Do in-house funds lock you in to brokerage?

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jj45
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Joined: Tue Jan 02, 2018 4:02 pm

Do in-house funds lock you in to brokerage?

Post by jj45 »

I am advising an elderly relative with a taxable account at Fidelity who wants to buy a total market index fund. The two obvious choices seem to be FZROX, Fidelity's ZERO total market index fund, and Vanguard's total market index fund VTSAX. I assume that if the account holder ever wants to leave Fidelity they can transfer VTSAX with no tax consequences but must sell FZROX and pay capital gains taxes. Is this true?

If true, then I wonder if it's worth paying the transaction fee and non-zero expenses for VTSAX to avoid being locked in. How do you'all think about this and has it impacted your decision on which funds to buy?

Also, is there a better non-Fidelity total market index fund than VTSAX?

Edited to add: Thanks to everyone letting me know FSKAX is transferrable. That helps. Also, the person wants mutual funds, not ETFs.
Last edited by jj45 on Wed Apr 07, 2021 10:49 am, edited 1 time in total.
runninginvestor
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Re: Do in-house funds lock you in to brokerage?

Post by runninginvestor »

If I recall correctly, you are right and that the zero index funds can only be bought at fidelity. I'm not sure if that means it can only be held there, or if you can transfer and sell.

Schwab has a total market index that people also recommend.

The other option would be to use the ETF equivalents of the total market funds since they are portable.
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retired@50
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Re: Do in-house funds lock you in to brokerage?

Post by retired@50 »

Why not FSKAX? The Fidelity Total Market Index Fund, which is transferable.

As I understand it, buying a Vanguard mutual fund (VTSAX) at Fidelity will incur a $75 fee.

If you prefer to use a Vanguard product AT Fidelity, then using VTI would be better.

Regards,
This is one person's opinion. Nothing more.
lazynovice
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Re: Do in-house funds lock you in to brokerage?

Post by lazynovice »

retired@50 wrote: Wed Apr 07, 2021 10:23 am Why not FSKAX? The Fidelity Total Market Index Fund, which is transferable.

As I understand it, buying a Vanguard mutual fund (VTSAX) at Fidelity will incur a $75 fee.

If you prefer to use a Vanguard product AT Fidelity, then using VTI would be better.

Regards,
+1

Yes the zero funds lock you in as you describe but FSKAX does not.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
retiredjg
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Re: Do in-house funds lock you in to brokerage?

Post by retiredjg »

The Fidelity zero funds cannot be transferred out of Fidelity according to what has been written here. The Vanguard fund (not the ETF) has a transaction fee to buy.

Fidelity has index funds that are not zero funds. If a mutual fund is what this investor wants, as opposed to an ETF, that is probably the best choice. Check out FSKAX. It likely can be transferred to many places.
Raraculus
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Re: Do in-house funds lock you in to brokerage?

Post by Raraculus »

I have this problem now. I currently hold zero-fee index funds at Fidelity. I will have LTCG's should I decide to sell them. I cannot transfer them to another brokerage such as Interactive Brokers.

At the time, I didn't know any better and did not value portability for index funds. It's a first world problem, and I'll eventually solve it. (Probably by selling them over time when it is tax advantageous.)
carne_asada
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Re: Do in-house funds lock you in to brokerage?

Post by carne_asada »

It's good to ask about this: Lock in is a bad thing when you want to take advantage of a brokerage bonus(such as the mortgage discounts that some banks have) or are forced to a specific brokerage for work reasons (e.g. you work in the consulting or finance industry)
carne_asada
Posts: 25
Joined: Sat Aug 03, 2019 7:38 am

Re: Do in-house funds lock you in to brokerage?

Post by carne_asada »

It's good to ask about this: Lock in is a bad thing when you want to take advantage of a brokerage bonus(such as the mortgage discounts that some banks have) or are forced to a specific brokerage for work reasons (e.g. you work in the consulting or finance industry)
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