Help picking Broker

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Topic Author
yogiph
Posts: 7
Joined: Fri Oct 12, 2018 2:47 pm

Help picking Broker

Post by yogiph »

Have been researching brokers.

There seems to be a lot of recommendations for Fidelity and Schwab. Have also read some positive reviews for Merrill Edge and mixed reviews for Vanguard, mostly related to service. I do have a BOA account so Merril Edge has some relationship benefits as well but those would come I am assuming with whatever broker I chose.

Have been using Wealthfront for taxable and Roth account and looking to possibly convert. I like the funds utilized by Wealthfront so trying to figure out what I lose by picking one broker over another. I guess I will qualify as having a messy account if converted since I have a bunch of individual stocks in my account. I am still in the accumulation phase and therefore create lots of opportunities for Wealthfront to tax harvest. My biggest concern if converting is assess to funds and ability to continue TLH and ease of purchasing funds by my AA. I like the idea of a slice and dice using 5-10 funds, which I still see as rather simple.

Please advise on keeping or switching from Wealthfront to another broker and which broker to use and why you would use them. Thanks!
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Help picking Broker

Post by delamer »

Are you looking for a company that will manage your portfolio for you or are you looking for a company just to hold the assets that you will manage yourself?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
yogiph
Posts: 7
Joined: Fri Oct 12, 2018 2:47 pm

Re: Help picking Broker

Post by yogiph »

I have a pretty solid idea of what I want my AA to be. What I have never done before is the TLH or buying funds. Have always deposited into 401k or Wealthfront. Have to imagine buying funds is the same as in a 401k. Pick your funds and it buys them each deposit based on your allocation. If that is not correct, please let me know. Which leaves TLH. Wealthfront handles this as well and since I am depositing weekly, I tend to accrue a good amount. However, since I’m not impressed with the risk parity fund they put me in and I wonder if I could manage the TLH without paying the 0.25%. I also have them buying individual stocks in my account versus just etf’s which helps with the TLH but again not sure if worth the 0.25% management fee. That’s why I am looking for advice on if I can do it relatively easily and which broker I should use to have access to etf funds to be able to buy and trade For TLH purposes. Do most people just swap vanguard for another vanguard or do you do like Wealthfront does and swap a vanguard fund for Schwab or ishares fund for TLH?

Hope that helps
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Help picking Broker

Post by delamer »

The philosophy underlying this forum is that you determine an asset allocation for retirement which you hold for the long-term.

The allocation is usually implemented using a handful of funds/ETFs.

If you are contributing regularly, then you add to specific funds as needed to maintain your desired allocation.

And maybe you occasionally need to rebalance (move money from one fund to another to keep your desired allocation). This might be done once a year, or less.

But if this is implemented in a taxable account, the idea of moving in and out of funds in order to TLH isn’t really part of the model.

In the Boglehead model, you buy and you hold. So most people on this forum are not choosing a brokerage based on the need/ability to do a lot of TLH.

Finally, any savings for retirement in a taxable account need to be considered along with retirement savings in your 401(k). The allocation you choose should be implemented across all your retirement accounts. If that is done correctly, then you won’t need to do much TLH.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Help picking Broker

Post by ruralavalon »

Welcome to the forum :) .

yogiph wrote: Fri Oct 12, 2018 2:58 pm Have been researching brokers.

There seems to be a lot of recommendations for Fidelity and Schwab. Have also read some positive reviews for Merrill Edge and mixed reviews for Vanguard, mostly related to service. I do have a BOA account so Merril Edge has some relationship benefits as well but those would come I am assuming with whatever broker I chose.

Have been using Wealthfront for taxable and Roth account and looking to possibly convert. I like the funds utilized by Wealthfront so trying to figure out what I lose by picking one broker over another. I guess I will qualify as having a messy account if converted since I have a bunch of individual stocks in my account. I am still in the accumulation phase and therefore create lots of opportunities for Wealthfront to tax harvest. My biggest concern if converting is assess to funds and ability to continue TLH and ease of purchasing funds by my AA. I like the idea of a slice and dice using 5-10 funds, which I still see as rather simple.

Please advise on keeping or switching from Wealthfront to another broker and which broker to use and why you would use them. Thanks!
yogiph wrote: Fri Oct 12, 2018 4:05 pm I have a pretty solid idea of what I want my AA to be. What I have never done before is the TLH or buying funds. Have always deposited into 401k or Wealthfront. Have to imagine buying funds is the same as in a 401k. Pick your funds and it buys them each deposit based on your allocation. If that is not correct, please let me know. Which leaves TLH. Wealthfront handles this as well and since I am depositing weekly, I tend to accrue a good amount. However, since I’m not impressed with the risk parity fund they put me in and I wonder if I could manage the TLH without paying the 0.25%. I also have them buying individual stocks in my account versus just etf’s which helps with the TLH but again not sure if worth the 0.25% management fee. That’s why I am looking for advice on if I can do it relatively easily and which broker I should use to have access to etf funds to be able to buy and trade For TLH purposes. Do most people just swap vanguard for another vanguard or do you do like Wealthfront does and swap a vanguard fund for Schwab or ishares fund for TLH?

Hope that helps


For funds and location of accounts I usually suggest
1) Vanguard,
2) Fidelity, or
3) Schwab
in that order of preference.

Vanguard has by far the largest selection of low expense mutual funds offered anywhere. I also like Vanguard's mutual structure, Vanguard is owned by the Vanguard funds, has no other shareholders, and so conflicts of interest with shareholders don't exist. Both Vanguard and Fidelity have a larger selection of low expense index funds than does Schwab. We have all of our accounts at Vanguard, and use only Vanguard index funds.

Both Fidelity and Schwab have local customer service offices in some cities, but Vanguard does not. None have a local office near me, so that was not a factor in my choice. A local office is important for some, but in my opinion not at all necessary. We have had no problems with the rare phone consultations that were necessary. I call Vanguard once per year at most, some years not at all. Once a reasonable investing plan is set up, it requires almost no attention. Some people prefer the customer service at Fidelity or Schwab.

Schwab does not offer a total international stock index fund, both Vanguard and Fidelity do. Vanguard stock index funds are more tax-efficient, which is important if you are using a taxable account. Vanguard offers a larger selection of tax-exempt bond funds than either Schwab or Fidelity, which is important if you are using a taxable account and are in a high tax bracket. Vanguard offers a small-cap value index fund, but Schwab and Fidelity do not, which is important if you are interested in value investing.

. . . . .

I suggest buying traditional mutual funds instead of ETFs or individual stocks.

Its good to see that you make regular contributions to your 401k and Roth IRA. Are you making the maximum annual contributions to those accounts? Making maximum annual contributions to those tax-advantaged accounts is ordinarily a priority ahead of contributing to a taxable brokerage account.

Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
yogiph
Posts: 7
Joined: Fri Oct 12, 2018 2:47 pm

Re: Help picking Broker

Post by yogiph »

Yes, very fortunate that both of us have been able to max out everything regarding retirement accounts since we began employment. We have to utilize taxable accounts because everything else is done. I’m very comfortable with the hierarchy of investing.

What I was looking for is and greatly appreciate is some of the info you gave about differences in the etf’s between the 3 brokerages, especially the small cap value fund, the muni bond funds and the tax efficiency of vanguard funds vs the others. I’m not sure though why you recommend mutual funds versus etf’s. Don’t they usually come with much higher fees?

I also don’t understand why the other user would not do TLH. I need every bit of tax mitigation I can get my hands on being in a high tax bracket. Lastly, no one has commented on the Merrill Edge. I saw some recommending it in other threads because of the amount of free trades you get. I may need that to offload some individual stocks along the way from my Wealthfront portfolio if I go that route, as I certainly don't know enough to pick and buy individual stocks. I assume you could buy the vanguard funds or any funds from any of the brokers, but what about admiral funds? I understand you can typically trade the brokers etf's free within the account for free. But for TLH, would you not need to buy and trade funds from the different brokers? I realize you can only harvest and use up to $3,000 per year, but $3k is still $3k. Just don't understand why you would not want that. Wealthfront has made all of this simple to do. However, as the accounts grow under their purview, I worry if the 0.25% fee is worth it. I mean, it's not rocket science what they are doing. I am looking for the simplest way to copy what they do with weekly deposits and TLH, but with the precise AA I am looking for which does not necessarily directly match WF's recommendations, especially that risk parity fund. I will probably start a separate thread to get more feedback from those that like to slice and dice the equity portion of their portfolio and the bond portion of their portfolio, but I know what equity to bond ratio I desire.

Guess I have basically had everything done for me using Wealthfront which made it simple, but I question continuing to pay the 0.25% fee since I think I can do it myself and so I want to find the best brokerage account to utilize to continue performing the same/similar services I have grown accustomed to with WF or hearing from someone who may have stayed with WF. I realize that person will likely be hard to find, especially on this forum, but since I am leaning toward breaking away anyways I figured I could get some good advice on which brokerage to use and pick up some knowledge on the various funds to choose from as the last user commented on for those funds I may not be familiar with.
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RickBoglehead
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Re: Help picking Broker

Post by RickBoglehead »

TLH isn't an investment strategy IMO.
Avid user of forums on variety of interests-financial, home brewing, F-150, EV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
Bhairston2018
Posts: 90
Joined: Wed Feb 21, 2018 2:23 pm

Re: Help picking Broker

Post by Bhairston2018 »

A few things to add:

TLH won’t affect your Roth, just your taxable account. I have accounts with vanguard and Charles Schwab. If I were to buy vanguard mutual funds at CS, there will be a fee for every purchase (i.e., buying vanguard mutual funds = $76 fee). If you were to choose CS, i’d suggest sticking with their funds. If you’re interested in admiral shares, you can only purchase those through vanguard. Vanguard is usually deemed as more tax efficient and I agree with this point.

In regards to your asset allocation, if you’re unsure where you should be see https://www.bogleheads.org/wiki/Asset_allocation

If you’re interested in the way Wealthfront’s “algorithms” determine allocations based on a number of questions, you can also purchase a target date fund until you are conformtable with managing your own funds at either brokerage. A fund manager will adjust the allocation and risk automatically for you. See: https://www.bogleheads.org/wiki/Target_date_funds

Once you’re well educated and comfortable you can move towards a three fund portfolio. Here is a link that also shows three fund portfolios at other brokerages (i.e., fidelity, CS, VG, etc.) https://www.bogleheads.org/wiki/Three-fund_portfolio

I have never done TLH bc I am Not to the point where I am able to put a significant amount into a taxable account. I think the other post saying they don’t do TLH is due to the buy and hold mentality. With TLH, you are essentially selling an investment and rebuying a similar investment back 31 days later. If that is what you’d like to do, see https://www.bogleheads.org/wiki/Tax_loss_harvesting

Also wanted to mention, if you are interested in doing a TLH, be sure to call whatever broker you choose to maybe get assistance with the rollover process. I know Wealthfront may have some Vanguard funds in their holdings. If your holdings at Wealthfront are sold and then you buy the same ones at the new brokerage, you may not be able to do TLH because that may trigger a wash sale. See https://www.bogleheads.org/wiki/Wash_sale

There are tons of posts on TLH and people willing to help you walk through the process should you need any clarification.

Lastly, I’ve never had a problem with vanguard but opened up a CS account because of their checking account being linked with the brokerage. Also they provide a debit card with free ATM reimbursement worldwide. I can transfer whatever extra cash I have in my checking to my brokerage same day and make purchases that day. I think the difference between the three F,CS,VG are insignificant. The biggest thing will be just taking your knowledge to the next level and managing your own funds rather than having someone do it for you. Once you get to that point I think you’ll be okay!

Hope this helps.
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ruralavalon
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Location: Illinois

Re: Help picking Broker

Post by ruralavalon »

yogiph wrote: Fri Oct 12, 2018 6:33 pm Yes, very fortunate that both of us have been able to max out everything regarding retirement accounts since we began employment. We have to utilize taxable accounts because everything else is done. I’m very comfortable with the hierarchy of investing.
It's great that have been maxing out all retirement accounts.


yogiph wrote: Fri Oct 12, 2018 6:33 pm What I was looking for is and greatly appreciate is some of the info you gave about differences in the etf’s between the 3 brokerages, especially the small cap value fund, the muni bond funds and the tax efficiency of vanguard funds vs the others. I’m not sure though why you recommend mutual funds versus etf’s. Don’t they usually come with much higher fees?
No traditional mutual funds do not have much higher fees than ETFs (Exchange Traded Funds). Expense ratios for Investor Shares of Vanguard funds are low, the difference in expense ratio of ETFs is trivial (on a $3k investment, a 0.10% difference in expense ratio = just $3 per year). When you use Admiral Shares of funds at Vanguard, the expense ratio is just as low as the ETF.

I have no need for intra-day trading. At Vanguard the ETF is just another share class of the mutual fund, so the mutual fund and ETF have the same tax-efficiency. In my opinion traditional mutual funds are easier to use and have simpler trading mechanics. With traditional mutual funds you can buy or sell fractional shares, you can easily set up automatic investment, and you can easily set up automatic reinvestment of dividends and gains.. Wiki article, Wiki article, "ETFs vs Mutual Funds".

The choice of traditional mutual fund or ETF is largely a matter of personal preference.

yogiph wrote: Fri Oct 12, 2018 6:33 pm also don’t understand why the other user would not do TLH. I need every bit of tax mitigation I can get my hands on being in a high tax bracket. Lastly, no one has commented on the Merrill Edge. I saw some recommending it in other threads because of the amount of free trades you get. I may need that to offload some individual stocks along the way from my Wealthfront portfolio if I go that route, as I certainly don't know enough to pick and buy individual stocks. I assume you could buy the vanguard funds or any funds from any of the brokers, but what about admiral funds? I understand you can typically trade the brokers etf's free within the account for free.
You generally cannot buy Admiral Shares of Vanguard index funds in accounts at other companies. When you buy shares of mutual funds of another company you commonly have to pay a per transaction fee.

Vanguard ETFs trade free at Vanguard and Vanguard offers free trades on ETFs of many other companies, including BlackRock, Schwab, and SSgA. "Vanguard Brings Unrivaled Access To ETFs With Launch Of Industry's Largest Commission-Free Platform". Yahoo finance (8/21/2018), link.


yogiph wrote: Fri Oct 12, 2018 6:33 pm But for TLH, would you not need to buy and trade funds from the different brokers? I realize you can only harvest and use up to $3,000 per year, but $3k is still $3k. Just don't understand why you would not want that. Wealthfront has made all of this simple to do. However, as the accounts grow under their purview, I worry if the 0.25% fee is worth it. I mean, it's not rocket science what they are doing. I am looking for the simplest way to copy what they do with weekly deposits and TLH, but with the precise AA I am looking for which does not necessarily directly match WF's recommendations, especially that risk parity fund. I will probably start a separate thread to get more feedback from those that like to slice and dice the equity portion of their portfolio and the bond portion of their portfolio, but I know what equity to bond ratio I desire.

To tax loss harvest you do not need funds from different providers, you need a pair of similar but not identical funds.

One example of a pair to use is Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and Vanguard 500 Index Fund Admiral Shares (VFIAX).

Another example of a pair to use is Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) and Vanguard FTSE All-World ex-US Index Fund Admiral Shares(VFWAX).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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