How to move a portfolio out of a traditional advisor service?

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purplesaber
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How to move a portfolio out of a traditional advisor service?

Post by purplesaber » Tue Oct 10, 2017 11:41 am

Hello everyone,

I’m new to the forum, but have been reading posts for a while. My main question is how to get help disentangling my portfolio from a traditional financial advisor service (Ameriprise) to something more simple and with less fees. Thank you if you have the time to read this and for any advice.

The background -- we’ve been with Ameriprise for about 20 years. I am now almost 50. I started with them because we had a modest windfall, I didn’t know much about finances, and I didn’t want to make mistakes. Overall I think the advisor has done a reasonable job. I am very diligent about living below my means and contributing monthly to my accounts. My wife and I have been fortunate to have successful independent businesses with relatively high incomes.

Over time I have increasingly felt that paying an advisor a 1% management fee is excessive - our portfolio has recently passed 5 million so I think it’s time to move on. I know it would have been better to have done this a long time ago, but better late than never I suppose.

I read William Bernstein’s “If you can” a couple of years ago, and of course have been browsing this site for a while. The idea of a much simpler 3 fund portfolio or something similar sounds very appealing.

The problem -- I don’t know how to make a transition to something less costly and more simple. The current portfolio is complicated -- with several accounts including a broad array of many mutual funds, bond funds, and some stocks. It is pretty diversified (domestic and international stocks, and bonds) though.

I am not knowledgeable about how to move the accounts, where would be appropriate, and also how to handle tax issues (i.e. whether or not to keep the stocks for now/when to sell them, how and when to consolidate the mutual funds to index funds assuming that is a good option, etc.)

My questions:
Are there advisors or services that help with taking an existing portfolio and transitioning it to a “Bogleheads style” portfolio which over time I can manage myself?
Are flat fee advisors a decent option in this situation? Any companies that people here would recommend and see as reputable?
Vanguard looks like they have an advisory service that charges 0.3% - I’d prefer to get out of paying a percentage based advisory fee but at least it’s a considerably less than what I am currently paying.
Other options you would recommend? It seems daunting so any help and advice is much appreciated.

Thank you in advance!

sco
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Re: How to move a portfolio out of a traditional advisor service?

Post by sco » Tue Oct 10, 2017 8:34 pm

Are there advisors or services that help with taking an existing portfolio and transitioning it to a “Bogleheads style” portfolio which over time I can manage myself?

Yes, vanguard but there are others. Some may still push the higher fee stuff. vanguard, Fidelity and Schwab come to mind.

Are flat fee advisors a decent option in this situation? Any companies that people here would recommend and see as reputable?
Possible a very good option, depending on the complexity. Also you can just post specific questions here and get very good feedback. The Garrett Network has a list of Fee only advisors, although some of them may do AUM as well?

Vanguard looks like they have an advisory service that charges 0.3% - I’d prefer to get out of paying a percentage based advisory fee but at least it’s a considerably less than what I am currently paying.

Consider paying .3% until you get things straightened out. You can cancel it anytime that you are ready. You don’t have to pay for the PAS service to just have them help do the rollovers.

Jack FFR1846
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Re: How to move a portfolio out of a traditional advisor service?

Post by Jack FFR1846 » Tue Oct 10, 2017 9:16 pm

Let your new house do all the work. You don't even have to pay them. On the phone with them, tell them the current accounts you want to move and how much is in each. They'll get the info from Ameriprise anyways. You can literally say "I want half in total US equity index....what's that called?". They'll tell you. Ask the expense ratio. They'll tell you. "Ok, good, the other half split with 25% in total US bond index....what's that called?". They'll tell you. "And the rest in total international equity index....what's that called?".

Or look in the wiki because it's all listed out there.
Bogle: Smart Beta is stupid

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Taylor Larimore
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Re: How to move a portfolio out of a traditional advisor service?

Post by Taylor Larimore » Tue Oct 10, 2017 9:29 pm

purplesaver:

Welcome to the Bogleheads Forum!

I agree with sco that Vanguard's Personal Advisory Service and their 0.3% fee is well worth the cost to have them move your securities to a simple, sophisticated, tax-efficient, diversified, low-cost portfolio like this:

The Three-Fund Portfolio.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

pkcrafter
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Re: How to move a portfolio out of a traditional advisor service?

Post by pkcrafter » Tue Oct 10, 2017 9:31 pm

purplesaber, I suggest you stay on the forum, ask questions and learn. I think you may be able to self manage at least some of your assets while turning over some to an advisor.

Ok, your portfolio is complicated, but at least list the accounts types with the amounts in each account, his/hers--taxable, 401ks, IRAs Roths, etc. Also, list your current overall asset allocation.

Advisors tend to over complicate holdings to give the appearance of doing something you couldn't do yourself.

Basically you would want something in the line of the 3-fund portfolio, but yes, it will vary due to available funds.

3-fund portfolio

viewtopic.php?f=10&t=88005

You can get variations of the 3-fund in target funds too.
The problem -- I don’t know how to make a transition to something less costly and more simple. The current portfolio is complicated -- with several accounts including a broad array of many mutual funds, bond funds, and some stocks. It is pretty diversified (domestic and international stocks, and bonds) though.

I am not knowledgeable about how to move the accounts, where would be appropriate, and also how to handle tax issues (i.e. whether or not to keep the stocks for now/when to sell them, how and when to consolidate the mutual funds to index funds assuming that is a good option, etc.)
Once you provide some information about your current accounts we can make better recommendations and help with the move.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Newone88
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Re: How to move a portfolio out of a traditional advisor service?

Post by Newone88 » Tue Oct 10, 2017 9:43 pm

I would see if your existing advisor could help you with this transition. One of my main concerns would be how to best handle the tax consequences that are likely to come with selling a larger number of funds to downsize to a smaller amount of lower expense funds. I would let the advisor know of your plan (they are going to know soon enough anyway) and ask if they can help with any tax loss harvesting or anything else to make it easier for you. They obviously would love to keep you as a client and they would love you have you back if you decide things are easier for them to manage your portfolio.

May be worth asking at least. And if they say no or seem like they would charge you even more for such services, then go with another company. 0.3% is pretty good.

KSActuary
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Re: How to move a portfolio out of a traditional advisor service?

Post by KSActuary » Tue Oct 10, 2017 10:11 pm

If you want the three fund portfolio then find a flat dollar advisor to manage the transition and be available for other questions concerning retirement. Managing a three fund portfolio is straightforward and the only reason to have an advisor is to provide financial support regarding other areas of financial planning and during high stress market periods.

LucyB
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Re: How to move a portfolio out of a traditional advisor service?

Post by LucyB » Wed Oct 11, 2017 8:35 am

Hello,

I will be curious about the responses of others. Our facts are very similar to yours and we have been working on our situation for about a year now. We also recently disengaged from an advisor.

Prior to disengaging, I did a video interview with someone at Vanguard to discuss our portfolio and what would happen if we transitioned to Vanguard. I also met with a financial consultant at Schwab and discussed options there. We felt we needed a plan before disengaging.

In speaking with Vanguard, we couldn’t quite find the comfort we were looking for. We wanted assurances that they wouldn’t sell positions and cause adverse tax consequences just because they had a different view of what our portfolio should look like. I think that if you’ve had management for a while, you will likely have a complex portfolio and, given recent market history, likely with significant gains.

In talking with Schwab, the options seemed greater and more flexible. Schwab has a private client option that is non-discretionary, meaning they will talk with you before making any trades, but it is also stepped percentage fee based. We liked that they would talk more freely with us, but we really didn’t want to go back to management at this time, but it is a good option to have if we start to feel overwhelmed by our current portfolio setup. Schwab also has financial consultants who will help you for free. That is what we are doing right now. Our consultant is very helpful and answers my questions. I call him whenever I want and we’ve met with him a few times to ask questions about our portfolio and things we didn’t understand (and failed to ask our advisor before). Schwab also has great tools. You can use the portfolio checkup tools whenever you want. I have been using those to determine large cap to small cap allocations and US to foreign allocations and equities to fixed income. At this point, we feel we can’t go on a selling spree for the sole purpose of simplification due to significant tax consequences, and so we are just using the tools to self-manage. For new funds, we are considering something different. We have set up the Schwab Intelligent Portfolio with a small sum of funds and really like it. It is a very diversified portfolio, structured similar to what we have, and it will be a good example to watch, like the canary in the mine, to let us know that IP account is rebalancing and maybe we should do a portfolio checkup on our previously managed portfolio.

We are also considering a simpler Boglehead portfolio, but we have just taken the past year to sit tight and analyze things.

Not sure that I have been to the point, but my suggestion is to talk with some brokerage firms to get an idea of how they would handle your portfolio and what services would be included/free or other fee structures. Just make sure they don’t sell for the sake of selling and cause significant tax issues. Take your time. Good luck. This is likely a complex problem but can be self-managed one step at a time if you want—and help is never far away.
The above comments are merely an expression of personal opinion and should not be considered advice in any form—tax, legal, financial or otherwise.

goingup
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Re: How to move a portfolio out of a traditional advisor service?

Post by goingup » Wed Oct 11, 2017 8:54 am

LucyB wrote:
Wed Oct 11, 2017 8:35 am
In talking with Schwab, the options seemed greater and more flexible.
I concur with thinking that Schwab will be nimble with a large complicated portfolio. I'd start there to explore options.

A few observations. Firms like Ameriprise over-complicate portfolios making it very difficult to get untangled due to embedded taxable gains or non-traded products. Transitioning tax-deferred accounts will be the easiest, so start with those. You don't have to make the change all at once, and it may go more smoothly to move accounts in stages.

Good luck and stay with it. One percent of your assets is too much to pay.

retiredjg
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Re: How to move a portfolio out of a traditional advisor service?

Post by retiredjg » Wed Oct 11, 2017 8:57 am

Part of this is simple. The IRAs and other tax-advantaged accounts can just be moved, liquidated, and new funds bought. Or liquidated, moved, and new funds bought. You will need to find out which order results in the lower amount of transaction fees.

The other part is not so simple. You'll need to consider each holding you have in the taxable account and decide whether to keep it, get rid of it now, get rid of it later, or whether to give it away (charitable causes - you get the deduction but do not pay the capital gains tax). If you don't want to go through this, you could just pull the bandaid off and pay the taxes on all your gains, both long and short term.

Do not expect Ameriprise's advisor to help you. Once they know you are leaving, your future contacts will be with someone at the corporate office, not at your advisor's office. That is as it should be because that is what they do.

Expect to pay some account closing fees.

If you decide on using Vanguard's PAS, you will already know if they plan to keep some of what you have (to avoid unnecessary taxes) or not. Or you can hold everything at Vanguard but only have some of it under their management. You would manage the rest.

Once very nice thing about Vanguard's system is you can have them manage your money for awhile and then you take it over once you understand how it all works. There would be no need to change your portfolio - you just stop using their management service.

In order to get familiar with what is going to happen, you might want to assemble a list of everything you have by account and post it here. For the taxable account (which seems like it might be quite large), you need to know the gains or losses, short term or long term, for each holding.

If you are not familiar with how capital gains taxation works, it would be good to learn something about that. People here can help with that.

purplesaber
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Re: How to move a portfolio out of a traditional advisor service?

Post by purplesaber » Wed Oct 11, 2017 6:58 pm

Thank you all for the replies and encouragement. This has been very helpful to me and my wife. I think I will reach out to Schwab, Vanguard, and also a fee-only advisor and see what they would offer to do. @goingup is definitely right -- I certainly think Ameriprise has made our portfolio overcomplicated!

I also appreciate how forthcoming this board is about giving advice and help. I expect this will need to be done in incremental steps, and I'll be back with some updates if it will help others, and most likely more questions!

Thanks!

Dottie57
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Re: How to move a portfolio out of a traditional advisor service?

Post by Dottie57 » Wed Oct 11, 2017 8:17 pm

Jack FFR1846 wrote:
Tue Oct 10, 2017 9:16 pm
Let your new house do all the work. You don't even have to pay them. On the phone with them, tell them the current accounts you want to move and how much is in each. They'll get the info from Ameriprise anyways. You can literally say "I want half in total US equity index....what's that called?". They'll tell you. Ask the expense ratio. They'll tell you. "Ok, good, the other half split with 25% in total US bond index....what's that called?". They'll tell you. "And the rest in total international equity index....what's that called?".

Or look in the wiki because it's all listed out there.
Bingo. August 2016, I decided I could advise myself. I went to the local Fidelity office and asked to talk to an advisor. I was assigned one immediately and was able to talk within 20 minutes. I brought the latest statements for the accounts I wanted transferred. The advisor walked me through the process. After funds were in thenew accounts, I sold all funds (no charge since my account was large enough). I then took my time and bought fidelity index funds. All has worked outwell. I love the Fidelity web site.

beehappy
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Re: How to move a portfolio out of a traditional advisor service?

Post by beehappy » Thu Oct 12, 2017 4:52 am

purplesaber wrote:
Wed Oct 11, 2017 6:58 pm
Thank you all for the replies and encouragement. This has been very helpful to me and my wife. I think I will reach out to Schwab, Vanguard, and also a fee-only advisor and see what they would offer to do. @goingup is definitely right -- I certainly think Ameriprise has made our portfolio overcomplicated!

I also appreciate how forthcoming this board is about giving advice and help. I expect this will need to be done in incremental steps, and I'll be back with some updates if it will help others, and most likely more questions!

Thanks!
With a $5M portfolio, many shops would be paying you (not the other way around) and giving you ample resources to transition it to their platform. So I'd suggest taking full advantage of that free service. All you need is a recent statement and they'll sort out the transfer for you, FOR FREE. To the extent Ameriprise assesses account closure fees, ask the new shop to reimburse them. Except for Vanguard, the others will happily oblige. I recently moved a portfolio much smaller than yours to Merrill Edge self-directed and they were extremely accommodating. While I like Vanguard products, I haven't been impressed with their account management services and platform. In your shoes, I'd look to Schwab, Fidelity, or Merrill Edge. They'll give you someone you can go to with questions, who will shepherd the transfer. Use that to your full advantage.

Serie1926
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Re: How to move a portfolio out of a traditional advisor service?

Post by Serie1926 » Thu Oct 12, 2017 5:36 am

We just went through the transfer process, Schwab to Vanguard. Process was easy and straightforward. We were assigned a transfer specialist by Vanguard. I took a bit over an hour on the phone. My wife was about an hour. Completed some online information and one form we had to complete, print, notorize, and mail in.

deltaneutral83
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Re: How to move a portfolio out of a traditional advisor service?

Post by deltaneutral83 » Thu Oct 12, 2017 8:43 am

OP is in the driver's seat with that amount, the Fido/Schwab/TDA's will be drooling to help you transfer from Ameriprise for free. You don't have to jump right into your self managed portfolio right off the bat, but a simple three fund I predict is what you end up doing. One thing you don't want to do is waste time moving from Ameriprise as this decision is worth several million over the next 20 years with that size portfolio. If you make it to 80+ it will most likely be an 8 figure decision.

dbr
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Re: How to move a portfolio out of a traditional advisor service?

Post by dbr » Thu Oct 12, 2017 8:58 am

purplesaber wrote:
Tue Oct 10, 2017 11:41 am

My questions:
Are there advisors or services that help with taking an existing portfolio and transitioning it to a “Bogleheads style” portfolio which over time I can manage myself?
Are flat fee advisors a decent option in this situation? Any companies that people here would recommend and see as reputable?
Vanguard looks like they have an advisory service that charges 0.3% - I’d prefer to get out of paying a percentage based advisory fee but at least it’s a considerably less than what I am currently paying.
Other options you would recommend? It seems daunting so any help and advice is much appreciated.

Thank you in advance!
It is certainly possible to move everything and accomplish no more than to have jumped from the frying pan into the fire. If you go to Vanguard the damage would be limited to what I think is an excessive 0.3% but there won't be any unreasonable fund costs. At any other broker you will be on your own to be sure you stay with accounts that don't come with advisory fees and someone selling you high cost funds. Fidelity, for example, can be perfectly practical for self managing your investments at no cost and quite predatory if you let them be.

I think tax advice is best sought from a tax accountant provided you shop around enough to make clear that the issue is tax planning for liquidating taxable investments as distinct from you just want him to prepare your tax return. I don't know that Vanguard PAS is actually a competent tax advisor.

Klmsilver
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Re: How to move a portfolio out of a traditional advisor service?

Post by Klmsilver » Thu Oct 12, 2017 8:58 am

We are in the process of this, as well. Our advisor became quiet unfriendly once he was told we were leaving, which we anticipated. So before that, we hired a fee-only advisor through Garrett to help us formulate a plan and answer questions. Our accountant was also involved to help advise us on tax implications. Appropriate accounts were set up with Vanguard, etc.

We knew where each penny was going prior to talking to our Ameriprise advisor, which helped because we just told him what we needed him to do.

We still aren’t done, but I just wanted to validate your choice to leave Ameriprise and tell you that having help with the transition was crucial for us. When you go from many years/decades of a complicated advising relationship, it can feel a little scary to be totally on your own.

Good luck!

beehappy
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Re: How to move a portfolio out of a traditional advisor service?

Post by beehappy » Thu Oct 12, 2017 8:58 am

deltaneutral83 wrote:
Thu Oct 12, 2017 8:43 am
OP is in the driver's seat with that amount, the Fido/Schwab/TDA's will be drooling to help you transfer from Ameriprise for free. You don't have to jump right into your self managed portfolio right off the bat, but a simple three fund I predict is what you end up doing. One thing you don't want to do is waste time moving from Ameriprise as this decision is worth several million over the next 20 years with that size portfolio. If you make it to 80+ it will most likely be an 8 figure decision.
+1

dbr
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Re: How to move a portfolio out of a traditional advisor service?

Post by dbr » Thu Oct 12, 2017 9:13 am

deltaneutral83 wrote:
Thu Oct 12, 2017 8:43 am
OP is in the driver's seat with that amount, the Fido/Schwab/TDA's will be drooling to help you transfer from Ameriprise for free. You don't have to jump right into your self managed portfolio right off the bat, but a simple three fund I predict is what you end up doing. One thing you don't want to do is waste time moving from Ameriprise as this decision is worth several million over the next 20 years with that size portfolio. If you make it to 80+ it will most likely be an 8 figure decision.
Is the right metaphor being in the drivers seat or is the right metaphor fat, slow moving pray attracting every predator for miles around (to play off the metaphor of drooling)?

But, yes, a large portfolio is attractive to a new custodian and should generate significant cooperation and some time spent to manage complexities. I think a good form of self-protection is to be as aware as possible of how you want to invest and to not let a "helpful" advisor put you in places you don't want to be. The investor is going to have to learn enough to arrive at this awareness himself. I agree that if you are lucky enough to find a not self interested advisor who does not actually manage the money, that this may work. I would definitely not follow the suggestions of anyone from a fund company without first being independently sure that is what you want. Vanguard PAS might be an exception because we already know they will insist on a Vanguard four fund portfolio based on some kind of amateurish risk assessment. I don't know if they are effective at tax managing the transition.

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