Best way to liquidate Wealthfront

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jamapa
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Best way to liquidate Wealthfront

Post by jamapa » Fri Nov 24, 2017 8:17 pm

Some background:
We opened an account with Wealthfront back in 2014 with around $50k. We were pretty happy with not having to worry about balancing/TLH etc. and the 0.25% fees seemed well worth it. We're in a high tax bracket 39.6 Fed + 12.3 CA state. So we were offsetting at least the $3k plus some cap gains from selling ESOP/ESPP stocks along the way. At roughly $600k account value, the fees ($1500) breaks even with the savings in tax (assuming we don't TLH ourselves)

The last couple years a few things went well and with bonuses and we kept putting all savings into Wealthfront. Now the value is a little over $1M. The fees are beginning to not look so good.

We signed up for their direct indexing and advanced direct indexing services:
https://research.wealthfront.com/whitep ... -indexing/
Around 40% of the portfolio is in US stocks - 490 different stocks from the S&P1000 at this time. They seem to buy and sell 10-20 individual stocks a week as the systems does TLH. Seems to me everything is short term taxable.

We discovered Bogleheads in the time since we did this stuff and now would like to move funds to Vanguard.

Questions:
- Is there a good way to liquidate the Wealthfront account? Has anyone here done this?
- Do the non US stock parts that are mostly Vanguard ETFs transfer in kind?
- The US stocks are trickier - seems like if I turn off Direct indexing they will move US stocks portion to VTI and trigger short term cap gains. Is there a way around this?
- What else shod I consider as I try to do this?

Will appreciate any help folks can give - thanks!!

NancyABQ
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Re: Best way to liquidate Wealthfront

Post by NancyABQ » Fri Nov 24, 2017 10:51 pm

Yeah one of the problems with the Direct Indexing at Wealthfront is all those individual holdings if you want to get out of it.

It should be totally possible to Transfer In Kind all of the holdings to another brokerage and maintain all the cost basis data. Then you can liquidate it at your leisure in a tax-efficient way (or keep it as your own mini-stock-index, but it would be a pain to maintain it that way...). Transferring individual stocks is just as easy/same as transferring ETFs. It will just be a lot of individual holdings showing in your brokerage account.

Personally I would do this to Schwab rather than Vanguard, for the customer service aspects. But I assume you can also transfer it to Vanguard. Schwab would give you a hefty cash bonus for opening a 1mill+ account with them (maybe $1000?). You should also be able to get some free trades. Definitely call and talk to a human being there about it if you want to go with Schwab. Any discount brokerage would work for this.

I had a much smaller (~$12K) Wealthfront account, with much smaller capital gains/losses, and I decide to liquidate it and transfer cash, rather than Transfer In Kind. But at that time I did investigate Transferring in Kind (to Schwab) and it was a totally straightforward thing to do. In your case I would definitely say Transfer in Kind due to the significant tax consequences.

Good luck!

livesoft
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Re: Best way to liquidate Wealthfront

Post by livesoft » Fri Nov 24, 2017 10:54 pm

It seems to me that Wealthfront would be the folks to ask about this. They should have an algorithm for folks like you who want the "Best way to liquidate Wealthfront." Call them and ask them for advice. You paid for it.
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Finance-MD
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Re: Best way to liquidate Wealthfront

Post by Finance-MD » Fri Nov 24, 2017 11:15 pm

Out of curiosity, how many total individual stocks do you have? And what is the average position... I’m just curious as to their algorithm. Do they try to keep it all Market weight? When you add more money, do they just keep adding smaller companies? Or do they add to the balances of the existing companies? When they TLH, are they buying within the same sector?
Do you think as your balance is now this big they can’t make up for it in tax efficiency? Obviously the TLH is maxed at $3000 per year off ordinary income... but you get the added efficiency of not having the underlying mutual fund ER and also potentially less taxable events from intrafund trading.
Just curious - sorry lots of questions.
As for getting out, i would go somewhere well adept at dealing with all these individual holdings... perhaps TD Ameritrade, Fidelity, Schwab... id Sell anything at a loss. Rebuying sp500 index or similar. Anything at a gain I’d hold at least until long term capital gain.. preferably if ever out of the top tax bracket... or maybe if you move to a no tax state.

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CyberBob
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Re: Best way to liquidate Wealthfront

Post by CyberBob » Fri Nov 24, 2017 11:18 pm

If you do transfer in-kind and have to sell them yourself, both Fidelity and Schwab have offers of 500 free trades good for 2 years.

https://rewards.fidelity.com/offers/ATP500free

https://www.schwab.com/public/schwab/ac ... ffer2.html

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Taylor Larimore
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Re: Best way to liquidate Wealthfront

Post by Taylor Larimore » Fri Nov 24, 2017 11:43 pm

jampana:
Welcome to the Bogleheads Forum!
Around 40% of the portfolio is in US stocks - 490 different stocks from the S&P 1000 at this time. They seem to buy and sell 10-20 individual stocks a week as the systems does TLH. Seems to me everything is short term taxable.
I understand why you might be leaving Wealthfront's "Advanced Indexing." Its description in your link is mind-boggling. It may be impossible for you to sell the profitable stocks in your portfolio without incurring significant capital-gain taxes.
Jane Bryant Quinn, syndicated columnist and author of "Smart and Simple Financial Strategies": "You shouldn't buy anything too complex to explain to the average 12-year old."
I will be interested to read the opinions of others.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

NancyABQ
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Re: Best way to liquidate Wealthfront

Post by NancyABQ » Sat Nov 25, 2017 12:00 am

Taylor Larimore wrote:
Fri Nov 24, 2017 11:43 pm
jampana:
Welcome to the Bogleheads Forum!
Around 40% of the portfolio is in US stocks - 490 different stocks from the S&P 1000 at this time. They seem to buy and sell 10-20 individual stocks a week as the systems does TLH. Seems to me everything is short term taxable.
I understand why you might be leaving Wealthfront's "Advanced Indexing." Its description in your link is mind-boggling. It may be impossible for you to sell the profitable stocks in your portfolio without incurring significant capital-gain taxes.
Heh heh... I read up on Wealthfront Direct Indexing a year or so ago, and discussed it with a friend. We thought it was an interesting idea, but basically the conversation was about "What do you do about the 500 individual stock holdings in a taxable account when you want to leave Wealthfront?" I don't think there is a "good" answer to this one, given that there are significant unrealized gains in a $1mill+ account!

Ellie
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Re: Best way to liquidate Wealthfront

Post by Ellie » Sat Nov 25, 2017 12:26 am

I helped my SO unwind from Wealthfront. Never was able to obtain the cost bases from Wealthfront. We ended up transferring in kind to Vanguard, and waiting until the holdings reached Vanguard to view the cost bases and develop a plan. Vanguard took everything in kind; there wasn’t anything that needed to be liquidated in advance.

We sold the losers (there wasn’t much there because Wealthfront’s policy apparently is to TLH very regularly, regardless of how small the loss) and the winners that we could dispose of without incurring too much gain. Almost all the gain was short term, so we’ve been considering sales on a rolling basis as the gain moves from short to long. All told, we sold over 30 stocks/funds, and he still has around 25 holdings from Wealthfront. Whichever brokerage you choose, make sure you have sufficient free trades to cover the volume.
Best thing that ever happened to me was being too busy in 2008 to pay attention to my portfolio.

jamapa
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Re: Best way to liquidate Wealthfront

Post by jamapa » Sat Nov 25, 2017 1:36 am

Thank you for the replies!

NancyABQ:
We thought of Vanguard since both my wife and I have IRA accounts with them. Were thinking of keeping things in one place for simplicity.

livesoft:
Will try calling them to see what their take on this kind of thing is. Haven't ever interacted with their customer service before this. Will see how that goes.

Finance-MD:
I haven't kept track of how they've dealt with new money. Will see if I can access history to see how things happened. If it gives any insight on their algortihms. Today we have 490 US stocks - last column is cost basis.
https://imgur.com/a/1jkys

If it helps understand their methods - our 1.2M is split like this:
Image

Taylor:
I wish I'd known of Bogle earlier and had the presence of mind to not get into this mess. Our motivation was to basically fire and forget and not have to do the kind of stuff I am going to have to do now - deal with weird dates, positions, taxes, etc. This is neither mine or my spouses favorite thing :)

Ellie:
Vanguard will move ETF from Schwab and individual stocks in kind as well? The non US stock bucket has all kinds of different ETFs.

Best,

boglebrain
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Re: Best way to liquidate Wealthfront

Post by boglebrain » Sat Nov 25, 2017 3:16 am

I did exactly this year about 1 year ago. Had the same evolution. Had a 1% fee advisor, used Wealthfront starting in 2013 and then got out and I’m doing it all on my own now. Very glad I did.

Wealthfront has multiple problems:
1) lack of tax aware placement
2) the Wealthfront 500 or 1000 will have tracking error. That is suppose for 30 days they sell Apple to harvest some losses...what is the other stock or stocks that best replace Apple? The prior correlated stocks are just that —-correlated stocks they pick but are they doing it intelligently enough to include both other Fortune 500 and extended market stocks.
3) benefit might not be there in the case of lump sum investing...adds more benefit if you make regular investments and have many different tax lots but for my situation it just didn’t add much value.
4) unnecessary complexity


So I just bit the bullet and sold all the stocks. I wasn’t in the W500 that long so didn’t have that much in gains. I kept the index funds and moved it all to vanguard. You might have a few stocks with significant appreciation and perhaps. I think I turned off the W500 inside Wealthfront and then they sold it all. Then I moved the money out in kind. If I had to move all individual stocks then I would have just had Vanguard sell them. They give a certain number free and it may be something you can negotiate.

Ellie
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Re: Best way to liquidate Wealthfront

Post by Ellie » Sat Nov 25, 2017 7:39 am

jamapa wrote:
Sat Nov 25, 2017 1:36 am
Vanguard will move ETF from Schwab and individual stocks in kind as well? The non US stock bucket has all kinds of different ETFs.
Vanguard accepted everything we had at Wealthfront as an in-kind transfer, including individual stocks and some Schwab funds. Still am holding one of the Schwab funds at Vanguard due to the gain. Before we transferred to Vanguard, we sent them a list of everything we had at Wealthfront to confirm they would take it all in-kind. I would recommend you do the same with whatever brokerage you choose.
Best thing that ever happened to me was being too busy in 2008 to pay attention to my portfolio.

NYC_Guy
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Location: New York

Re: Best way to liquidate Wealthfront

Post by NYC_Guy » Sat Nov 25, 2017 8:39 am

Taylor Larimore wrote:
Fri Nov 24, 2017 11:43 pm
jampana:
Welcome to the Bogleheads Forum!
Around 40% of the portfolio is in US stocks - 490 different stocks from the S&P 1000 at this time. They seem to buy and sell 10-20 individual stocks a week as the systems does TLH. Seems to me everything is short term taxable.
I understand why you might be leaving Wealthfront's "Advanced Indexing." Its description in your link is mind-boggling. It may be impossible for you to sell the profitable stocks in your portfolio without incurring significant capital-gain taxes.
Jane Bryant Quinn, syndicated columnist and author of "Smart and Simple Financial Strategies": "You shouldn't buy anything too complex to explain to the average 12-year old."
I will be interested to read the opinions of others.

Best wishes.
Taylor
I very much respect Taylor and his views, but I think he is flat out wrong about this. The direct indexing approach can add significant value. It’s simply indexing with TLH on steroids. Also allows you to gift your super appreciated winners to charity. There is no downside other than fees (with a big caveat below). I’m going to be surprised if it isn’t a recommended Boglehead strategy for larger portfolios in 10 years. If any of Schwab, Fidelity or Vanguard offered this at a reaonable fee (25 bps or less), I would have my entire S&P 500 component in a direct indexing product. The only reason I’m not at Wealthfront is that I don’t trust such a new/young conpany with my investments (that’s the caveat) and the fees are a bit too high.

Edit: I mentioned the S&P 500 above. I think the product will only makes sense for large cap holdings. I would not do this for mid or small cap (just use an extended market index fund or etf to get to market weight). Literally an example of the 80/20 rule if you are seeking normal market weight. Tax matters, particularly if your marginal rate is >50%.

livesoft
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Re: Best way to liquidate Wealthfront

Post by livesoft » Sat Nov 25, 2017 8:53 am

Maybe Wealthfront direct indexing with TLH is good for folks who are contributing a lot to a taxable account every month. For folks who do not do that, I doubt it makes any sense at all.

And eventually, many folks in the first category will probably get out of the mode of high monthly contributions and then TLH opportunities will be fewer and fewer. So far in 2017, I did not (a) TLH at all and (b) contribute to taxable at all, nor (c) incur any capital gains tax liability and I have more in taxable than the OP.
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boglebrain
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Re: Best way to liquidate Wealthfront

Post by boglebrain » Sat Nov 25, 2017 12:00 pm

livesoft wrote:
Sat Nov 25, 2017 8:53 am
Maybe Wealthfront direct indexing with TLH is good for folks who are contributing a lot to a taxable account every month. For folks who do not do that, I doubt it makes any sense at all.

And eventually, many folks in the first category will probably get out of the mode of high monthly contributions and then TLH opportunities will be fewer and fewer. So far in 2017, I did not (a) TLH at all and (b) contribute to taxable at all, nor (c) incur any capital gains tax liability and I have more in taxable than the OP.
Completely agree. That was my experience and why I left Wealthfront. I had a large lump sum and not contributing on an on-going basis.

I also think the tracking error is an issue with the individual stock investing index.

jamapa
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Re: Best way to liquidate Wealthfront

Post by jamapa » Sat Nov 25, 2017 6:48 pm

NYC_Guy, boglebrain, livesoft:
Got a few things from your replies:
- DI can make sense if you contribute frequently
- >50% marginal tax rate means DI makes a little more sense
- if you made one large lump sum contribution and little later, DI makes less sense
- NYC_Guy, sounds like you would be OK with <=25 bps fee for DI at a different brokerage firm than WF

Would you please add your thoughts in light of above and following things about our situation:
- expect to save ~400k per year for next 3-4 years
- we're both 40 yr old professionals, expect to be in high tax bracket for next 4 years or so.
- we are both in tech - no guarantees that skill sets and demand will sustain comp for much longer than 4 yrs
- both have little appetite and even less financial literacy to want to actively manage portfolio
- savings: ~500k in 401k/IRAs, 1.2M in WF, 1M in cash, 850k in home equity
- debts: 1.1M on home

I was planning to move 1.2M in WF plus the 1M in cash into a 3 fund portfolio at Vanguard to simplify the future. What gives me pause is that we seem to have a few things going on in favor of DI:
- we're OK with risk of WF being a young company, and they charge 25bps
- we will have ongoing contributions going on for 4 years or so
- marginal rates are going to remain high for 4 years or so

Thanks,

livesoft
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Re: Best way to liquidate Wealthfront

Post by livesoft » Sat Nov 25, 2017 6:55 pm

Personally, I would move now before unrealized cap gains trapped you even more. I would learn to do tax-loss harvesting on my own. The forum can help you with that. I think you would only have to do it once or twice year, so it was be really easy.
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TomatoTomahto
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Re: Best way to liquidate Wealthfront

Post by TomatoTomahto » Sat Nov 25, 2017 7:16 pm

jamapa wrote:
Sat Nov 25, 2017 6:48 pm
NYC_Guy, boglebrain, livesoft:
Got a few things from your replies:
- DI can make sense if you contribute frequently
- >50% marginal tax rate means DI makes a little more sense
- if you made one large lump sum contribution and little later, DI makes less sense
- NYC_Guy, sounds like you would be OK with <=25 bps fee for DI at a different brokerage firm than WF

Would you please add your thoughts in light of above and following things about our situation:
- expect to save ~400k per year for next 3-4 years
- we're both 40 yr old professionals, expect to be in high tax bracket for next 4 years or so.
- we are both in tech - no guarantees that skill sets and demand will sustain comp for much longer than 4 yrs
- both have little appetite and even less financial literacy to want to actively manage portfolio
- savings: ~500k in 401k/IRAs, 1.2M in WF, 1M in cash, 850k in home equity
- debts: 1.1M on home

I was planning to move 1.2M in WF plus the 1M in cash into a 3 fund portfolio at Vanguard to simplify the future. What gives me pause is that we seem to have a few things going on in favor of DI:
- we're OK with risk of WF being a young company, and they charge 25bps
- we will have ongoing contributions going on for 4 years or so
- marginal rates are going to remain high for 4 years or so

Thanks,
It’s funny how the same thread can be read so differently. We (DW and I) have high income, probably for a few years, and I had considered WF. 25 bps don’t scare me, but it is money, after all. Our marginal rate might not be as high as CA residents, but NJ can be pricey also.

I don’t want to wake up some day with 500 different stocks, having saved a few bps through tax loss harvesting (after fees, the eventual coming home to roost of the CG kicked down the road, and the housekeeping required to undo what WF hath wrought). No thanks. I’ll just stick to our boring mostly 3-Fund portfolio/LMP hybrid (plus some PRIMECAP because we can).

OP. THANK YOU FOR STARTING THIS THREAD.

boglebrain
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Re: Best way to liquidate Wealthfront

Post by boglebrain » Sat Nov 25, 2017 10:31 pm

I agree with livesoft.

I think your underlying investments are safe if Wealthfront goes belly-up. What’s more concerning is that Wealthfront has changed strategy and management many times. They were originally called “kaching” and provided a platform to invest in other’s investing strategies—almost the exact opposite of low cost index investing. Then they rebranded and hired new ceo and top talent; then they changed ceo again and there has been tremendous change internally. Who knows if they will keep their fees or raise them or change investing strategy.

Then at the conceptual level I think the index tracking error is larger than people realize. I don’t think the replacement stocks will sufficiently work all the time. When you sell a specific lot of Apple shares and in those 30 days Apple goes up 5% the other investments you were in are unlikely to have the same movement.

Also, their W500 only impacts like 20-30% of your overall portfolio. That’s because they have all these other funds you get invested in (emerging markets, developed markets, extended US market, etc) so only US portion is in the WF500. So while they claim “effective performance” might be better it is on only a portion of your portfolio.

I also think Wealthfront is missing some key strategies for your situation. You should a) fill up our 401(k) space with bonds and then b) if you have any leftover for bond allocation then you should do some portion of CA municipal bonds in your taxable.

Wealthfront can’t see your whole picture and isn’t doing tax aware placement. It also doesn’t have any state municipal bond holdings but just used national muni.

I have found that the simplicity and control of doing it myself and following 3-fund are worth it and am happy I got out when I did. At the same time I think Wealthfront is not bad and it will likely work out fine in terms of performance and maybe I’m wrong about index tracking error and future capital gains rates go down so better to harvest now.

Overall though I think being disciplined and selecting your stock/bond allocation will make a bigger difference than if you continue with them or not.

38,000 ft
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Re: Best way to liquidate Wealthfront

Post by 38,000 ft » Sun Nov 26, 2017 1:16 am

jamapa wrote:
Sat Nov 25, 2017 1:36 am

If it helps understand their methods - our 1.2M is split like this:
Image
Is it just me or does that emerging markets allocation seem pretty aggressive? I'm not familiar with Wealthfront, is this typical?

jamapa
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Re: Best way to liquidate Wealthfront

Post by jamapa » Sun Nov 26, 2017 1:22 am

Thanks for all your replies.

TomatoTomhato, you were smart about this - we're exactly where you did not want to be.

We've decided to get out of WF - seems like the sooner the better. Some notes:
- plan to talk to Vanguard and Schwab to see where I can get most free trades. I have to get out of 490 individual stocks, 90% of which are short term taxable at this point. So will have to do this in a period starting 12 months out.
- will need to figure out how that will work with doing TLH myself. I am unclear on how the 'substantially similar' rules for TLH will work with ETFs and individual stocks in the pot. I will likely ask for help in this good forum when I learn enough about what questions to ask :)
- plan to keep a nominal amount in WF until tax season so I can import schedule info into Turbotax. Form 1099 from WF was 500 pages long last year with ~3k trades due to the TLH stuff they do. Happily it imports painlessly into Turbotax - would be a nightmare otherwise.

boglebrain,
Your comments made me think of addressing our taxable vs tax-advantaged ratio as well. We have only 15% of our savings in retirement accounts. Over the next 3-4 years this will drop to <10%. This is mostly because both SO and I spent a lot of time in grad school and academia with lower earnings. We did max out all available employer 401k plans but likely neglected to do many years of individual IRAs and the like outside of employer plans that we could have done. But that's water under the bridge. Most of our income was earned in the last 4-5 years. By the time we learned about backdoor Roth (I am still fuzzy on that), we were in the >50% tax bracket and it didn't seem to make sense. But that is for another thread. I will seek folks help with that issue in a few months when this mess is under control.

Best,

jamapa
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Re: Best way to liquidate Wealthfront

Post by jamapa » Sun Nov 26, 2017 1:32 am

38,000 ft wrote:
Sun Nov 26, 2017 1:16 am
jamapa wrote:
Sat Nov 25, 2017 1:36 am
Is it just me or does that emerging markets allocation seem pretty aggressive? I'm not familiar with Wealthfront, is this typical?
One more piece of info:
WF has a risk appetite choosing wizard. Asks for a number between 1 to 10. We chose the highest risk number of 10. The logic here was that we knew we were getting a substantial chunk in LTCG income this year (that's the 1M cash we are sitting on - it was not gradually accumulated, we recently got that). My thinking was to do reasonably risky things with the existing savings - if they worked out it would be fine, if they didn't they would offset some of the LTCG that was going to happen anyway.

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whodidntante
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Re: Best way to liquidate Wealthfront

Post by whodidntante » Sun Nov 26, 2017 3:20 am

CyberBob wrote:
Fri Nov 24, 2017 11:18 pm
If you do transfer in-kind and have to sell them yourself, both Fidelity and Schwab have offers of 500 free trades good for 2 years.

https://rewards.fidelity.com/offers/ATP500free

https://www.schwab.com/public/schwab/ac ... ffer2.html
Merrill Edge will provide 100 free trades per month for 100k+ on an ongoing basis via preferred rewards. They also offer free trades on account signup.

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whodidntante
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Re: Best way to liquidate Wealthfront

Post by whodidntante » Sun Nov 26, 2017 3:32 am

Probably the least cost way is to transfer in kind then liquidate it in a tax efficient way. Sell losers first, use losses to offset gains, allow STCG to become LTCG, and sell the stocks with the smallest LTCG first.

I have considered rolling my own passively managed quant basket of stocks as a way of lowering my current year taxes and as a low cost way of achieving the factor loading I want. Kind of a homegrown DFA. One poster here is doing that. However, since I am working while the stock market is open, it isn't practical for me. It might be realistic for me to trade stocks in Asia/Pacific this way but then it's going to be a challenge to gap fill the rest of my portfolio. Trading stocks in those markets would be quite the time consuming hobby I think. I'm not sure that Wealthfront is doing that for foreign stocks and I won't pay them to do it, since lower cost and custom factor tilts likely isn't on the menu with them.

NYC_Guy
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Re: Best way to liquidate Wealthfront

Post by NYC_Guy » Sun Nov 26, 2017 8:55 am

jamapa wrote:
Sat Nov 25, 2017 6:48 pm
NYC_Guy, boglebrain, livesoft:
Got a few things from your replies:
- DI can make sense if you contribute frequently
- >50% marginal tax rate means DI makes a little more sense
- if you made one large lump sum contribution and little later, DI makes less sense
- NYC_Guy, sounds like you would be OK with <=25 bps fee for DI at a different brokerage firm than WF

Would you please add your thoughts in light of above and following things about our situation:
- expect to save ~400k per year for next 3-4 years
- we're both 40 yr old professionals, expect to be in high tax bracket for next 4 years or so.
- we are both in tech - no guarantees that skill sets and demand will sustain comp for much longer than 4 yrs
- both have little appetite and even less financial literacy to want to actively manage portfolio
- savings: ~500k in 401k/IRAs, 1.2M in WF, 1M in cash, 850k in home equity
- debts: 1.1M on home

I was planning to move 1.2M in WF plus the 1M in cash into a 3 fund portfolio at Vanguard to simplify the future. What gives me pause is that we seem to have a few things going on in favor of DI:
- we're OK with risk of WF being a young company, and they charge 25bps
- we will have ongoing contributions going on for 4 years or so
- marginal rates are going to remain high for 4 years or so

Thanks,
Given your facts (existing WF client, comfortable with their newness, 25 bps fees and substantial upcoming contributions to taxable), I would leave the S&P 500 component with them. Move everything else to a Schwab, Fidelity or Vanguard account and round out the portfolio there. For example, if you want to be market weight in US equities and have a significant international exposure - say 2/3 US and 1/3 Intl - I would suggest 50% at WF (S&P 500 via DI), 33% ex-US equities (eg VFWAX) and 17% extended market (eg VEXAX). Add in your fixed income fund of choice (probably a muni fund), and you have a boglehead-like approach, but with active TLH on the S&P 500 component. Also gives you an “advantage” of having your funds split between two institutions (some see multiple accounts as a means to limit the damage/frustration associated with an account hack). Good luck.

boglebrain
Posts: 94
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Re: Best way to liquidate Wealthfront

Post by boglebrain » Sun Nov 26, 2017 10:45 am

NYC_Guy wrote:
Sun Nov 26, 2017 8:55 am
jamapa wrote:
Sat Nov 25, 2017 6:48 pm
NYC_Guy, boglebrain, livesoft:
Got a few things from your replies:
- DI can make sense if you contribute frequently
- >50% marginal tax rate means DI makes a little more sense
- if you made one large lump sum contribution and little later, DI makes less sense
- NYC_Guy, sounds like you would be OK with <=25 bps fee for DI at a different brokerage firm than WF

Would you please add your thoughts in light of above and following things about our situation:
- expect to save ~400k per year for next 3-4 years
- we're both 40 yr old professionals, expect to be in high tax bracket for next 4 years or so.
- we are both in tech - no guarantees that skill sets and demand will sustain comp for much longer than 4 yrs
- both have little appetite and even less financial literacy to want to actively manage portfolio
- savings: ~500k in 401k/IRAs, 1.2M in WF, 1M in cash, 850k in home equity
- debts: 1.1M on home

I was planning to move 1.2M in WF plus the 1M in cash into a 3 fund portfolio at Vanguard to simplify the future. What gives me pause is that we seem to have a few things going on in favor of DI:
- we're OK with risk of WF being a young company, and they charge 25bps
- we will have ongoing contributions going on for 4 years or so
- marginal rates are going to remain high for 4 years or so

Thanks,
Given your facts (existing WF client, comfortable with their newness, 25 bps fees and substantial upcoming contributions to taxable), I would leave the S&P 500 component with them. Move everything else to a Schwab, Fidelity or Vanguard account and round out the portfolio there. For example, if you want to be market weight in US equities and have a significant international exposure - say 2/3 US and 1/3 Intl - I would suggest 50% at WF (S&P 500 via DI), 33% ex-US equities (eg VFWAX) and 17% extended market (eg VEXAX). Add in your fixed income fund of choice (probably a muni fund), and you have a boglehead-like approach, but with active TLH on the S&P 500 component. Also gives you an “advantage” of having your funds split between two institutions (some see multiple accounts as a means to limit the damage/frustration associated with an account hack). Good luck.
Unfortunately I don’t think you can just leave a portion with them that only gets invested in the s&p equivalent. Perhaps if you call them and discuss. But I believe they work automatically and you just get to decide your risk tolerance and size of portfolio.

NancyABQ
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Re: Best way to liquidate Wealthfront

Post by NancyABQ » Sun Nov 26, 2017 10:50 am

boglebrain wrote:
Sun Nov 26, 2017 10:45 am
Unfortunately I don’t think you can just leave a portion with them that only gets invested in the s&p equivalent. Perhaps if you call them and discuss. But I believe they work automatically and you just get to decide your risk tolerance and size of portfolio.
I'm pretty sure this is the case. They want to manage the whole portfolio to one of their canned asset-allocations. It's part of their whole business model. Maybe they would make an exception, but certainly it's not their normally policy to just do the Direct Indexing on S&P 500 part.

Also, once OP is definitely planning to leave Wealthfront, you should notify them to freeze all the trading on the account. This isn't so much because any trades they do would hurt you (they probably wouldn't hurt, they would just be TLH trades), but because when you do the Transfer-In-Kind I think there is a high risk of not getting the correct cost-basis on the most recent trades. You want to make sure it transfers as smoothly as possible with all cost-basis info.

nasrullah
Posts: 138
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Re: Best way to liquidate Wealthfront

Post by nasrullah » Sun Nov 26, 2017 1:12 pm

I'm in a similar boat - although while I've been considering leaving Wealthfront for Vanguard for a few weeks I've decided to hold off on the decision until a) I've finished all of the books in the recommended reading section, and b) after the 1st of the year (no point potentially upsetting taxes in December). As of now, I think I'll likely the direct and advanced indexing on my taxable account and let Wealthfront manage the initial trading before transferring to a different brokerage.

To their credit, Wealthfront does seem to be mindful of taxes when trading as they advertise. I changed my risk profile last month (life event) and the platform didn't do anything bizarre in the process. While we can debate the merits of their AA across the risk profiles, or if the direct and advanced indexing actually is worth it, I really do believe that Wealthfront is trying to do good for the customers. Personally, it's been a great start into the Boglehead world, made life easier, motivated me to save more, and ultimately lead to me wanting to learn more about investing. I'll continue to recommend Wealthfront to my friends as a great starting place.
"We have a lot to do, and very little time, so we must work slowly." Liviu Ciulei | | Thanks vineviz (https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=134698) for the quote.

rgs92
Posts: 2071
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Re: Best way to liquidate Wealthfront

Post by rgs92 » Sun Nov 26, 2017 1:19 pm

I feel that the 50% international-stocks allocation of the *total portfolio*, not just of the equity portion, if way too high. And the emerging market part is also far too much. There is too much risk going on here I feel. (I see others here have mentioned this also.)
Good luck to you, but that's my considered advice.

rustproof
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Re: Best way to liquidate Wealthfront

Post by rustproof » Sun Mar 11, 2018 9:04 pm

I'm also looking to transfer my Wealthfront holdings to a standard brokerage. Does anyone know the implications of simply disabling direct indexing before making the transfer? I would assume that this forces Wealthfront to sell off the individual DI stocks and reallocate the funds to VTI or similar. It seems easier to do this than to transfer the individual stocks out and continue to deal with them individually.

nasrullah
Posts: 138
Joined: Fri Feb 10, 2017 11:40 am

Re: Best way to liquidate Wealthfront

Post by nasrullah » Mon Mar 12, 2018 1:02 pm

I never got a clear answer out of Wealthfront on this one. Ultimately I decided to move the accounts over to Vanguard and figure it out when we could see what was there. Fortunately PAS was able to get me into the discounted trading tier so it wasn't expensive for me to trade out of the positions.
"We have a lot to do, and very little time, so we must work slowly." Liviu Ciulei | | Thanks vineviz (https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=134698) for the quote.

dval29
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Joined: Tue Jun 05, 2018 1:32 pm

Re: Best way to liquidate Wealthfront

Post by dval29 » Tue Jun 05, 2018 1:37 pm

I read through the thread and cannot find the answer to my question.

I am liquidating my WF account (selling positions, not transferring), and am trying to find out the % of my gains that are LT gains vs ST gains -does anyone know how to do that?

Details:

Put $300k on June 25, 2017 with TLH on. The account is now worth $333k on June 5, 2018. I need to liquidate the account, and would prefer now, but if there is a large tax benefit to waiting until June 26, I can do that. What I dont' understand is how TLH affects my long term cap gains. If my entire account experienced turnover within the year, then nothing is lt cap gains. But if the majority of my initial holdings are still intact, then I should wait another few weeks.

Does anyone know where to find this info? Or does anyone know generally what % of my account will have been turned over within the year?

Thank you!

nasrullah
Posts: 138
Joined: Fri Feb 10, 2017 11:40 am

Re: Best way to liquidate Wealthfront

Post by nasrullah » Tue Jun 05, 2018 4:43 pm

I don't have an active account with Wealthfront so I cannot log in and help with this.

Wealthfront TLH only impacts you when there is a loss in a holding, have you had TLH activity in the last year? Your account is positive from your initial deposit so I wouldn't imagine there's been much of it.

IIRC you can view TLH transactions in your statements, and the statements did show the long vs short holdings. Downloading the account into Quicken would probably provide the best visibility into your account.
"We have a lot to do, and very little time, so we must work slowly." Liviu Ciulei | | Thanks vineviz (https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=134698) for the quote.

livesoft
Posts: 61944
Joined: Thu Mar 01, 2007 8:00 pm

Re: Best way to liquidate Wealthfront

Post by livesoft » Tue Jun 05, 2018 4:51 pm

Doesn't Wealthfront have customer service? Call them up and ask them where to see gains and whether they are ST or LT. Then please report back. Thanks!
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