advice on possible brokerage Link

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LouisT
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Joined: Wed Sep 20, 2017 2:58 pm

advice on possible brokerage Link

Post by LouisT » Wed Sep 20, 2017 3:01 pm

Long time reader but here is my first post. Thanks for all the good information I've read over the years...

Bogle head posting:

Emergency Fund: 3 months of expenses
Debt: (student loans) 207K @4.8% student loan debt (monthly payment $2,600 month but able to pay $6,000 month)
Debt: (house) $189k @4.25% on 30yr mortage ($1,489 month payments)
Tax Filing Status: Married Filing Jointly
Tax Rate: 33%; federal ; 5 % state
State of Residence: OH
Age: 35 (myself); 27 (wife)
Desired Asset Allocation: 90% stocks/10% bonds

Current Retirement Assests

Taxable: none

His 401K at Fidelity
72K, 70% total market stock index,FSTVX (0.04% ER)
14K, 10 %,Intl Index,FSIVX (0.08 %ER)
$8900,10%, US Bond Index, FSITX (0.05%)
$2,600, 5%, Real Est Index,FSRVX (0.09%ER)
2K, 5% Emerging Mkts, Index,FPMAX (0.13% ER)
Match: 6% of contributions; then 10% of total salary at the end of the year (max at 25K)
Total percentage: 100%

His Roth IRA at Fidelity
$3,700, IVW (.18% ER)
$317 FREL ( 0.08% ER)
$256 FENY (0.08% ER)
$209 XLI (0.14% ER)

Her 401K through STRS Ohio
$11,700 STRS Russel 1000 Index (.10 % ER)
$6,000 STRS REIT Choice (.15% ER)
$2,100 STRS small cap (0.10% ER)
Match: 9.5% of salary (approx. $3,800 year)


Her Roth IRA through Vanguard
$7.00 VTTSX (0.16% ER)
$2,300 VGT (0.10% ER)
$1,700 VHT (0.09% ER)


Her Traditional IRA through Vanguard
$2,869.46 VTTSX (0.16%ER)


Contribution
18K year to his 401K
$5,600 year to her 401K (14% of her salary is mandatory towards the plan)

Questions:

1. My 401K through fidelity charges an advisor fee of 0.3% of account balance a year deducted quarterly
a. I can use a brokerage link to move up to 95% of my balance into other funds to avoid paying this advisor fee
b. Fidelity charges $4.95 for each transaction into the brokerage account
c. I was thinking of moving a large chunk from Fidelity once a year into the brokerage account and buy equivalent funds/ETFs at Vanguard (plan to do ETFs on the funds where I do not have enough money to get the admiral shares)
d. Funds at Vanguard I am considering:
i. 70% Total stock market index,VTSAX (0.04% ER)
ii. 10% Total International stock,VXUS (0.11 % ER)
iii. 10% Intermediate Term Bond,BIV (0.07% ER)
iv. 5% REIT, VNQ (0.12%)
v. 5% Emergening Markets, VWO (0.14% ER)
e. I get better expense ratios on my funds through Fidelity, but I by paying 0.3% of total balance a year in advisor fees, would I come out better by using the above listed Vanguard funds?

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oldcomputerguy
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Re: advice on possible brokerage Link

Post by oldcomputerguy » Wed Sep 20, 2017 3:21 pm

Your plan may be different, but when I had Brokeragelink through my Fido 401k it was considered an integral part of the 401k plan, not a separate brokerage account.

I know Fidelity charges $4.95 generally for non-Fidelity purchases, but there are a boatload of commission-free funds you can buy at Fidelity in your Brokeragelink. Why buy funds on which you'll have to pay a commission?

I wouldn't even consider buying VTSAX through Fidelity. For one thing, unless I'm mistaken, you may not even be able to purchase Admiral class shares of Vanguard funds at Fidelity. And if you can, it'll likely cost you dearly. (Fidelity lists the Investor-class version, VTSMX, as having a $75 commission. Look instead at Fidelity's Total Market Index Fund Premium Class, FSTVX.)
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livesoft
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Re: advice on possible brokerage Link

Post by livesoft » Wed Sep 20, 2017 3:38 pm

I think that the OP may not quite understand all the fees that they might pay for using the Brokerage Link option. Also, they may not understand that not all funds are available for purchase through the Brokerage Link option.

For instance, it is doubtful that one can buy VTSAX through a Fidelity Brokerage LInk option and even if so, it is doubtful that it would cost less than $20 to do so.

Second, why choose Vanguard ETFs when Fidelity has such good index funds and index ETFs without any commissions? Would the brokerage link option give one free commissions?

Third, many brokerage link options have a quarterly fee.

Fourth, I can imagine that information on the Brokerage Link option is hard to come by since the Advisor would presumably lose money, but it is also possible that the Advisor gets 0.3%% of the money in such accounts even though the OP says they don't. The reason why I state that is because of other oddities stated as fact in this post.

Fifth, if someone says something about their Fidelity BrokerageLink option, that does not mean it applies to the OP's Fidelity Brokerage Link option since all fees and services are negotiated on a per-plan basis.

Full disclosure: My spouse has a Self-Directed Brokerage Account in her 401(k). She is probably the only one to use it in her entire company, so information and fees were quite difficult to confirm because no one at her employer knew anything about it. And their "advisor" was not helpful.

Bottom line: Make sure fees are as stated. Use no-commission ETFs and index funds and not Vanguard products in this 401(k).
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Gadget
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Re: advice on possible brokerage Link

Post by Gadget » Wed Sep 20, 2017 8:44 pm

I'd reread the Brokeragelink plan details carefully. Then I'd call Fidelity to confirm. Each company is different. But my Brokeragelink option has no fee to transfer to Brokeragelink, I can transfer 100%, and I can select all "No Transaction Fee" options from Fidelity. So it's a pretty great deal. Yours may be as you said, but most people who have posted about brokeragelink on here have options more similar to mine.

ryman554
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Re: advice on possible brokerage Link

Post by ryman554 » Thu Sep 21, 2017 9:32 am

Brokeragelink is great.

I would be surprised if there were a fee to transfer in; it's usually just another investment option listed amongst your existing options.

But fidelity "spartan" funds (spartan name is gone, but funds remain) that have ERs <= 0.1. You can get all the US, international, and bond funds you want. These should be completely no cost to you, although some have 90 day redemption fees. But you won't be selling all that often, so don't worry about it.

Brokeragelink *should* give you access to any fund that Fidelity sells, since it is "linked" to your 401(k) plan, but controlled via their regular investment side. I have heard of some restrictions, but I have never encountered them myself.

In my case, it also appears immune to quarterly 401(k) plan fees that my old company installed recently. It might be why the OP company limits to 95% contribution.

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prudent
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Re: advice on possible brokerage Link

Post by prudent » Thu Sep 21, 2017 10:20 am

livesoft wrote:
Wed Sep 20, 2017 3:38 pm
Fifth, if someone says something about their Fidelity BrokerageLink option, that does not mean it applies to the OP's Fidelity Brokerage Link option since all fees and services are negotiated on a per-plan basis.

Full disclosure: My spouse has a Self-Directed Brokerage Account in her 401(k). She is probably the only one to use it in her entire company, so information and fees were quite difficult to confirm because no one at her employer knew anything about it. And their "advisor" was not helpful.

Bottom line: Make sure fees are as stated. Use no-commission ETFs and index funds and not Vanguard products in this 401(k).
Just to add a bit - the only authoritative info on our Brokerage Link option I got came from the Plan Custodian itself. They sent a packet with all details, restrictions, options, available investments, fees, etc. And it was clear that the information was specifically for our company's plan. That's where I would go - not the advisor, not anyone at the company.

LouisT
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Joined: Wed Sep 20, 2017 2:58 pm

Re: advice on possible brokerage Link

Post by LouisT » Thu Sep 21, 2017 5:19 pm

Thanks for the replies. Yes, I double checked and their is no brokerage link fee or fee to transfer money in. We just have to have $500 minimum to use the brokerage link. From thinking through the replies, I think I will start moving money into the brokerage link and just purchase the same fidelity index funds that I am currently to avoid paying the advisor fees. If I cannot get those premium index funds through the brokerage link, then I will likely just buy corresponding ETFs through fidelity. The expense ratios on the ETFs are around 0.14% instead of the 0.04% I currently pay but that still would save more money than paying the 0.3% a year. Is my math correct on that?

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oldcomputerguy
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Re: advice on possible brokerage Link

Post by oldcomputerguy » Thu Sep 21, 2017 5:29 pm

LouisT wrote:
Thu Sep 21, 2017 5:19 pm
Thanks for the replies. Yes, I double checked and their is no brokerage link fee or fee to transfer money in. We just have to have $500 minimum to use the brokerage link. From thinking through the replies, I think I will start moving money into the brokerage link and just purchase the same fidelity index funds that I am currently to avoid paying the advisor fees. If I cannot get those premium index funds through the brokerage link, then I will likely just buy corresponding ETFs through fidelity. The expense ratios on the ETFs are around 0.14% instead of the 0.04% I currently pay but that still would save more money than paying the 0.3% a year. Is my math correct on that?
Check your plan documents, but I don't think there would be a restriction on buying the premium index funds through BrokerageLink. You should be able at least to get FSTVX (or, if you prefer S&P500 to Total Market, FUSVX) for your domestic allocation, FUSGX or FTIPX for your international, and FSITX (or, if you'd rather have Treasurys, FIBAX or FSBAX) for your fixed-income allocation.

Good luck.
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ryman554
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Re: advice on possible brokerage Link

Post by ryman554 » Fri Sep 22, 2017 9:10 am

LouisT wrote:
Thu Sep 21, 2017 5:19 pm
Thanks for the replies. Yes, I double checked and their is no brokerage link fee or fee to transfer money in. We just have to have $500 minimum to use the brokerage link. From thinking through the replies, I think I will start moving money into the brokerage link and just purchase the same fidelity index funds that I am currently to avoid paying the advisor fees. If I cannot get those premium index funds through the brokerage link, then I will likely just buy corresponding ETFs through fidelity. The expense ratios on the ETFs are around 0.14% instead of the 0.04% I currently pay but that still would save more money than paying the 0.3% a year. Is my math correct on that?
IF (and only if) the brokerage link (BL) option really saves you the 0.3% plan fee, then yes. But if you have 5% of your money outside of BL, what is to stop them from taking the 0.3% on your entire balance out of the money that is not in BL? Sadly, the only way you are really going to find out is by getting hit with the fee one time so you can assess what is counted and what is not.

Typically, you will save money on investments in your plan vs. brokerage link, since you may have access to lower cost institutional funds vs. investor class. that looks to be the case for you, in which case you may lose out by moving to BL.

ETFs in a tax-advantaged account really don't give you much advantage unless you are day-trading, and may disadvantage if there is bid-ask spread.

Where BL really shines is the ability to get funds that are NOT in your corporate 401(k) plan. I use it to get my international holdings and small-value tilt (via extended market fund), not to replace the excellent s&p and treasuries my plan has. The fact that I choose to have the s&p and treasuries on BL is for simplicity in rebalancing only.

mhalley
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Re: advice on possible brokerage Link

Post by mhalley » Fri Sep 22, 2017 10:18 am

Fidelity has premium index funds that rival Vanguard's, so there is no need to buy the Vangurd ETFs. They do require a minimum of 10k each though. The regular index funds are fine while you wait to get that much money to invest. Here is their premium fund list:
https://www.fidelity.com/mutual-funds/i ... &gclsrc=ds
And their overall index fund list:
https://www.fidelity.com/mutual-funds/f ... electTab=5
Another option would be to use the fidelity freedom INDEX target retirement funds until you have enough money to switch.
https://www.fidelity.com/fund-screener/ ... ft=BAL_all

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