Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

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sockfight
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Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by sockfight »

I currently have my assets at Fidelity. I'm looking at refinancing my mortgage, and Schwab offers mortgages with a relationship discount. I know some other institutions do this, but as far as I know, Fidelity has no such program. If I'm wrong about that, would love to know.

The rub is I own shares of FZROX in a taxable brokerage account with Fidelity. I have read several forum posts on this subject, advising against owning Fidelity Zero funds in a taxable account because they are proprietary. File that under "things I wish I'd known in the first place", but here I am. I need to transfer the money tied up in that fund to hit the threshold for the relationship discount, but if I sell the fund, the tax implications are unpleasant, including some short-term gains.

Is there any way around this? Is it possible for another institution to "hold" my position in this fund? Is it possible to do an in-kind exchange? Any way whatsoever to avoid the tax consequence? Or any way to have the position appear in/count for my new account even if it doesn't transfer? I'm prepared for the answer to be no based on what I've previously read, but it never hurts to see if anyone has found a workaround.

The mortgage refinance rate is probably still worth it with the tax consequences, but it's a massive complication. Thank you.
anaparafunds
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by anaparafunds »

Also interested in this thread.

Schwab offers better mortgage if you have some stock with them while Fidelity doesn't?

I'd like to know more as well.
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sockfight
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by sockfight »

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bertilak
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by bertilak »

sockfight wrote: Wed Jul 21, 2021 4:40 pm I need to transfer the money tied up in that fund to hit the threshold for the relationship discount, but if I sell the fund, the tax implications are unpleasant, including some short-term gains.
I'm not familiar with Fidelity but they will certainly give you the ability to sell specific lots. Some lots may have long term gains or some lots might even have losses.
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exodusNH
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by exodusNH »

sockfight wrote: Wed Jul 21, 2021 4:40 pm I currently have my assets at Fidelity. I'm looking at refinancing my mortgage, and Schwab offers mortgages with a relationship discount. I know some other institutions do this, but as far as I know, Fidelity has no such program. If I'm wrong about that, would love to know.

The rub is I own shares of FZROX in a taxable brokerage account with Fidelity. I have read several forum posts on this subject, advising against owning Fidelity Zero funds in a taxable account because they are proprietary. File that under "things I wish I'd known in the first place", but here I am. I need to transfer the money tied up in that fund to hit the threshold for the relationship discount, but if I sell the fund, the tax implications are unpleasant, including some short-term gains.

Is there any way around this? Is it possible for another institution to "hold" my position in this fund? Is it possible to do an in-kind exchange? Any way whatsoever to avoid the tax consequence? Or any way to have the position appear in/count for my new account even if it doesn't transfer? I'm prepared for the answer to be no based on what I've previously read, but it never hurts to see if anyone has found a workaround.

The mortgage refinance rate is probably still worth it with the tax consequences, but it's a massive complication. Thank you.
You'll have to pay the taxes eventually. Selling them now and reinvesting in a similar fund will give you a higher basis and reduce future gains.

Can you sell just enough of it to get you to the relationship discount you're looking at with Schwab?
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Wiggums
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by Wiggums »

If you end up selling the lots with long term gains, don’t go back into the Fidelity Zero funds. Especially if you sell at a loss.
nalor511
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by nalor511 »

Do you have a spouse with other (portable) assets at Fido that you can gift each other so that yours can be moved to schwab and theirs can remain at Fido in your current non portable investment?
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gwe67
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by gwe67 »

"Zero" sure does have strings attached....

The idea is to suck you in and then make you stay at Fidelity forever.

Same concept as EJ, just different execution.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by delamer »

Do you have to sell your entire position in the fund in order to meet the Schwab requirement?
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by exigent »

sockfight wrote: Wed Jul 21, 2021 4:40 pm Is there any way around this? Is it possible for another institution to "hold" my position in this fund?
Call Schwab and ask whether or not they can accept/hold these shares. It’s possible to transfer Admiral shares from Vanguard to at least some receiving brokerage, so perhaps something similar can be done with these shares from Fidelity. The only way to know for sure is to call Schwab and ask them.

Regardless, this is a good cautionary tale.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by 02nz »

exigent wrote: Wed Jul 21, 2021 6:11 pm
sockfight wrote: Wed Jul 21, 2021 4:40 pm Is there any way around this? Is it possible for another institution to "hold" my position in this fund?
Call Schwab and ask whether or not they can accept/hold these shares. It’s possible to transfer Admiral shares from Vanguard to at least some receiving brokerage, so perhaps something similar can be done with these shares from Fidelity. The only way to know for sure is to call Schwab and ask them.

Regardless, this is a good cautionary tale.
We know for a fact the ZERO funds cannot be held anywhere else. Fidelity has made sure of this. A good cautionary tale indeed. I'll try to remember to link to this thread the next time someone asks what the catch is with the ZERO funds.
Last edited by 02nz on Wed Jul 21, 2021 6:16 pm, edited 1 time in total.
anaparafunds
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by anaparafunds »

sockfight wrote: Wed Jul 21, 2021 5:17 pm Yes, here's the link to that info: https://www.schwab.com/public/schwab/ba ... gage_rates
Sounds cool but the minimum is $ 250,000 to avail of the better rates? Wish I had that much. Thanks for sharing.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by 02nz »

anaparafunds wrote: Wed Jul 21, 2021 6:15 pm
sockfight wrote: Wed Jul 21, 2021 5:17 pm Yes, here's the link to that info: https://www.schwab.com/public/schwab/ba ... gage_rates
Sounds cool but the minimum is $ 250,000 to avail of the better rates? Wish I had that much. Thanks for sharing.
IRAs qualify, per the terms. OP, if you have an old 401k that you can roll into an IRA, that would also work. But keep in mind the problems that could create for the backdoor Roth and differences in protection from creditors, which is generally stronger on 401k plans.
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sockfight
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by sockfight »

exigent wrote: Wed Jul 21, 2021 6:11 pm Call Schwab and ask whether or not they can accept/hold these shares. It’s possible to transfer Admiral shares from Vanguard to at least some receiving brokerage, so perhaps something similar can be done with these shares from Fidelity. The only way to know for sure is to call Schwab and ask them.
I will definitely ask. I have a friend who had the Admiral share issue, and I think exchanging share class within a fund (e.g. Admiral to Voyager), even if the fund has a different symbol, is a special case that is not a taxable event.

Thank you for the other advice, everyone. I will certainly look at selling long-term lots instead of short-term lots, if that's enough. As I used the average-cost method, I can't select weaker holdings.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by tomsense76 »

Interesting I'd try the opposite tact. Call Fidelity and tell them you are thinking of bailing to Schwab due to their lower mortgage rate offer. See if Fidelity will match it :wink:
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by mx711yam »

gwe67 wrote: Wed Jul 21, 2021 6:06 pm "Zero" sure does have strings attached....

The idea is to suck you in and then make you stay at Fidelity forever.

Same concept as EJ, just different execution.

What are the strings?
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sockfight
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by sockfight »

tomsense76 wrote: Wed Jul 21, 2021 7:29 pm Interesting I'd try the opposite tact. Call Fidelity and tell them you are thinking of bailing to Schwab due to their lower mortgage rate offer. See if Fidelity will match it :wink:
I would try this tactic if Fidelity had a mortgage program. As far as I know, they do not. Am I wrong?
02nz
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by 02nz »

mx711yam wrote: Wed Jul 21, 2021 7:41 pm
gwe67 wrote: Wed Jul 21, 2021 6:06 pm "Zero" sure does have strings attached....

The idea is to suck you in and then make you stay at Fidelity forever.

Same concept as EJ, just different execution.

What are the strings?
Did you read this thread? The catch is that the Zero funds can only be held at Fidelity. In a taxable account, that means you cannot leave Fidelity without incurring tax costs.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by fwellimort »

sockfight wrote: Wed Jul 21, 2021 7:45 pm
tomsense76 wrote: Wed Jul 21, 2021 7:29 pm Interesting I'd try the opposite tact. Call Fidelity and tell them you are thinking of bailing to Schwab due to their lower mortgage rate offer. See if Fidelity will match it :wink:
I would try this tactic if Fidelity had a mortgage program. As far as I know, they do not. Am I wrong?
Fidelity is a brokerage firm. No mortgage program as far as I understand (at least as of yet).


There's really no way in a taxable account without realizing the gains.
In a taxable account, I would highly recommend going ITOT/VTI/SCHB/SPTM instead or FSKAX if you really want to stick with mutual funds.
(In this day, I would always recommend ETFs instead because they are the most portable [and easiest to tax loss harvest with in market downturns])

FZROX and FZILX should only be used in tax advantaged account (cause you can simply exchange funds without any tax issues).
If you can realize losses, then that would be great (tax loss harvesting). If you have gains, there's really nothing much you can do.
You agreed to the conditions and in return, Fidelity allowed you to purchase funds at zero expense. I only buy ITOT in taxable due to this.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by SnowBog »

gwe67 wrote: Wed Jul 21, 2021 6:06 pm "Zero" sure does have strings attached....

The idea is to suck you in and then make you stay at Fidelity forever.

Same concept as EJ, just different execution.
:shock:

Fidelity offers a ton of options, the ZERO funds are just one of them... But yes, you can't transfer their ZERO mutual funds to another brokerage. I'm not sure why you think that's some sinister issue...

I guess Vanguard must be just as evil in your mind? When I transferred my funds from Vanguard to Fidelity a few years ago, not all funds would transfer. Those that wouldn't had to be liquidated to cash and moved over that way.

There's a reason that people recommend using ETF's in taxable accounts, as ETF's are highly portable - and most brokerages these days have $0 commissions on ETF's.

For OP - I hear you! I found out this lessen the hard way as well. This was one of the trades I made in March 2020 (when I was able to either TLH or have minimum gains) to "clean up" and convert from mutual funds to ETFs (whenever possible) in my taxable accounts.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by Grogs »

SnowBog wrote: Wed Jul 21, 2021 7:54 pm
gwe67 wrote: Wed Jul 21, 2021 6:06 pm "Zero" sure does have strings attached....

The idea is to suck you in and then make you stay at Fidelity forever.

Same concept as EJ, just different execution.
:shock:

Fidelity offers a ton of options, the ZERO funds are just one of them... But yes, you can't transfer their ZERO mutual funds to another brokerage. I'm not sure why you think that's some sinister issue...

I guess Vanguard must be just as evil in your mind? When I transferred my funds from Vanguard to Fidelity a few years ago, not all funds would transfer. Those that wouldn't had to be liquidated to cash and moved over that way.

There's a reason that people recommend using ETF's in taxable accounts, as ETF's are highly portable - and most brokerages these days have $0 commissions on ETF's.

For OP - I hear you! I found out this lessen the hard way as well. This was one of the trades I made in March 2020 (when I was able to either TLH or have minimum gains) to "clean up" and convert from mutual funds to ETFs (whenever possible) in my taxable accounts.
One of the great things about VG, at least with their large funds, is the ability to convert to an ETF with no tax consequences. I did it a couple of years ago when Vanguard absolutely refused to let me transfer shares of VTSAX to a donor advised fund at Fidelity. I made one call to have the lots I wanted converted to VTI and then the transfer went through the next day. So I feel like I can have the convenience of mutual funds and still get the portability of ETFs when I need them. Unfortunately, this tax-free conversion is unique to VG as far as I know.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by SnowBog »

Grogs wrote: Wed Jul 21, 2021 8:11 pm
SnowBog wrote: Wed Jul 21, 2021 7:54 pm
gwe67 wrote: Wed Jul 21, 2021 6:06 pm "Zero" sure does have strings attached....

The idea is to suck you in and then make you stay at Fidelity forever.

Same concept as EJ, just different execution.
:shock:

Fidelity offers a ton of options, the ZERO funds are just one of them... But yes, you can't transfer their ZERO mutual funds to another brokerage. I'm not sure why you think that's some sinister issue...

I guess Vanguard must be just as evil in your mind? When I transferred my funds from Vanguard to Fidelity a few years ago, not all funds would transfer. Those that wouldn't had to be liquidated to cash and moved over that way.

There's a reason that people recommend using ETF's in taxable accounts, as ETF's are highly portable - and most brokerages these days have $0 commissions on ETF's.

For OP - I hear you! I found out this lessen the hard way as well. This was one of the trades I made in March 2020 (when I was able to either TLH or have minimum gains) to "clean up" and convert from mutual funds to ETFs (whenever possible) in my taxable accounts.
One of the great things about VG, at least with their large funds, is the ability to convert to an ETF with no tax consequences. I did it a couple of years ago when Vanguard absolutely refused to let me transfer shares of VTSAX to a donor advised fund at Fidelity. I made one call to have the lots I wanted converted to VTI and then the transfer went through the next day. So I feel like I can have the convenience of mutual funds and still get the portability of ETFs when I need them. Unfortunately, this tax-free conversion is unique to VG as far as I know.
That's my understanding as well... But Vanguard does not have ETF for every fund (or at list didn't when I transferred a few years ago).

For clarity, I wasn't trying to take a shot at Vanguard.
I was simply trying to point out the nature of mutual funds being less portable than ETFs. And for those that value portability, they should strongly consider ETF's in taxable.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by lazynovice »

gwe67 wrote: Wed Jul 21, 2021 6:06 pm "Zero" sure does have strings attached....

The idea is to suck you in and then make you stay at Fidelity forever.

Same concept as EJ, just different execution.
EJ has free funds? Which ones are those?
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by Jack FFR1846 »

Personally, I'd sell the zero and just learn going forward to stick with ETFs in taxable going forward. I've got a huge position in FZROX myself, but it's in a tIRA. All of my taxable positions can move anywhere in the form of ETFs and one stock.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by vtMaps »

Grogs wrote: Wed Jul 21, 2021 8:11 pm Unfortunately, this tax-free conversion is unique to VG as far as I know.
It is unique for the moment, but I think Vanguard's patent on share classes expires soon. Other brokerages might allow mutual fund to ETF conversions when the patent expires.

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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by 02nz »

SnowBog wrote: Wed Jul 21, 2021 8:24 pm
Grogs wrote: Wed Jul 21, 2021 8:11 pm
SnowBog wrote: Wed Jul 21, 2021 7:54 pm
gwe67 wrote: Wed Jul 21, 2021 6:06 pm "Zero" sure does have strings attached....

The idea is to suck you in and then make you stay at Fidelity forever.

Same concept as EJ, just different execution.
:shock:

Fidelity offers a ton of options, the ZERO funds are just one of them... But yes, you can't transfer their ZERO mutual funds to another brokerage. I'm not sure why you think that's some sinister issue...

I guess Vanguard must be just as evil in your mind? When I transferred my funds from Vanguard to Fidelity a few years ago, not all funds would transfer. Those that wouldn't had to be liquidated to cash and moved over that way.

There's a reason that people recommend using ETF's in taxable accounts, as ETF's are highly portable - and most brokerages these days have $0 commissions on ETF's.

For OP - I hear you! I found out this lessen the hard way as well. This was one of the trades I made in March 2020 (when I was able to either TLH or have minimum gains) to "clean up" and convert from mutual funds to ETFs (whenever possible) in my taxable accounts.
One of the great things about VG, at least with their large funds, is the ability to convert to an ETF with no tax consequences. I did it a couple of years ago when Vanguard absolutely refused to let me transfer shares of VTSAX to a donor advised fund at Fidelity. I made one call to have the lots I wanted converted to VTI and then the transfer went through the next day. So I feel like I can have the convenience of mutual funds and still get the portability of ETFs when I need them. Unfortunately, this tax-free conversion is unique to VG as far as I know.
That's my understanding as well... But Vanguard does not have ETF for every fund (or at list didn't when I transferred a few years ago).

For clarity, I wasn't trying to take a shot at Vanguard.
I was simply trying to point out the nature of mutual funds being less portable than ETFs. And for those that value portability, they should strongly consider ETF's in taxable.
AFAIK all the stock index funds have ETF equivalents, but active funds, target date funds, and LifeStrategy funds do not. And worth noting that some bond funds with ETF equivalents CANNOT be converted, e.g., you cannot do from VBTLX to BND without actually selling (although there the tax costs will in most cases be modest, if any).
Last edited by 02nz on Wed Jul 21, 2021 9:56 pm, edited 1 time in total.
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beyou
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by beyou »

Seems simple math.

How much taxes will you pay if you sell ?

How much do you save on the mortgage ?
And are there other options similar elsewhere ?

A simple comparison will give you your answer.
I find it hard to believe nobody can beat Schwab on a mortgage.
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sockfight
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by sockfight »

Thank you again for all of the continued comments. Lesson learned.

Which ETFs would one turn to for a total stock market index?
beyou wrote: Wed Jul 21, 2021 8:49 pm I find it hard to believe nobody can beat Schwab on a mortgage.
I mean, who jumps to your mind?
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by pasadena »

sockfight wrote: Wed Jul 21, 2021 8:58 pm Which ETFs would one turn to for a total stock market index?
VTI or SCHB
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by Statistical »

fwellimort wrote: Wed Jul 21, 2021 7:50 pm In a taxable account, I would highly recommend going ITOT/VTI/SCHB/SPTM instead or FSKAX if you really want to stick with mutual funds.
(In this day, I would always recommend ETFs instead because they are the most portable [and easiest to tax loss harvest with in market downturns])

FZROX and FZILX should only be used in tax advantaged account (cause you can simply exchange funds without any tax issues).
If you can realize losses, then that would be great (tax loss harvesting). If you have gains, there's really nothing much you can do.
You agreed to the conditions and in return, Fidelity allowed you to purchase funds at zero expense. I only buy ITOT in taxable due to this.
This right here. I use VTI in taxable and FZROX is tax sheltered accounts. VTI is very portable even more so than VTSAX (although Vanguard can convert for you). ETFs in general are universally transferable and any broker worth using these days has $0 commission trades on stocks/ETFs.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by Statistical »

sockfight wrote: Wed Jul 21, 2021 8:58 pm Thank you again for all of the continued comments. Lesson learned.

Which ETFs would one turn to for a total stock market index?
beyou wrote: Wed Jul 21, 2021 8:49 pm I find it hard to believe nobody can beat Schwab on a mortgage.
I mean, who jumps to your mind?
Aimloan or likely any of the discount online mortgage brokers.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by Statistical »

sockfight wrote: Wed Jul 21, 2021 8:58 pm Thank you again for all of the continued comments. Lesson learned.

Which ETFs would one turn to for a total stock market index?
VTI. With the near universal zero commissions on stocks/ETF trades combined with fractional share support at most brokerages (but not Vanguard) it is hard to beat VTI in a taxable account these days. For tax loss harvesting I will swap VTI for SCHIB.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by sc9182 »

Hoping OP (and/or spouse) don’t have all their savings in the this Fidelity Zero fund - or how did you accumulate/build position(s) approaching million in brokerage (or possibly more) in a fund — which has been Open for bidness little over 2 years (?) - just curious! If you truly got a large chunk - May be you could try to bargain voting-rights on this approx $10B fund :-) (kidding, right!)

If you have accumulated good chunk of monies into these funds - and you only temporarily need those funds (and have good embedded cap gains, thank Markets) — may be take Margin (can get for under 2% possibly for 1% — based on some of the numbers you are hinting) as a bridge till closing. After closing — pay it right back ..

Then again - other posters have good suggestions.

Btw - I am sure you looked at Mortgage Refinance Mega thread - some of those low current rates seems better than Relationship discount at Schwab (or Chase for that matter)
Last edited by sc9182 on Thu Jul 22, 2021 7:44 am, edited 3 times in total.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by ruud »

02nz wrote: Wed Jul 21, 2021 8:35 pm AFAIK all the stock index funds have ETF equivalents, but active funds, target date funds, and LifeStrategy funds do not. And worth noting that even bond funds with ETF equivalents CANNOT be converted, so you cannot do from VBTLX to BND without actually selling (although there the tax costs will in most cases be modest, if any).
Tiny correction: some (but as you say, not all) bond funds can be converted, i.e. the ones that accrue interest monthly. Among these are the various Treasury Index, Corporate Bond Index and Tax-Exempt Bond Index funds (but Total Bond and Short/Intermediate/Long-Term Bond are out). For a full list, see this document from Vanguard.
.
02nz
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by 02nz »

ruud wrote: Wed Jul 21, 2021 9:54 pm
02nz wrote: Wed Jul 21, 2021 8:35 pm AFAIK all the stock index funds have ETF equivalents, but active funds, target date funds, and LifeStrategy funds do not. And worth noting that even bond funds with ETF equivalents CANNOT be converted, so you cannot do from VBTLX to BND without actually selling (although there the tax costs will in most cases be modest, if any).
Tiny correction: some (but as you say, not all) bond funds can be converted, i.e. the ones that accrue interest monthly. Among these are the various Treasury Index, Corporate Bond Index and Tax-Exempt Bond Index funds (but Total Bond and Short/Intermediate/Long-Term Bond are out). For a full list, see this document from Vanguard.
Ah thanks, learn something new everyday! Edited my earlier post.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by tomsense76 »

fwellimort wrote: Wed Jul 21, 2021 7:50 pm
sockfight wrote: Wed Jul 21, 2021 7:45 pm
tomsense76 wrote: Wed Jul 21, 2021 7:29 pm Interesting I'd try the opposite tact. Call Fidelity and tell them you are thinking of bailing to Schwab due to their lower mortgage rate offer. See if Fidelity will match it :wink:
I would try this tactic if Fidelity had a mortgage program. As far as I know, they do not. Am I wrong?
Fidelity is a brokerage firm. No mortgage program as far as I understand (at least as of yet).
No though they do seem to partner with a few different companies for housing needs. Notably LendingTree for mortgages. Perhaps they can work out some kind of deal for you there.

That said, when it comes to negotiating, which is really what I'm suggesting, it helps to be flexible. Presumably you are happy with Fidelity and your investments with them. It's really only the prospect of a lower mortgage rate, which is causing you to rethink things, right? Are there other things Fidelity could do to make you happier? What would they be?
fwellimort wrote: Wed Jul 21, 2021 7:50 pm There's really no way in a taxable account without realizing the gains.
In a taxable account, I would highly recommend going ITOT/VTI/SCHB/SPTM instead or FSKAX if you really want to stick with mutual funds.
(In this day, I would always recommend ETFs instead because they are the most portable [and easiest to tax loss harvest with in market downturns])

FZROX and FZILX should only be used in tax advantaged account (cause you can simply exchange funds without any tax issues).
If you can realize losses, then that would be great (tax loss harvesting). If you have gains, there's really nothing much you can do.
You agreed to the conditions and in return, Fidelity allowed you to purchase funds at zero expense. I only buy ITOT in taxable due to this.
Here's the real rub. Moving to Schwab means selling your positions and realizing taxable gains. Yes I'm sure you are already kicking yourself for investing in funds that cannot be moved (best to let that go). Though this does raise an important point and one considering for your next step and what you would really want from Fidelity or anyone else. Namely how much would you really save moving to Schwab less the taxes paid on selling these funds? If this is a large number, maybe it is still worth doing (though as others note lower rates may be found from others that do not have this requirement). If it is small, maybe there is something Fidelity can do to make up that difference. For example getting 3% cash back on a credit card instead of 2% (this is enough to overcome credit card transaction fees when paying estimated taxes) or a long 0% APR period (good for a balance transfer or floating some expenses). Not trying to get overly focused on credit cards, but that's one avenue. There might be other things that Fidelity can do, which would improve things for you without needing to sell and pay taxes now. Just something to think about :happy
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
02nz
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by 02nz »

tomsense76 wrote: Wed Jul 21, 2021 10:09 pm For example getting 3% cash back on a credit card instead of 2% (this is enough to overcome credit card transaction fees when paying estimated taxes) or a long 0% APR period (good for a balance transfer or floating some expenses). Not trying to get overly focused on credit cards, but that's one avenue. There might be other things that Fidelity can do, which would improve things for you without needing to sell and pay taxes now. Just something to think about :happy
It's possible Fidelity can offer a retention bonus. Forget about the credit card though - it's a Fidelity-branded card, they don't issue it (Elan does) and they really have nothing to do with its operations other than receiving the 2% deposit.
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sockfight
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by sockfight »

sc9182 wrote: Wed Jul 21, 2021 9:21 pm Hoping OP (and/or spouse) don’t have all their savings in the this Fidelity Zero fund - or how did you accumulate portfolio approaching million (or possibly more) in a fund — which has been Open for bidness little over 2 years (?) - just curious! If you truly got a large chunk - May be you could try to bargain voting-rights on this approx 10B fund :-)

If you have accumulated good chunk of monies into these funds - and you only temporarily need those funds (and have good embedded cap gains, thank Markets) — may be take Margin (can get for under 2% possibly for 1% — based on some of the numbers you are hinting) as a bridge till closing. After closing — pay it right back ..

Then again - other posters have good suggestions.

Btw - I am sure you looked at Mortgage Refinance thread - some of those current rates seems better than Relationship discount at Schwab (or Chase for that matter)
Well, I have been using it as my stock fund as part of a general three-fund approach. I didn't see anything wrong with it before this issue, though I've now learned there are better options for tax purposes like VTI. But the fund itself seems fine as far as its holdings go, unless I'm missing something?

Were it not for mortgage considerations, I would probably shift out of this fund as it made sense to sell positions over time...

I have not seen this Mortgage Refinance thread but will go looking for it now!

The margin loan is interesting. Does Fidelity offer that? I know Schwab has the Pledged Asset Line, but last I looked, Fidelity didn't have a quite comparable program where you could outright withdraw money on a margin loan.

I have been generally happy with Fidelity but here's two things - mortgage rates and margin loans - they don't offer that others do! I had considered that if I did move money, I might make it permanent. But good point that it would be wise to talk to Fidelity too and see what they can offer...
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by tomsense76 »

02nz wrote: Wed Jul 21, 2021 10:17 pm
tomsense76 wrote: Wed Jul 21, 2021 10:09 pm For example getting 3% cash back on a credit card instead of 2% (this is enough to overcome credit card transaction fees when paying estimated taxes) or a long 0% APR period (good for a balance transfer or floating some expenses). Not trying to get overly focused on credit cards, but that's one avenue. There might be other things that Fidelity can do, which would improve things for you without needing to sell and pay taxes now. Just something to think about :happy
It's possible Fidelity can offer a retention bonus. Forget about the credit card though - it's a Fidelity-branded card, they don't issue it (Elan does) and they really have nothing to do with its operations other than receiving the 2% deposit.
Yep wasn't trying to get overly focused on credit cards. Just trying to give the OP some things to consider asking for. Agree a retention bonus is a nice simple way to go.

That said, Fidelity does give 3% back to Fidelity Rewards+ clients. Whether one can motivate Fidelity to give you that as a retention offer (even for a limited time like 1yr) without getting stuck in some expensive asset management plan IDK, but it could be worth trying. Worst case (as long as one doesn't get suckered) is getting nothing
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
SnowBog
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by SnowBog »

sockfight wrote: Wed Jul 21, 2021 10:25 pm But the fund itself seems fine as far as its holdings go, unless I'm missing something?
I've found nothing wrong with FZROX (or FZILX) as a fund. They are low cost reasonably well diversified funds. They make up the bulk of my investments in my tax-advantaged accounts.

But as you found out, it's generally not suggested to have mutual funds in taxable accounts if you value portability. Invariably, you are going to find mutual funds that can't be transferred to any brokerage you want. (That is not unique to these fund, nor Fidelity...)

ETFs in taxable are much better for portability, and generally better for tax-efficiency.
exigent
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by exigent »

02nz wrote: Wed Jul 21, 2021 6:14 pm
exigent wrote: Wed Jul 21, 2021 6:11 pm
sockfight wrote: Wed Jul 21, 2021 4:40 pm Is there any way around this? Is it possible for another institution to "hold" my position in this fund?
Call Schwab and ask whether or not they can accept/hold these shares. It’s possible to transfer Admiral shares from Vanguard to at least some receiving brokerage, so perhaps something similar can be done with these shares from Fidelity. The only way to know for sure is to call Schwab and ask them.

Regardless, this is a good cautionary tale.
We know for a fact the ZERO funds cannot be held anywhere else. Fidelity has made sure of this. A good cautionary tale indeed. I'll try to remember to link to this thread the next time someone asks what the catch is with the ZERO funds.
Well, there’s the answer then. Short of selling, there’s no way around this, and no way for another institution to hold the position.

When we moved our holdings to Fidelity late last year, we switched our retirement accounts into Fidelity mutual funds but decided against the Zero version mostly b/c I was concerned about hidden gotchas and they sounded too good to be true. We had already converted our Vanguard funds in taxable to ETFs before making the move (except for Int Tax Exempt [VWIUX*], which doesn’t have an ETF share class).

Granted, the use of proprietary funds isn’t a huge deal in a retirement account (no tax consequences to switching), but I’m glad we did that we stuck with ‘normal’ index funds.

*Note: We’ve since moved our VWIUX holdings from Fidelity to Merrill Edge where they just sit there and qualify us for Platinum Honors with BofA.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by exigent »

sockfight wrote: Wed Jul 21, 2021 8:58 pm
beyou wrote: Wed Jul 21, 2021 8:49 pm I find it hard to believe nobody can beat Schwab on a mortgage.
I mean, who jumps to your mind?
We have refinanced twice in the past year with Better.com and were very happy with the pricing and experienced. We ultimately ended up at 2.125% for a 15 yr fixed w/no escrow and we incurred negligible costs along the way thanks to the available lender credits. The main investment was time spent shuffling paperwork and some credit pulls. Our timing wasn’t perfect, but it was pretty good and we’re very happy with where we wound up.

All in all, it was a very smooth and efficient process. It’s done almost entirely online via their secure portal, and they partner with local law firms for a mobile closing. The attorney came to us both times and we closed on our back patio.

This is not an endorsement, but they are worth a look. In both cases, the loan was initially handled by their servicing arm, The Money Source, and sold shortly thereafter to Mr. Cooper (aka Nationstar).
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by ruralavalon »

sockfight wrote: Wed Jul 21, 2021 4:40 pm . . . . .
Is there any way around this? Is it possible for another institution to "hold" my position in this fund? Is it possible to do an in-kind exchange? Any way whatsoever to avoid the tax consequence? Or any way to have the position appear in/count for my new account even if it doesn't transfer? I'm prepared for the answer to be no based on what I've previously read, but it never hurts to see if anyone has found a workaround.
. . . . .
No.
The Prospectus for FZROX wrote:Shares of the fund are available only to individual retail investors who purchase their shares through a Fidelity® brokerage account, including retail non-retirement accounts, retail retirement accounts (traditional, Roth and SEP Individual Retirement Accounts (IRAs)), health savings accounts (HSAs), Fidelity BrokerageLink® accounts, and stock plan services accounts.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by aristotelian »

I have specifically asked at Schwab whether they can accept in kind transfer of FZROX and the answer is no. OP is going to have to eat the tax cost or find another account to transfer to get the relationship bonus at Schwab.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by ryman554 »

sockfight wrote: Wed Jul 21, 2021 4:40 pm I currently have my assets at Fidelity. I'm looking at refinancing my mortgage, and Schwab offers mortgages with a relationship discount. I know some other institutions do this, but as far as I know, Fidelity has no such program. If I'm wrong about that, would love to know.

....

The mortgage refinance rate is probably still worth it with the tax consequences, but it's a massive complication. Thank you.
Goodness gracious me, those are terrible rates from Schwab. And there is nothing about closing costs.

You will get better rates without having to jump through hoops with discount lenders. You can expect to get around 2% on a 15 / 2.75% on a 30 with no closing costs at all (you get credits for all fees). Give or take. I'm seeing 1.75% on a 15 or 2.375% on a 30 (fixed) at "normal" lending fees. Shop around and your problem goes away.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by gogleheads.orb »

sockfight wrote: Wed Jul 21, 2021 8:58 pm Thank you again for all of the continued comments. Lesson learned.

Which ETFs would one turn to for a total stock market index?
beyou wrote: Wed Jul 21, 2021 8:49 pm I find it hard to believe nobody can beat Schwab on a mortgage.
I mean, who jumps to your mind?
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by UpperNwGuy »

ryman554 wrote: Thu Jul 22, 2021 12:34 pm
sockfight wrote: Wed Jul 21, 2021 4:40 pm I currently have my assets at Fidelity. I'm looking at refinancing my mortgage, and Schwab offers mortgages with a relationship discount. I know some other institutions do this, but as far as I know, Fidelity has no such program. If I'm wrong about that, would love to know.

....

The mortgage refinance rate is probably still worth it with the tax consequences, but it's a massive complication. Thank you.
Goodness gracious me, those are terrible rates from Schwab. And there is nothing about closing costs.

You will get better rates without having to jump through hoops with discount lenders. You can expect to get around 2% on a 15 / 2.75% on a 30 with no closing costs at all (you get credits for all fees). Give or take. I'm seeing 1.75% on a 15 or 2.375% on a 30 (fixed) at "normal" lending fees. Shop around and your problem goes away.
I agree. Instead of figuring out how to get your investments into Schwab with minimal tax damage, you should instead be shopping around for a better deal on a mortgage loan with other lenders. You can leave your investment portfolio alone.
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sockfight
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by sockfight »

Aimloan and lenderfi aren't as good as Schwab. And Better wants to do a soft credit pull just to give a rate! Schwab's rates are 0 points and before relationship discount.
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by ryman554 »

sockfight wrote: Thu Jul 22, 2021 2:29 pm Aimloan and lenderfi aren't as good as Schwab. And Better wants to do a soft credit pull just to give a rate! Schwab's rates are 0 points and before relationship discount.
points != lender fees.

I am trying to figure out how you numbers are different than mine.

What state are you in? How much are you refi-ing? And you LTV?

For conforming, $500k loan in CA:
A true no cost 15 year refi at aimloan is at 2-2.125%. At Schwab, it's at least 2.5%, admittedly before the 0,25 discount.
A true no cost 30 year refi at aimloan is at 2.75-2.875%. At Schwab, it's at least 3.0%, admittedly before the 0,25 discount.

Lender fi is typically 0.25% better than aimloan.
A true no cost 15 year refi at lenderfi is at 1.875%. At Schwab, it's at least 2.5%, admittedly before the 0,25 discount.
A true no cost 30 year refi at lenderfi is at 2.5%. At Schwab, it's at least 3.0%, admittedly before the 0,25 discount.

Are you sure you aren't comparing to an ARM or something?
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Re: Fidelity ZERO funds complicating transfer to another brokerage / mortgage deal

Post by nalor511 »

sockfight wrote: Thu Jul 22, 2021 2:29 pm Aimloan and lenderfi aren't as good as Schwab. And Better wants to do a soft credit pull just to give a rate! Schwab's rates are 0 points and before relationship discount.
Who cares about a soft pull?
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