How to save $ switching from Ed Jones?

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Doggofriendo
Posts: 6
Joined: Wed Jun 13, 2018 4:55 pm

How to save $ switching from Ed Jones?

Post by Doggofriendo » Wed Jun 13, 2018 5:05 pm

Hi all,

Im currently in the process of moving some money from Edward Jones to Vanguard. What I'm struggling with is what to do with my EJ brokerage account (not an IRA).

I currently have the following mutual funds with EJ:

American Mutual Fund class A, AMRMX, 5.75 front end load, .25 12b-1 fee, .6 gross expense ratio
Franklin Balanced class A, FBLAX , 5.75 front end load, .25 12b-1 fee, 1.03 gross expense ratio
Harbor cap appreciation class I, HACAX no front load or 12b-1 fee, .71 gross expense ratio, maybe because its "sell only eligible?"
Harbor small cap growth class I, HASGX no front load or 12b-1 fee, .87 gross expense ratio, maybe because its "sell only eligible?"
New world fund class A, NEWFX, 5.75 front end load, .24 12b-1 fee, 1.04 gross expense ratio

From what I understand, I can't move these in-kind to Vanguard because they're proprietary to EJ. I would need to liquidate and start fresh at Vanguard. Is this worth doing and having to pay taxes on the capital gains? Or, would I be better off just letting that money sit at EJ and not adding any more to it, and instead put money into a Vanuard target fund? If I do leave the money at EJ, how do I reduce the amount of fees I pay?

Thanks so much for your assistance.
Last edited by Doggofriendo on Wed Jun 13, 2018 5:27 pm, edited 2 times in total.

emlowe
Posts: 33
Joined: Fri Jun 01, 2018 2:57 pm

Re: How to save $ switching from Ed Jones?

Post by emlowe » Wed Jun 13, 2018 5:17 pm

You said "ROTH" - so in truth it doesn't matter what happens to them - there is no tax implications.

But, did Vanguard tell you they couldn't be moved, or EJ?

Because I can buy FBLAX at Fidelity - it's even "no fee" (NTF)

I can also buy all your other funds at Fidelity if I wanted to - so if I can buy them at Fidelity - I'd be pretty surprised that Vanguard won't in-kind transfer them.

You should ask Vanguard specifically about it.

Dottie57
Posts: 3378
Joined: Thu May 19, 2016 5:43 pm

Re: How to save $ switching from Ed Jones?

Post by Dottie57 » Wed Jun 13, 2018 5:20 pm

Doggofriendo wrote:
Wed Jun 13, 2018 5:05 pm
Hi all,

Im currently in the process of moving my ROTH from Edward Jones to Vanguard. It was fairly easy for me to figure out the cost savings involved with doing this because of the annual fee difference. What I'm struggling with now is what to do with my EJ brokerage account.

I currently have the following mutual funds with EJ:

AMRMX, 5.75 front end load, .25 12b-1 fee, .6 gross expense ratio
FBLAX , 5.75 front end load, .25 12b-1 fee, 1.03 gross expense ratio
HACAX no front load or 12b-1 fee, .71 gross expense ratio, maybe because its "sell only eligible?"
HASGX no front load or 12b-1 fee, .87 gross expense ratio, maybe because its "sell only eligible?"
NEWFX, 5.75 front end load, .24 12b-1 fee, 1.04 gross expense ratio

From what I understand, I can't move these in-kind to Vanguard because they're proprietary to EJ. I would need to liquidate and start fresh at Vanguard. Is this worth doing and having to pay taxes on the capital gains? Or, would I be better off just letting that money sit at EJ and not adding any more to it, and instead put money into a Vanuard target fund? If I do leave the money at EJ, how do I reduce the amount of fees I pay?

Thanks so much for your assistance.
You can sell over time. Concentrate on the funds with the highest ER. In coming yesrs sell the next highest fee fund. Mone the money to Vanguard and purchas ndexes.

dbr
Posts: 26915
Joined: Sun Mar 04, 2007 9:50 am

Re: How to save $ switching from Ed Jones?

Post by dbr » Wed Jun 13, 2018 5:22 pm

It would help if you would tell us the fund names and not just the tickers. But I looked up a couple of them for you and they are surely not proprietary to EJ. Maybe the confusion is someone is mixing up the old Vanguard mutual fund account with Vanguard brokerage. Another possibility is that EJ is snowjobbing you to get what commissions they can from you as you leave. There is no capital gains tax on capital gains in a Roth.

Doggofriendo
Posts: 6
Joined: Wed Jun 13, 2018 4:55 pm

Re: How to save $ switching from Ed Jones?

Post by Doggofriendo » Wed Jun 13, 2018 5:26 pm

dbr wrote:
Wed Jun 13, 2018 5:22 pm
It would help if you would tell us the fund names and not just the tickers. But I looked up a couple of them for you and they are surely not proprietary to EJ. Maybe the confusion is someone is mixing up the old Vanguard mutual fund account with Vanguard brokerage. Another possibility is that EJ is snowjobbing you to get what commissions they can from you as you leave. There is no capital gains tax on capital gains in a Roth.
Edited the names in, sorry! Wasn't sure what was easiest. Also took the part out about my Roh because that's a separate thing im dealing with and may not have phrased it correctly.

Well i looked them up on Vanguard and it appears that some of them can be transferred based on this message at the top - "This fund can be transferred to your Vanguard brokerage account but isn't available for purchase through FundAccess", while a few of them don't have that message. Maybe I should just talk to Vanguard again. Thanks for the help.

Doggofriendo
Posts: 6
Joined: Wed Jun 13, 2018 4:55 pm

Re: How to save $ switching from Ed Jones?

Post by Doggofriendo » Wed Jun 13, 2018 5:29 pm

emlowe wrote:
Wed Jun 13, 2018 5:17 pm
You said "ROTH" - so in truth it doesn't matter what happens to them - there is no tax implications.

But, did Vanguard tell you they couldn't be moved, or EJ?

Because I can buy FBLAX at Fidelity - it's even "no fee" (NTF)

I can also buy all your other funds at Fidelity if I wanted to - so if I can buy them at Fidelity - I'd be pretty surprised that Vanguard won't in-kind transfer them.

You should ask Vanguard specifically about it.
Edited to clarify that this aren't in my Roth, just separate mutual funds. Looked into it and i do see some available on Vanguard, didn't think to look into it on my own and took their word for it. Thanks!

emlowe
Posts: 33
Joined: Fri Jun 01, 2018 2:57 pm

Re: How to save $ switching from Ed Jones?

Post by emlowe » Wed Jun 13, 2018 5:30 pm

Sorry I misread your post re: roth and taxable.

So this is a Taxable EJ Brokerage account. I think asking Vanguard again is in order because it would seem to be these funds could be transferred in-kind.

I checked Fidelity, and I can definitely buy all those in my Fidelity account - so I assume one could then transfer them but perhaps a bad assumption.

-Earle

dbr
Posts: 26915
Joined: Sun Mar 04, 2007 9:50 am

Re: How to save $ switching from Ed Jones?

Post by dbr » Wed Jun 13, 2018 5:38 pm

In general the sooner you sell funds with high ERs at whatever capital gains cost the sooner you get off the curve of accumulating more and more tax liability to change. Granted you can wait for a market downturn, but that is a bit of a gamble. It might be best to explicitly compute the tax cost of making each sale and compare that to the holding cost of continuing to pay expenses. It is not likely the CGs are huge, and the tax rate is most likely either 0% or 15%. Note the expenses of holding the funds are not just the ER, but also internal brokerage costs estimated at 1% for every 100% in turnover plus taxes you pay on capital gains distributions the funds may make. Those funds are not likely to be tax efficient.

emlowe
Posts: 33
Joined: Fri Jun 01, 2018 2:57 pm

Re: How to save $ switching from Ed Jones?

Post by emlowe » Wed Jun 13, 2018 5:54 pm

While you ponder the CG gains and whether to just sell immediately you should ask EJ to stop re-investing the dividends/cg - no point in buying more of stuff you eventually don't want.

I've done this myself with managed funds I have that I purchased during my un-informed days but I'm not quite ready to sell to due to large gains (the ERs aren't horrible for managed funds - at least < 1)

MotoTrojan
Posts: 1598
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to save $ switching from Ed Jones?

Post by MotoTrojan » Wed Jun 13, 2018 6:20 pm

All good advice. Do some more research on tax-efficient fund placement (Bogleheads has a good wiki to start) before you start investing in taxable at Vanguard. A Target Fund has bonds which are not very tax-efficient. Looking at your total portfolio as one entity would be smarter, and then allocate depending on the account type (Total Stock Market & Total Int in taxable usually).

Jablean
Posts: 64
Joined: Sat Jun 02, 2018 2:38 pm

Re: How to save $ switching from Ed Jones?

Post by Jablean » Wed Jun 13, 2018 7:29 pm

Good luck. I've been trying for a month to get my inherited accounts from Waddell & Reed to Fidelity. Nothing transfers even though it's all in IVY accounts. They have class markers at the end of the fund name like "I" or "Y" and they are all proprietary to the W&R brokerage. So Fidelity is resubmitting with liquidate instructions. My son's UTMA is in their A shares - I'm waiting till next year because while the "should" nobody can guarantee they "will" transfer without liquidation.

Doggofriendo
Posts: 6
Joined: Wed Jun 13, 2018 4:55 pm

Re: How to save $ switching from Ed Jones?

Post by Doggofriendo » Wed Jun 13, 2018 8:20 pm

dbr wrote:
Wed Jun 13, 2018 5:38 pm
In general the sooner you sell funds with high ERs at whatever capital gains cost the sooner you get off the curve of accumulating more and more tax liability to change. Granted you can wait for a market downturn, but that is a bit of a gamble. It might be best to explicitly compute the tax cost of making each sale and compare that to the holding cost of continuing to pay expenses. It is not likely the CGs are huge, and the tax rate is most likely either 0% or 15%. Note the expenses of holding the funds are not just the ER, but also internal brokerage costs estimated at 1% for every 100% in turnover plus taxes you pay on capital gains distributions the funds may make. Those funds are not likely to be tax efficient.
Ok, I think I know what you mean. So for example, one of my funds is .6 ER but my unrealized gain is $372 for the year so far (if I'm reading the statement correctly). So in this case its just best to sell it all and pay the 15% tax on long term capital gain instead of worrying about it, and then put the funds into a lower ER? Thanks for your explanation.

dbr
Posts: 26915
Joined: Sun Mar 04, 2007 9:50 am

Re: How to save $ switching from Ed Jones?

Post by dbr » Wed Jun 13, 2018 8:26 pm

Doggofriendo wrote:
Wed Jun 13, 2018 8:20 pm
dbr wrote:
Wed Jun 13, 2018 5:38 pm
In general the sooner you sell funds with high ERs at whatever capital gains cost the sooner you get off the curve of accumulating more and more tax liability to change. Granted you can wait for a market downturn, but that is a bit of a gamble. It might be best to explicitly compute the tax cost of making each sale and compare that to the holding cost of continuing to pay expenses. It is not likely the CGs are huge, and the tax rate is most likely either 0% or 15%. Note the expenses of holding the funds are not just the ER, but also internal brokerage costs estimated at 1% for every 100% in turnover plus taxes you pay on capital gains distributions the funds may make. Those funds are not likely to be tax efficient.
Ok, I think I know what you mean. So for example, one of my funds is .6 ER but my unrealized gain is $372 for the year so far (if I'm reading the statement correctly). So in this case its just best to sell it all and pay the 15% tax on long term capital gain instead of worrying about it, and then put the funds into a lower ER? Thanks for your explanation.
Right, 15% of $372 is $55.80. If you have a $10,000 investment there and the cost is 0.7% plus maybe another 0.3% in fund brokerage costs and we'll ignore capital gains distributions for now, that is $100 in just one year, and it will accumulate this year, next year, and every year if you don't stop it. In the meantime if your investment grows the unrealized gain grows and it gets more and more expensive to get out. So by waiting you pay more for staying in and the cost of getting out goes up and you get a double whammy.

Doggofriendo
Posts: 6
Joined: Wed Jun 13, 2018 4:55 pm

Re: How to save $ switching from Ed Jones?

Post by Doggofriendo » Wed Jun 13, 2018 8:28 pm

So I figured it out with Vanguard and will be transferring all of the mutual funds to EJ, just the first person I talked to there was confusing this stuff with my IRA and didn't realize I had a separate account. Thanks for the advice so far!

Basically what I'm looking into now is selling all of these funds as they're high ER, and then reallocating from there. I have a few with unrealized losses that might offset the gains, so may just sell all at once and bite the bullet on the taxes this year. There is one that I've only had for 5-6 months which ill just hold until the year mark for a small tax break.

Doggofriendo
Posts: 6
Joined: Wed Jun 13, 2018 4:55 pm

Re: How to save $ switching from Ed Jones?

Post by Doggofriendo » Wed Jun 13, 2018 8:31 pm

dbr wrote:
Wed Jun 13, 2018 8:26 pm
Doggofriendo wrote:
Wed Jun 13, 2018 8:20 pm
dbr wrote:
Wed Jun 13, 2018 5:38 pm
In general the sooner you sell funds with high ERs at whatever capital gains cost the sooner you get off the curve of accumulating more and more tax liability to change. Granted you can wait for a market downturn, but that is a bit of a gamble. It might be best to explicitly compute the tax cost of making each sale and compare that to the holding cost of continuing to pay expenses. It is not likely the CGs are huge, and the tax rate is most likely either 0% or 15%. Note the expenses of holding the funds are not just the ER, but also internal brokerage costs estimated at 1% for every 100% in turnover plus taxes you pay on capital gains distributions the funds may make. Those funds are not likely to be tax efficient.
Ok, I think I know what you mean. So for example, one of my funds is .6 ER but my unrealized gain is $372 for the year so far (if I'm reading the statement correctly). So in this case its just best to sell it all and pay the 15% tax on long term capital gain instead of worrying about it, and then put the funds into a lower ER? Thanks for your explanation.
Right, 15% of $372 is $55.80. If you have a $10,000 investment there and the cost is 0.7% plus maybe another 0.3% in fund brokerage costs and we'll ignore capital gains distributions for now, that is $100 in just one year, and it will accumulate this year, next year, and every year if you don't stop it. In the meantime if your investment grows the unrealized gain grows and it gets more and more expensive to get out. So by waiting you pay more for staying in and the cost of getting out goes up and you get a double whammy.
Makes sense when you put it that way. Kind of a sunk cost fallacy. Appreciate it!

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