Leaving Merryill Lynch

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d404040
Posts: 6
Joined: Thu Mar 17, 2022 9:51 am

Leaving Merryill Lynch

Post by d404040 »

My parents have decided to move away from their high fee advisor, I've basically convinced them of the value of index funds and they now do understand the benefits of index funds. They want to transfer money away from their Merryill advisor and brokerage. Is there anything I should know to help them through that process? They now do seem to want simple three fund with just vanguard funds but they are afraid of any fees or taxes. I really want to help them get off on the right foot with this, they’ve worked so hard I really want to help them. But I’ve never used this platform so I’m a bit hesitant what to tell them, and I don’t want to mess up and they lose faith in passive investing.

Can people here counsel me on moving the money to fidelity, how to avoid fees, anything I should tell them to be aware of? Will they be able to do a transfer in kind? Is there somewhere they can easily see the net worth of their own holdings now? Is there any guidance on how to conduct breaking the news to their longtime advisor and what questions to ask? I do have a finance background academically/professionally but really want to make sure I don’t make mistakes, I’ve never used people like Merrill so I know zero about leaving them.
Last edited by d404040 on Thu May 12, 2022 8:15 pm, edited 2 times in total.
radiowave
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Re: Leaving Merryill Lynch

Post by radiowave »

I applaud your parents decision but it's complicated. If you haven't done so already, read the Boglehead's Wiki and recommend your parents post their portfolio here per the instructions in the Wiki - confidential of course.

Depending on their situation, it may be helpful to consider both Fidelity and Schwab if there is a local office near them. Vanguard is fine but they don't have any field offices and everything is handled by phone.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
Topic Author
d404040
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Joined: Thu Mar 17, 2022 9:51 am

Re: Leaving Merryill Lynch

Post by d404040 »

I don't know if they would really be comfortable posting here. They are planning to use fidelity already, not Vangurad, and just buy vanguard index funds on Fidelity. What elements of this are complicated in your mind as far as transferring it? I'm confident they trust me as far as setting up a simple 3 fund portfolio once their accounts are on Fidelity and out of Merryill, I just need help with ending that relationship with Merryill.
Doctor Rhythm
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Re: Leaving Merryill Lynch

Post by Doctor Rhythm »

Ideally your parents should join this forum to ask any questions themselves. Unless you know what types of accounts, which funds, unrealized capital gains and losses, and the brokerage’s policies, we can only give generic answers and advice.

So generically: Most investments can be transferred in-kind. However, if these are taxable accounts, there will almost certainly be taxes to pay to switch to Vanguard funds. Some funds they own might be worth holding rather than switching - we don’t know. There may be an account closure fee - which is usually trivial compared to the tax burden. Less commonly, some funds have a back-end load (commission fee) that gets charged when selling.

And my generic advice is: have your parents contact Fidelity to open account(s) and ask Fidelity to facilitate the transfer of assets. There is no ethical need or legal requirement to “break the news” to their advisor.

BTW, I believe it’s Merrill (no “y”).
Last edited by Doctor Rhythm on Thu May 12, 2022 8:18 pm, edited 2 times in total.
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arcticpineapplecorp.
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Re: Leaving Merryill Lynch

Post by arcticpineapplecorp. »

Are these taxable accts or tax advantaged or a combo?

You need to be careful selling funds in taxable because you could generate significant cap gains creating a large tax bill depending on how the investments have done over the years.

Vanguard can likely help you transfer over in kind but what you do from there needs to be carefully weighed and planned out regarding the exchanging of some investments for the three fund portfolio.

If you can post their holdings we can give more targeted advice. Click on the link in my signature about asking portfolio questions.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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sigmadave_2000
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Re: Leaving Merryill Lynch

Post by sigmadave_2000 »

Sometimes the cost basis might not carry over to the new firm. Keep your records. Fidelity can update for the 1099.
student
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Re: Leaving Merryill Lynch

Post by student »

If it is a portfolio created by a Merrill advisor, it will likely have many funds and it would be a pain to upload if the account is taxable. If it is a tax advantaged account, then it is easy, liquidate and move, or move and liquidate depending on whether the new place (say fidelity) can hold the funds. Don't forget to ask for a transfer bonus.
Topic Author
d404040
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Re: Leaving Merryill Lynch

Post by d404040 »

Do you not think we could do a transfer in kind, get it all onto fidelity, and decide from there?
student
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Re: Leaving Merryill Lynch

Post by student »

d404040 wrote: Thu May 12, 2022 9:17 pm Do you not think we could do a transfer in kind, get it all onto fidelity, and decide from there?
If Merrill Lynch uses some "in-house" funds or funds that are not available at Fidelity, they no. When you transfer from Merrill to Fidelity, you can ask them to transfer those that can be held at Fidelity and the rest be liquidated. But of course, this will be a taxable event. You can try typing each fund from the most recent quarterly statement and type it in Fidelity to see whether it is in its network.
richard.h.gao
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Re: Leaving Merryill Lynch

Post by richard.h.gao »

student wrote: Thu May 12, 2022 9:49 pm
d404040 wrote: Thu May 12, 2022 9:17 pm Do you not think we could do a transfer in kind, get it all onto fidelity, and decide from there?
If Merrill Lynch uses some "in-house" funds or funds that are not available at Fidelity, they no. When you transfer from Merrill to Fidelity, you can ask them to transfer those that can be held at Fidelity and the rest be liquidated. But of course, this will be a taxable event. You can try typing each fund from the most recent quarterly statement and type it in Fidelity to see whether it is in its network.
Just transfer to Merrill Edge, it's essentially a same no fee self-directed account you're getting a Fidelity.
student
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Re: Leaving Merryill Lynch

Post by student »

richard.h.gao wrote: Thu May 12, 2022 9:55 pm
student wrote: Thu May 12, 2022 9:49 pm
d404040 wrote: Thu May 12, 2022 9:17 pm Do you not think we could do a transfer in kind, get it all onto fidelity, and decide from there?
If Merrill Lynch uses some "in-house" funds or funds that are not available at Fidelity, they no. When you transfer from Merrill to Fidelity, you can ask them to transfer those that can be held at Fidelity and the rest be liquidated. But of course, this will be a taxable event. You can try typing each fund from the most recent quarterly statement and type it in Fidelity to see whether it is in its network.
Just transfer to Merrill Edge, it's essentially a same no fee self-directed account you're getting a Fidelity.
Are you sure Merrill Advisors do not use some supposedly superior funds that are not available at Merrill Edge?
https://olui2.fs.ml.com/publish/content ... cument.pdf
It says
"At Merrill Lynch, certain share classes offered by a mutual fund are limited to specific service models."
and
"These asset-based fee programs allow you to purchase institutional shares, or “no-load” (or another share class without a front-end sales charge or CDSC) (“Advisory Share Classes”). These asset-based fee programs provide features and benefits, as well as share classes that are not available for purchase in a traditional Merrill Lynch brokerage account that charges transaction fees and is serviced by your Merrill Lynch Financial Advisor or Financial Solutions Advisor, or through Merrill Edge self-directed investing accounts."
I haven't read through the entire file but it seems that it is not a given that all shares can go from Merrill Advisory account to Merrill Edge.
SeaDog
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Re: Leaving Merryill Lynch

Post by SeaDog »

I just went through this, transferring my mother's portfolio from ML to Schwab. ML had her in a Management Directed Mutual Fund called "Pioneer Growth Fund". Pioneer is a fund family that ML would mirror by buying and selling individual stock shares several times a week. When it transferred to Schwab it came over as individual stocks which will take years to convert to a three fund portfolio. She also had an IRA Variable Annuity that was a nightmare to get ML to surrender. I ended up filing a complaint against the broker because of the games he played.

When the transfers were initiated the ML broker suddenly found everyone's phone number and left messages to call him immediately because there was a potential fraud event on her account. I called him back and told him we were transferring her accounts to Schwab. He reluctantly said he would release the hold on her accounts and allow the transfer. If this is ML's typical procedure your parents should be prepared to be contacted by ML. I had hoped Schwab could just suck everything over into their brokerage without any further contact with ML, but that was not the case. What clearly helped the process was I had DPOA over my mother's affairs at ML and with the new account at Schwab.
niagara_guy
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Re: Leaving Merryill Lynch

Post by niagara_guy »

I use Vanguard, Fidelity and Schwab, all are very good. Vanguard has no offices, Fidelity and Schwab have offices in major cities. I would discuss with Fidelity (assuming you are going with them) about what assets will transfer in kind (won't have to sell to move). All 3 of these will work very hard to get your business and will help move the funds from ML. I would call them and learn how they will help. You don't need to talk to anyone at ML to do this (and I would not) but I would send their 'advisor' a nice thank you after the paperwork is submitted by the receiving institution. Print the cost basis for anything in taxable since ML may freeze your account when you leave. Fido may reimburse you for any fees ML charges so check.

I don't know if Fidelity charges to buy Vanguard funds but Fidelity has some funds that are very similar to the Vanguard fund.

I agree that you will get the best advice if you post their financial picture using the standard format (I couldn't find it to add it as a link), you can do this without revealing their identity. If you can't do that then the advice will be based on what you have posted.

If they have assets in taxable accounts be careful about selling since it can cause large income tax bills.
Eno Deb
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Re: Leaving Merryill Lynch

Post by Eno Deb »

You really need to take a close look at the current investments. If there are positions with significant unrealized gains, switching them to an index fund will have tax consequences. Unless the current investments are spectacularly bad, it's probably not worth it.

If you want to move to a new brokerage, check if the current investments are portable and can be held at the new brokerage. As an alternative, it may be worth considering to stay with Merrill but switch from a managed to a self-directed (Merrill Edge) account.

If you want them to invest in Vanguard mutual funds in the future, consider that many brokerages (including Fidelity) take commissions for buying them. Alternatively you can consider the ETF equivalents of the funds, but not everyone is comfortable with those because the process of buying them is slightly different.

Lastly, don't try to pressure them. If they are happy with the current arrangement, maybe it's best to stick with it. The self-directed model is not for everyone.
earlywynnfan
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Re: Leaving Merryill Lynch

Post by earlywynnfan »

richard.h.gao wrote: Thu May 12, 2022 9:55 pm
student wrote: Thu May 12, 2022 9:49 pm
d404040 wrote: Thu May 12, 2022 9:17 pm
Just transfer to Merrill Edge, it's essentially a same no fee self-directed account you're getting a Fidelity.
I did that to keep my BOA credit card, However, certain transactions are like 20 bucks. I bought once and that fund just sits there now. I have a separate one at Vanguard.
deltaneutral83
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Re: Leaving Merryill Lynch

Post by deltaneutral83 »

d404040 wrote: Thu May 12, 2022 9:17 pm Do you not think we could do a transfer in kind, get it all onto fidelity, and decide from there?
No, not exactly, if they hold some type of proprietary fund of Merrill, it might not be able to be moved to Fidelity. The most important issue is what are the types of accounts and if there is a taxable, you need to do a deep dive into the unrealized gains. If they are IRA's or other tax advantaged accounts, it should be a pretty simple process.
richard.h.gao
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Re: Leaving Merryill Lynch

Post by richard.h.gao »

SeaDog wrote: Fri May 13, 2022 7:29 am When the transfers were initiated the ML broker suddenly found everyone's phone number and left messages to call him immediately because there was a potential fraud event on her account. I called him back and told him we were transferring her accounts to Schwab.
LOL. I just transferred from Schwab to Merrill and Schwab did the same thing.
illumination
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Re: Leaving Merryill Lynch

Post by illumination »

I would just have Fidelity "pull" the accounts and positions "as is" and decide what to do once your they are on with Fidelity. All the cost basis data should transfer, but I would download absolutely everything possible before the process just in case. I had an issue one time with a transfer and the "old" full service brokerage was incredibly unhelpful.

You should be able to show Fidelity your positions and they can tell you if anything won't transfer, but most of the time it's not an issue. Usually its something like an in-house money market mutual funds that are a problem and you can easily just move that to a cash position. But not every mutual fund will transfer.

The retirement accounts will be easy to restructure, no tax consequences to make changes. The taxable accounts though will likely be a mess an you'll just have to make some decisions about what to sell. Considering the market is "down" right now, it might make sense to get aggressive with rebalancing. Start with selling anything that's in the red and you can use that to offset the gains and move towards index funds. Even if the taxable portfolio isn't ideal, that doesn't necessarily mean you take a huge tax hit to line up with what is advocated here.
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