How do I unwind this Wealthfront mess?

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randomizer
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Re: How do I unwind this Wealthfront mess?

Post by randomizer »

I'd just bite the bullet and sell all the lots with long term gains. When the lots with short term gains become long term gains, sell those too.
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libralibra
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Re: How do I unwind this Wealthfront mess?

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Re: How do I unwind this Wealthfront mess?

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alex_686
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Re: How do I unwind this Wealthfront mess?

Post by alex_686 »

TIAX wrote: Wed Feb 21, 2018 10:50 am
wolf359 wrote: Tue Feb 20, 2018 3:59 pm Having the individual stocks is roughly like holding the S&P 500 index, plus Facebook. That's exactly what Wealthfront was trying to replicate.
What about index sampling risk?
Fairly low. Whatever you lose on the misfit index should be more than made up in the tax Alpha thrown off by the tax harvesting. In theory this should be more efficient after tax than straight indexing. I got a chance to see this close up in the 90s, before computers automated things.

I think this will be the wave of the future. It is complex but it is the simply type of complexity that computers handle well. Yes, it kicks off lots of paperwork but it is all electronic and one should be able to upload this stuff into their tax software.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
kevinpet
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Re: How do I unwind this Wealthfront mess?

Post by kevinpet »

nasrullah wrote: Wed Feb 21, 2018 9:41 am Wealthfront doesn't have a mechanism for this. You can uncheck the direct indexing & advanced indexing knobs, but they can't answer what would actually happen after you do this. Do all of the individual stocks get sold immediately? Do they sell the losses immediately? How does the weighting of the portfolio adjust going forward?
It's as Nisiprius quoted above: if you turn off DI/AI we'll sell all the individual stocks and reinvest in ETFs (VTI or SCHB depending on wash sales). I'm not any sort of official spokesman, but I'd imagine that if you want an account that's easy to manage by hand, it's probably better to turn it off and let it trade back into ETFs before ACATing out.
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Noobvestor
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Re: How do I unwind this Wealthfront mess?

Post by Noobvestor »

libralibra wrote: Wed Feb 21, 2018 2:11 pm A lot of tail-wagging-the-dog advice here. Don't let taxes be the only factor in your decision. Step 0 is to educate yourself on all your holdings to decide which you want to keep. For anything you don't understand or are unwilling to devote the time to, sell ASAP.

Or to quickly simplify your portfolio, sell anything with less than X balance, eg. anything you own less than 2k of.

Commissions are also a tiny factor. Selling 100 stocks would cost less than 1k in fees. Just pick a day this week where your portfolio has some gains and sell the chosen stocks at the close. You can just mentally say that the day's gains covered the fees.
I get the risk of tail-wagging-the-dog, and definitely about not caring too much about commissions, but selling only small holdings and keeping large still leaves quite a mess. OP will have to decide the balance of simplicity versus paying a lot of taxes right now, of course, but ignoring taxes and selling small holdings doesn't do that much good, and won't simplify anything for this year's taxes anyway (though a good idea before 2019).
nisiprius wrote: Tue Feb 20, 2018 5:59 pm ]Note that
Advanced Indexing is included as part of PassivePlus®, our investment strategy, applied to your account at no additional charge. We recommend it for most clients.
In short... it is a fairly brutal lock-in. 124 lines on Schedule D?
I've always been a little reluctant to embrace robos that are just TLHing a handful of index funds (and creating tons of tiny lots), and wary of potential hassles of switching away vis a vis cost basis, but this is a whole other level. Seems designed to keep people in place. :annoyed
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Badger1754
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Thank you nasrullah [Wealthfront]

Post by Badger1754 »

Based on your post (and some back testing and digging on my part), I am transferring all my Wealthfront accounts back to Vanguard.
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Re: How do I unwind this Wealthfront mess?

Post by LadyGeek »

^^^ Badger1754 - You started a new topic which does not make sense as a stand-alone post. I moved your post into the original thread.
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jacoavlu
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Re: Thank you nasrullah [Wealthfront]

Post by jacoavlu »

Badger1754 wrote: Fri Feb 23, 2018 12:43 pm Based on your post (and some back testing and digging on my part), I am transferring all my Wealthfront accounts back to Vanguard.
hopefully you're not also in the direct indexing product? Just holding a dozen ETFs give or take?

I don't know that Vanguard is the best (initial) landing spot if you need to trade away lots of individual stock holdings. I'd find someone that gave me free trades, if that were the case.
aristotelian
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Re: How do I unwind this Wealthfront mess?

Post by aristotelian »

Thinking somewhat out of the box here... You could transfer back to Wealthfront, order them to sell everything, then transfer back to VG. Even if there are account transfer fees it might be cheaper than trying to liquidate 100+ individual stocks for $20 per trade.

Another possibility, you might not get anywhere but might be worth a call to VG. Tell them you thought Wealthfront was supposed to liquidate before the transfer. See if VG will give you a bunch of free trades.

Alternatively just let the stocks sit. It's reasonably diversified. Eventually they will either grow enough or go to zero such that it will be worth it to pay the trading fees to liquidate.
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Re: How do I unwind this Wealthfront mess?

Post by Badger1754 »

So, yes, we are still talking about ~10-15 individual ETFs and not ~500 single stocks (I turned off Direct Indexing before they got started).
I just spoke to VG, and while they can't give me 500 free trades or whatever, because the amount we'd be transferring in qualifies us as Voyager Select, we'd be talking about $2 per trade.
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Re: How do I unwind this Wealthfront mess?

Post by jacoavlu »

aristotelian wrote: Fri Feb 23, 2018 1:44 pm Thinking somewhat out of the box here... You could transfer back to Wealthfront, order them to sell everything, then transfer back to VG. Even if there are account transfer fees it might be cheaper than trying to liquidate 100+ individual stocks for $20 per trade.

Another possibility, you might not get anywhere but might be worth a call to VG. Tell them you thought Wealthfront was supposed to liquidate before the transfer. See if VG will give you a bunch of free trades.

Alternatively just let the stocks sit. It's reasonably diversified. Eventually they will either grow enough or go to zero such that it will be worth it to pay the trading fees to liquidate.
and incur unnecessary short term gains? Unless there is an urgent need for cash this seems like not the best idea

Look at the bright side; at least OP has control of the situation now.
jvini
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Re: How do I unwind this Wealthfront mess?

Post by jvini »

wolf359 wrote: Tue Feb 20, 2018 3:59 pm Having the individual stocks is roughly like holding the S&P 500 index, plus Facebook. That's exactly what Wealthfront was trying to replicate. You could just hold onto them, and consider them collectively the equivalent of that index. They're already bought, and it doesn't cost anything to continue to hold them. Redirect any dividends into index funds. The Facebook stock should be sold if you don't want the individual stock risk, but that's a separate decision.

When you eventually have a reason to sell something from your portfolio, sell the individual stocks first.

That reason could be: 1) You're tax loss harvesting; 2) You've retired or need to sell something to raise money.

There is absolutely no reason to incur more costs. The mess is made, but it doesn't cost anything to leave it that way. The only reason to go back is to pay their costs so that they can TLH for you.

...

I was thinking the same thing. Look at all these individual stocks as an S&P 500 index, as that is what WF was trying to do, while being able to sell for tax loss harvesting. If you look at it this group as the S&P 500 index, maybe just buy a % of small cap index to reflect VTI (Total market), add VXUS (international) and BND, and simply hold a 4 'fund' or etf portfolio. I break up my U.S. holdings with a small cap tilt, so I actually own a 6 fund portfolio consisting of ijr (small cap), ijh (mid), IVV (large), ixus (international), and BND (total bond). I rebalance this on about a yearly basis unless things get totally out of whack. I even own about 4 individual stocks that make up about 2% of my portfolio. I hate the idea of incurring capital gains taxes due to the mess Wealthfront created, if it's not necessary. I wonder how those stocks, taken as a group, did when compared to the S&P 500.
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nasrullah
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Re: How do I unwind this Wealthfront mess?

Post by nasrullah »

Vanguard PAS has actually been extremely helpful for me with this. They've tax modeled a few different options for sales and provided examples on how to leverage the remaining ETFs into a sane portfolio moving forward. I'm going to opt to take a slightly higher realized gain (about $25k) since it makes the most sense for simplification and management moving forward. I won't be in a three fund portfolio when done, but the result will be reasonable and manageable.

The verdict is still out on if I'll keep PAS after this year (I'm going to stay for a few quarters to get a feel for them long term), but it will be part of my financial instructions in my estate planning.
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happyjuice8000
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Re: How do I unwind this Wealthfront mess?

Post by happyjuice8000 »

I was in precisely the same scenario after transferring a hundred or so individual stocks AND bonds to Vanguard from a horribly complicated and expensive Well Fargo wealth management account. I *strongly* advise you to do what I did. I too have a high marginal federal tax rate and state tax rate. It took about a couple years, but my strategy DRAMATICALLY reduced my tax burden on the process.

(1) Do NOT rush, as much as a "messy" portfolio might be driving you bananas. As you continue to invest new money over the months and years at high prices, you WILL have opportunities to tax-loss harvest (TLH) when those overpriced ETF's plummet.

(2) Vanguard has a great Portfolio Analyzer built in, so you know where you stand in your asset allocation, no matter how messy your portfolio looks with an amalgamation of individual stocks, individual bonds, ETFs, mutual funds, etc. It's a critical tool to use on a regular basis. Having a hundred holdings does not mean loss of oversight of your asset allocation.

(2) Each time you TLH, you can match the loss with a gain from the sale of individual stocks to reduce or minimize your tax burden.

(3) The global stock market is HIGH right now. WAIT until the market falls, then start selling individual holdings with now smaller gains (or larger losses) and immediately put the proceeds into a Vanguard ETF to maintain your asset allocation.

Every time I rushed to sell some of my hundred or so stocks, like selling an outsized holding in AAPL with a large gain, I kicked myself because a better opportunity lurked right around the corner during the next correction. I probably saved over $50,000 with my strategy. I calculate that $50k will help me retire a year earlier.
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Re: How do I unwind this Wealthfront mess?

Post by whodidntante »

What, no risk parity fund?
RNJ
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Re: How do I unwind this Wealthfront mess?

Post by RNJ »

Badger1754 wrote: Tue Feb 20, 2018 1:53 pm Can I ask why you moved out of Wealthfront?
Am a bit paranoid myself as my money is all in there - but I simply don't have the patience/time to do manual rebalancing/TLH.
7 figure portfolio, 11 holdings across a dozen accounts at 3 different brokerages/banks. Rebalancing & TLHs take about an hour - annually.
123
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Re: How do I unwind this Wealthfront mess?

Post by 123 »

I just looked at the Wealthfront site and it just has changed since the last time I looked some months ago. They now offer a package of services called "Passive Plus". To fully utilize things like tax loss harvesting and some other options they will, with the help of their automation, invest in up to 1,000 individual stocks in your account (mimicking VTI ). I'm assuming that over time you could accumulate a number of different lots in each individual stock holding.

The OP got off easy with 125 individual stock holding. Had he got the full benefit of Wealthfront's technology he could easily have had 1,000 individual stock positions.

From the Wealthfront website:
"Updated February 10, 2018 13:13
Will Wealthfront really buy up to 1,000 individual stocks on my behalf?
That’s right. We’re able to do it because we are an automated investment service. Our software algorithms are able to efficiently trade and tax-loss harvest the hundreds of stocks we buy on your behalf commission free – something that is incredibly challenging and expensive to do in any other way."
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totoroto
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Re: How do I unwind this Wealthfront mess?

Post by totoroto »

By the way, I'm surprised no one has mentioned this, but if OP eventually does want to sell all the individual securities without incurring all the broker transaction fees, Merrill Edge will probably be the best bet. It's worth consideration at least.

If you sign up with Merrill Edge and have a Bank of America account with assets over $100k (can be all in investments), you get Platinum Honors Preferred that allows you up to 100 free trades per month. It takes about 3 months from the time you fund the account to reach that status, but it's an option especially if you're looking at over 100 trades that will cost you $200-$700 depending on broker. There's been extensive talk in this forum about this if you search.

Looks like Merrill Edge is currently running a promotion until March 30th that gives you $1K if you transfer $200K in assets.
https://www.merrilledge.com/offers/1000 ... -_-orlms18
grp2c
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Re: How do I unwind this Wealthfront mess?

Post by grp2c »

I just transferred my wealthfront account to fidelity. I then transferred some of the most highly appreciated stocks to a fidelity donor advised fund. I plan to use the 500 free trades over 2 years to sell all the individual stocks so I only have etfs.

https://rewards.fidelity.com/offers/ATP500free
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nasrullah
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Re: How do I unwind this Wealthfront mess?

Post by nasrullah »

For those interested / following this thread. After a couple of days of modeling (thank you Vanguard PAS) I opted to sell all (except FB) of the individual stocks, and many of the ETFs.

Several suggested waiting for a downturn in the market and using the holdings for TLH - market timing is against my IPS.
Vanguard pointed out and modeled for me the cost (expense ratios) to hold certain ETFs for long durations vs realizing a gain now and moving.
I wanted out of slice and dice holdings with a move to a simplified portfolio.

This generated a taxable gain of $26,072.38, which while unfortunate for taxes next year will be a lot better than the alternative. I've updated my Google Sheet with the final holdings after all of the trades were finished (Vanguard PAS did come through with $2 trades so that was excellent).

https://docs.google.com/spreadsheets/d/ ... sp=sharing
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nasrullah
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Re: How do I unwind this Wealthfront mess?

Post by nasrullah »

And I'm left with the 75/25 AA that I want.
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livesoft
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Re: How do I unwind this Wealthfront mess?

Post by livesoft »

I am interested if VPAS then bought the Vanguard stock funds say before this recent 4% drop (from last 4 days) and if so, how does tax-loss harvesting work with them?
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nasrullah
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Re: How do I unwind this Wealthfront mess?

Post by nasrullah »

livesoft wrote: Fri Mar 02, 2018 12:21 pm I am interested if VPAS then bought the Vanguard stock funds say before this recent 4% drop (from last 4 days) and if so, how does tax-loss harvesting work with them?
They do not aggressively TLH. My expectation is only when a rebalancing band is hit so probably only 2x per year at the most. The explaination was along the lines of “avoiding purchasing high ER funds which will be detrimental to the long term performance of the portfolio”, and of course avoiding what happened with Wealthfront.
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mpnret
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Re: How do I unwind this Wealthfront mess?

Post by mpnret »

happyjuice8000 wrote: Fri Feb 23, 2018 4:10 pm (2) Vanguard has a great Portfolio Analyzer built in, so you know where you stand in your asset allocation, no matter how messy your portfolio looks with an amalgamation of individual stocks, individual bonds, ETFs, mutual funds, etc. It's a critical tool to use on a regular basis. Having a hundred holdings does not mean loss of oversight of your asset allocation.
How do I access this Portfolio Analyzer. I can't seem to find it. Is it because I never upgraded to a brokerage account? Does this tool let me enter non-Vanguard investments like my US Savings Bonds?
livesoft
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Re: How do I unwind this Wealthfront mess?

Post by livesoft »

mpnret wrote: Sun Jun 10, 2018 6:58 pmHow do I access this Portfolio Analyzer. I can't seem to find it. Is it because I never upgraded to a brokerage account? Does this tool let me enter non-Vanguard investments like my US Savings Bonds?
See this thread on it:
viewtopic.php?t=150267
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