Switch, or buy Vanguard funds in ML account?

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BigMike
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Switch, or buy Vanguard funds in ML account?

Post by BigMike » Tue Oct 19, 2010 9:01 pm

Before I came across this site, my wife and I started our accounts with Merrill Lynch. We have about 80K spread between four accounts: a taxable account, a Roth, a SEP and a rollover 401K

After much reading and research (thanks to this site!) I realize the high expense ratios we are paying for our investments there, but I'm trying to figure out if it makes more sense to move all our funds to Vanguard, or to just direct our ML advisor to buy into the Vanguard funds I want through ML and keep our accounts there. It appears that ML will charge me management fees to do this, but am I going to take a big hit or create problems by trying to move all the money to VG? How big of a hassle is it to transfer a bunch of different accounts to VG? And will it cost me money to do this?

Insights are appreciated. Thanks!

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Post by retiredjg » Tue Oct 19, 2010 9:20 pm

I cannot think of any reason to stay at ML myself. Why pay for something at ML when you can get it for free at Vanguard?

Most of the time, moving stuff is not hard at all. You just tell Vanguard to move it (fill out some paperwork) and it gets moved. It will take 10 days to maybe 3 weeks. You might want to do one account at a time so that everything is not "out of the market" all at once.

ML likely has some sort of termination fee. Other than that, I don't know how you would "take a hit".

The Roth, rollover and taxable should be no problem. I don't know what they offer for SEP IRA. Just call them and let them do all the work.

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BigMike
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Post by BigMike » Tue Oct 19, 2010 9:26 pm

From the ML site, it looks like they are going to ding me $75 for each of the retirement accounts and $95 for the taxable. This means it will cost $320 to move everything.

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Post by dbr » Tue Oct 19, 2010 9:29 pm

BigMike wrote:From the ML site, it looks like they are going to ding me $75 for each of the retirement accounts and $95 for the taxable. This means it will cost $320 to move everything.
Very likely, but those costs are penny-ante compared to the cost savings from moving the account and investing in cost effective funds over a lifetime.

Normally the biggest dilemma in liquidating bad funds is the possibility of a capital gains tax hit in the taxable account. If you don't have a lot of money there and/or the current unrealized gains are small, this becomes a non-issue. You may even have unrealized losses that can be captured for a tax offset.

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Post by FarmGirl » Tue Oct 19, 2010 9:30 pm

You can pay them now, or you can pay them later, and just keep paying and paying and paying. Call Vanguard, chat with them, and then make your decision.

Easy for me to say, I have already moved my money and paid my dues. :roll:

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Post by kirent » Wed Oct 20, 2010 3:34 am

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Last edited by kirent on Fri Dec 07, 2012 4:19 pm, edited 1 time in total.

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Post by nisiprius » Wed Oct 20, 2010 4:40 am

Random thoughts. These mostly have to do with moving accounts in general not Merrill Lynch or Vanguard in particular.

a) Whenever you move from one account to another, it is always best--I think it's really is an "always"--to move the assets "in kind." You can do this provided the asset is one that can be held at the destination account. Moving assets "in kind" means you are moving the shares themselves, rather than selling the shares, moving the money, and buying them again. One reason why it is better is that there's no issue about losing interest or being out of the market when it makes a big move, etc. Another is that my limited experience is that for some reason transfers in kind seems to be less likely to encounter glitches.

If you're even thinking about moving to Vanguard, which I think is a good idea, as part of your preparation have your Merrill Lynch statement in front of you, call Vanguard, and go down the list point by point and see whether there are any mutual funds or other holdings that can't be transferred "in kind," and figure out how to deal with that.

b) Always deal with the institution you're moving the assets to, they are the ones who are motivated to make everything work smoothly.

Don't be afraid to call Vanguard, 877-662-7447. Bend their ear. That's what customer service is for. Any brokerage you're transferring $80,000 to is going to be happy to chat with you. Don't think of customer service as a place to go for investment advice, but patient explanation of nitty-gritty nuts-and-bolts, including fees and what you need to do to avoid them--absolutely.

c) Depending on the fee structure at Merrill Lynch, instead of buying the Vanguard mutual funds it may be cheaper to buy the corresponding Vanguard ETFs. I don't want to get off onto the whole mutual fund versus ETF thing, the important point is that they are basically the same things--like beer in cans versus beer in bottles--and the differences are technical minutiae that don't matter.

d) When the heck did those account closing fees come in? They're something new in the last decade, they're poisonous, they seem to be increasing, and if we can't stop brokers from charging them through the exercise of market discipline There Oughta Be A Law. Anyway, I don't know whether Vanguard reimburses account closing fees--anyone know?--but sometimes under some circumstances some brokers do, so you should at least ask.

e) Moving accounts is relatively easy, but you should do it at a time when things are "quiet" (you're not using the account much). Some things to be prepared for: in my personal experience transfers have taken anywhere from a week to six weeks, it's just unpredictable, there's no way of knowing. Merrill Lynch may or may not require a "medallion signature guarantee." If they do, it's a minor pain; you get it done at your local bank, it's sorta like getting things notarized, but not everyone who can notarize a document can provide a medallion signature guarantee, so call ahead. At my local small bank it has to be done during weekdays and you need to be sure the guy who does them isn't out that day. At a big bank sometimes you have to go to a big branch instead of the little corner storefront.

f) While the account is being moved, you need to be patient but not too patient. When you look online in your target account, as things start to arrive things sometimes look weird for a day or two, like assets being listed with a market value of zero. If the asset pays interest or dividends, and it happens while the transfer is being done, you don't lose them but they often don't get picked up until a "sweep" a month later.

g) Sometimes there are glitches. Be proactive: do jot down the names of everyone you talk to and when and what they said, it will save time and make things easier later on if you can say "Mary Jones said she had done thus-and-such on October 18th and that I should see thus-and-such happen in three days."
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Post by amarone » Wed Oct 20, 2010 9:12 am

I just transferred my accounts from TD Ameritrade to Vanguard. What nisiprius says is spot on. The Vanguard rep was very helpful and called TD Ameritrade with me on the line to get things going. He checked with the TDA rep as to whether I needed a medallion signature (I did not).

It took about 2 weeks for everything to appear in my VG accounts. TDA did charge me $75 for some, but not all, of my accounts.

The one glitch is that a couple of accounts had dividend payments that went into my TDA accounts after the transfer. That was a month ago and I still have not got the money. TDA say they are backed up and it will be another week or two.

One minor point that I was not keen on is that a brokerage account with a cash balance became two accounts at VG - a brokerage account and a money market account. As one reason for my transferring the accounts was to simplify things, having four TDA accounts become eight Vanguard accounts was not exactly a step in the right direction.

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Post by pkcrafter » Wed Oct 20, 2010 9:45 am

The problem with transferring in kind is you can't go directly into Vanguard, you must go into the brokerage where you can't get Vanguard funds. The transfer won't even work if Vanguard does not have all your funds available as brokerage options. So, first check to see if Vanguard carries the funds you have. Check here under search fund families or Search other funds. If some funds are not transferable, your account will not close and you will end up with a partial transfer and accounts at both places.

https://personal.vanguard.com/us/funds/other

One other bit of advice--If you decide to move accounts, which I recommend, do them one at a time. Throwing paperwork for three or four accounts at a new custodian all at once can cause confusion and errors.

I agree that the cost of leaving ML is going to end up being much less than the cost of staying. ML is perhaps the most expensive brokerage in the business.


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Post by stlutz » Wed Oct 20, 2010 10:01 am

If your goal is to sell everything you have in ML and buy Vanguard funds, why not just sell the investments at ML, then buy Vanguard funds directly? Unless you want to hold onto your investments that you have at Merrill, I'm not sure if the account transfer process is really worth the hassle and expense.

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Post by dbr » Wed Oct 20, 2010 10:07 am

As mentioned, one logistical decision is whether or not to invest in Vangaurd funds at Vanguard Mutual Fund, which will not hold anything besides their own mutual funds, or whether you want to start by opening a brokerage account at Vanguard where you can invest in anything except Vanguard Mutual Funds. You might avoid some sales costs by moving in kind to the brokerage, getting free trades from Vanguard if possible, then selling everything and moving it all to Vanguard Funds Company. You could talk to Vanguard about what to do there.

A recent change is that minimums on Admiral funds have been reduced which may open the window to lower costs than ever before and remove some incentive to invest in Vanguard ETF's instead.

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Post by fishndoc » Wed Oct 20, 2010 10:11 am

BigMike wrote:From the ML site, it looks like they are going to ding me $75 for each of the retirement accounts and $95 for the taxable. This means it will cost $320 to move everything.
Even if you stay, ML will charge you an annual account fee, plus they will figure out other ways to milk cash from you.

I can't see any reason to stay with ML. When I was foolish and used ML, my "advisor" had our holdings (myself, wife, four kids) divided up into 13 separate accounts! As you can see, I paid even more than you for transfering the accounts to Vanguard, but it was the best money I ever spent.
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Moving to Vanguard

Post by Taylor Larimore » Wed Oct 20, 2010 10:43 am

Hi Big Mike:

in 1986 we moved all our investments from Merrill Lynch to Vanguard.

It was the best investment decision we ever made.
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Re: Switch, or buy Vanguard funds in ML account?

Post by YDNAL » Wed Oct 20, 2010 10:51 am

BigMike wrote:Before I came across this site, my wife and I started our accounts with Merrill Lynch.
My very first Investment account was at Merrill Lynch. They and I have not had a relationship since... and, I'm not as mature as Taylor, but I ain't no spring chicken. :)
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Post by BigMike » Wed Oct 20, 2010 12:54 pm

Thank you all so much for your thoughtful and detailed replies, this has been a huge help. I've learned more about investing in eight weeks on this forum (and by reading the recommended books) than I have in years of talking to financial "advisers."

I checked into Merrill Edge, but they do not have a SEP option. That, combined with the many comments on fees, makes me positive that moving to Vanguard is the right thing to do. I think also that moving them one at a time would be the best option to avoid any potential mix-ups.

Here's a question: why couldn't I tell my current ML adviser to move all of our accounts into VG funds at ML, then call VG and make the transfer? Then I could be sure that an in-kind transfer would work for 100% of our funds.

Or could I have ML convert all the funds to a cash balance, and transfer them into a money market? Is that what stlutz meant by "selling" the investments (three of the four are tax-deferred retirement accounts, so I don't want to take a distribution from ML and get into a tax wrangle by taking a cash payment from ML)?

Thanks again for all the very valuable advice! I'm sure what I need to do is just get on the phone with VG and talk it through, but of course when you've spent years deferring to "experts" the first experiences of handling it yourself can be a little nerve-wracking!

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Post by vesalius » Wed Oct 20, 2010 1:01 pm

BigMike wrote:Thank you all so much for your thoughtful and detailed replies, this has been a huge help. I've learned more about investing in eight weeks on this forum (and by reading the recommended books) than I have in years of talking to financial "advisers."

I checked into Merrill Edge, but they do not have a SEP option. That, combined with the many comments on fees, makes me positive that moving to Vanguard is the right thing to do. I think also that moving them one at a time would be the best option to avoid any potential mix-ups.

Here's a question: why couldn't I tell my current ML adviser to move all of our accounts into VG funds at ML, then call VG and make the transfer? Then I could be sure that an in-kind transfer would work for 100% of our funds.

Or could I have ML convert all the funds to a cash balance, and transfer them into a money market? Is that what stlutz meant by "selling" the investments (three of the four are tax-deferred retirement accounts, so I don't want to take a distribution from ML and get into a tax wrangle by taking a cash payment from ML)?

Thanks again for all the very valuable advice! I'm sure what I need to do is just get on the phone with VG and talk it through, but of course when you've spent years deferring to "experts" the first experiences of handling it yourself can be a little nerve-wracking!
If you like the keep the number of Vanguards accounts to a minimum, selling and placing the proceeds in cash or money market sweep at ML, then transferring to Vanguard whereupon you buy vanguard funds would undoubtably be cheaper than selling and buying at ML with a subsequent vanguard transfer.

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Post by nisiprius » Wed Oct 20, 2010 1:17 pm

BigMike wrote:THere's a question: why couldn't I tell my current ML adviser to move all of our accounts into VG funds at ML, then call VG and make the transfer? Then I could be sure that an in-kind transfer would work for 100% of our funds.
That would work, probably very smoothly. But it might incur transaction fees at Merrill Lynch for the fund purchases.
Or could I have ML convert all the funds to a cash balance, and transfer them into a money market? Is that what stlutz meant by "selling" the investments (three of the four are tax-deferred retirement accounts, so I don't want to take a distribution from ML and get into a tax wrangle by taking a cash payment from ML)?
That would also work, again, probably quite smoothly. There are two issues with it. One, as you note, is that to avoid possible tax hassles it needs to be a custodian-to-custodian transfer. That should be trivially easy. If Merrill Lynch screws up and mails you a check instead, you're still OK but you need to be johnny-on-the-spot about getting the check into the Vanguard account right away--I think perhaps you have 60 days but don't trust me--and perhaps call the IRS just to make sure you're followed the appropriate procedure.

The second, particularly a concern with stock funds, is that you are out of the market with your whole portfolio for a couple of weeks, and stocks could move up or down quite a bit during that time. You could just as easily win on the deal as lose--I actually gained 1% during the five weeks it took to do a TIAA-CREF to Vanguard transfer--but who wants to, in effect, bet 1% or so of your whole portfolio on a coin flip?

Vanguard Brokerage Services can handle just about all of the run-of-the-mill mutual funds, stocks, and bonds the average investor is likely to have, and the chances are good you can transfer 100% in kind, but check.

By the way, the posters who mentioned the annoyance of doubling the number of accounts when you move to Vanguard--yeah. In case it isn't clear, here's what happens. Each account registration, e.g. "Roth IRA," becomes a pair of accounts at Vanguard. One account contains all of your Vanguard funds--and there is always at least one, because your money market fund is a Vanguard fund. The other account, at Vanguard Brokerage Services (VBS), holds every non-Vanguard asset. The two are joined at the hip by the money market account; that is, the VBS account can draw directly and instantly, or pay directly and instantly, into the money market account. It is an annoyance.

It might be an annoyance that's unique to Vanguard; certainly Fidelity isn't that way. It's might be a side effect of Vanguard's unique corporate structure; each Vanguard mutual fund is actually a separate business (hence "the Vanguard Group.")
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Post by Noobvestor » Wed Oct 20, 2010 2:00 pm

Glad a lot of folks are offering tips on the details. As to whether it is worth it: yes - the earlier you lock into the right investment company and settle things down, the better it will be for you in the long term. I'm glad I largely started with Vanguard, and wish others were as lucky!

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Post by tarnation » Wed Oct 20, 2010 5:58 pm

My understanding is you can't buy VG mutual funds at ML. You can buy the ETF's, but at what cost? From what I have seen trades are criminally expensive. I could never even get a straight answer on the commission schedule. If your funds are NTF funds at VG, then just transfer it all in kind. If not, it would probably be cheaper to sell the funds at ML and transfer stocks.
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Post by kenbrumy » Wed Oct 20, 2010 6:05 pm

Get away from Merrill Lynch as soon as you can. Why are you still reading this post. Get your account moved NOW.

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Post by BigMike » Wed Oct 20, 2010 10:07 pm

nisiprius wrote: By the way, the posters who mentioned the annoyance of doubling the number of accounts when you move to Vanguard--yeah. In case it isn't clear, here's what happens. Each account registration, e.g. "Roth IRA," becomes a pair of accounts at Vanguard. One account contains all of your Vanguard funds--and there is always at least one, because your money market fund is a Vanguard fund. The other account, at Vanguard Brokerage Services (VBS), holds every non-Vanguard asset. The two are joined at the hip by the money market account; that is, the VBS account can draw directly and instantly, or pay directly and instantly, into the money market account. It is an annoyance.
Does this mean that if you have four types of accounts you get four checkbooks for the MM fund in each account? Or can you simply transfer money in or out electronically from/to your bank account? Really what I want to be able to do is transfer a monthly lump sum into the taxable account from my bank, and then fund the other accounts on an annual or semiannual basis. It would be great to be able to do all this electronically.

Thanks again to all for the extremely helpful replies.

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Post by amarone » Wed Oct 20, 2010 10:11 pm

BigMike wrote:
nisiprius wrote: By the way, the posters who mentioned the annoyance of doubling the number of accounts when you move to Vanguard--yeah. In case it isn't clear, here's what happens. Each account registration, e.g. "Roth IRA," becomes a pair of accounts at Vanguard. One account contains all of your Vanguard funds--and there is always at least one, because your money market fund is a Vanguard fund. The other account, at Vanguard Brokerage Services (VBS), holds every non-Vanguard asset. The two are joined at the hip by the money market account; that is, the VBS account can draw directly and instantly, or pay directly and instantly, into the money market account. It is an annoyance.
Does this mean that if you have four types of accounts you get four checkbooks for the MM fund in each account? Or can you simply transfer money in or out electronically from/to your bank account? Really what I want to be able to do is transfer a monthly lump sum into the taxable account from my bank, and then fund the other accounts on an annual or semiannual basis. It would be great to be able to do all this electronically.

Thanks again to all for the extremely helpful replies.
You can transfer in and out via your bank account using ACH.

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Post by musbane » Wed Oct 20, 2010 11:04 pm

When I finally realized in 2003 that I was being milked by ML and decided to leave, I remember that my concerns were that there might be fees or complications, and then there was to be that call from our broker
( and my father's before me)...sure to be painful.
But there were no complications - no fees. I just called . In my case, Fidelity but vanguard should be as good - and they took care of the whole thing. Painless.
Oh yes, my ML broker never called. I felt almost hurt...

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Post by BigFoot48 » Wed Oct 20, 2010 11:18 pm

BigMike wrote:Here's a question: why couldn't I tell my current ML adviser to move all of our accounts into VG funds at ML, then call VG and make the transfer? Then I could be sure that an in-kind transfer would work for 100% of our funds.
I'm with Schwab and they charge me about $49 every time I buy or sell a Vanguard fund. While this helps keep my rebalancing to once a year, it's not the ideal situation and I suspect ML, assuming they even offer Vanguard mutual funds, might be about the same.

I recommend you ignore whatever costs are involved in moving from ML to Vanguard and just do it. You will easily be way ahead when the cost is netted over the rest of your life with the savings of a self-administered account at Vanguard.
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Post by tarnation » Fri Nov 26, 2010 1:07 pm

stives wrote:You should check to be sure but I think you can convert your Merrill Lynch account over to a Merrill Edge account for free, and get 30 free trades a month on everything (including Vanguard mutual funds). When that happens you basically have all the features of a Vanguard account in addition to free trades on everything else (so it could actually be better). There are also no management fees when you choose to do so (again check to be sure).
We recently inherited some assets that are at a ML "advisor" and have been looking at the easiest way to get them out of there. I called ML edge folks. They can transfer from your ML "advisor" for no fee. They said it would be a "journal entry" and would show up in 48 hours with all basis info etc. You get free trades only if you have $25K in cash at either ML edge or Bank of Am. There is also a quarterly fee, but that is waived if you have over $50K in assets in the account. I think this is the route we will go, since they don't give you the $95 kick in the pants on the way out and we can get it transferred and some trades done before the end of the year.
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Post by Cash » Fri Nov 26, 2010 3:13 pm

nisiprius wrote: a) Whenever you move from one account to another, it is always best--I think it's really is an "always"--to move the assets "in kind."
I think an exception may be, as I have often found to be the case, a brokerage charges a fee for an ACAT transfer but not for an ACH transfer. In that case, depending on the number of positions and the relative commissions of the old and new brokerage, it may cheaper to liquidate and ACH out than to do an in-kind transfer.

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Moving to Vanguard

Post by Taylor Larimore » Fri Nov 26, 2010 3:42 pm

It may cheaper to liquidate and ACH out than to do an in-kind transfer.
Always consider fees and the tax cost (if any) when selling or exchanging a security in a taxable account.
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Re: Moving to Vanguard

Post by Cash » Fri Nov 26, 2010 3:55 pm

Taylor Larimore wrote:
It may cheaper to liquidate and ACH out than to do an in-kind transfer.
Always consider fees and the tax cost (if any) when selling or exchanging a security in a taxable account.
This is true. I meant to limit my exception to tax-advantaged accounts.

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Post by BigMike » Fri Nov 26, 2010 6:58 pm

retiredjg wrote:Most of the time, moving stuff is not hard at all. You just tell Vanguard to move it (fill out some paperwork) and it gets moved. It will take 10 days to maybe 3 weeks. You might want to do one account at a time so that everything is not "out of the market" all at once.

ML likely has some sort of termination fee. Other than that, I don't know how you would "take a hit".

The Roth, rollover and taxable should be no problem. I don't know what they offer for SEP IRA. Just call them and let them do all the work.
This is exactly what happened. I called Vanguard and was put in touch with their "concierge" service. It took about 20 minutes on the phone to create paperwork for all three accounts (SEP, IRA, and Roth). VG then mailed the paperwork to me with much of the info pre-printed. We filled out the rest, signed it and sent it back. The only minor hassle was that ML requires a "medallion signature" on the transfer paperwork, which means you have to go to a bank and have the signature witnessed by someone qualified to give you a medallion stamp -- not a big deal, our local community bank has such a person. Our accounts are now in the process of being transferred to VG. Because of the complexity of the large variety of holdings our ML adviser had us in, I decided to liquidate the holdings and have the cash transferred to VG mutual fund accounts -- it was easier, and since these are all tax-deferred accounts there won't be any tax issues. Each account closing will cost us $75, but it is well worth it for the long-term savings in ERs.

An interesting footnote. I e-mailed my ML adviser to tell her what was going on, and she called to ask why we were leaving ML. I told her that it made no sense to me to keep my funds in accounts with ERs that are 4x, 5x, even 6x those of the same kinds of funds at Vanguard. Her answer: "Oh, OK." That was that.

Many thanks to those who answered my questions and helped me through this process.

Mike

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Post by retiredjg » Fri Nov 26, 2010 7:17 pm

Glad it went well!

That "Oh, OK" sort of speaks volumes!

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