum Funds are just subavised products of other MFs. It seems like such a scam.

Call Vanguard, they can do everything. You may have to sell some funds (when I say "you", I mean LPL) that Vanguard can't accept, move the rest "in kind". You can keep or sell when you get to Vanguard.

I would go ahead and use the Vanguard Personal Advisory Services to start. It is low cost (0.3%) and can give your folks a comfort level with hand-holding. Vanguard makes it very easy to "turn off" the service in 6 months or a year or two. You keep your accounts and funds with no issue.

[Bella]

Thanks David Jay. My preference would be FIDO since we do have some local offices, but your point on the advisory services is very helpful.

[David Jay]

Thanks David Jay. My preference would be FIDO since we do have some local offices, but your point on the advisory services is very helpful.

Does FIDO have a robo-advisor service?

One problem with FIDO is that if you don't insist on Spartan funds, they will put you in high cost (cheaper than Optima, but high cost as Bogleheads see it) funds again...

[Bella]

I'll definitely check that. My approach would be the three fund portfolio similar to what I have, but at a different AA:

Total Stock Market Index
US Bond Index
International Index