Walk in service [moving assets to a brokerage that offers it]

[mrrentman]

[Topic title clarified - mod mkc]

I have a friend with a $9 million portfolio at Vanguard (simple 60/40 VTSAX/VBTLX).
They are getting old and get confused on the website with annual RMD's and rebalancing.
They are thinking they should go to a Merrill Lynch or Fidelity where they can have walk-in service when they need help.
But they want to keep the VTSAX/VBTLX for the low costs.

I'm trying to figure out the downsides, so that I can explain to this person.
I know they would have to be extremely careful in transferring their holdings In Kind to avoid immediate tax consequences.
But can anyone help me understand all the other costs that will be involved.
Fees for in kind transfer?
Fees for new brokerage to execute RMD's or periodic rebalancing?
Fees because new brokerage is holding mutual funds from Vanguard?
The person doesn't want to pay an advisory fee as they are very happy with their allocation and holdings.
Any information would be helpful. Google has not been useful in looking for how this would play out.
Thank you

[Wiggums]

Fidelity and Schwab have equivalent low cost funds.

https://www.bogleheads.org/wiki/Three-fund_portfolio

1) Look under establishing a three fund portfolio
2) scroll down to Three-fund portfolios using mutual funds

Example:
With Fidelity, for example, you could construct a three-fund portfolio using:
Fidelity ZERO Total Market Index Fund (FZROX)[note 5] or Fidelity Total Market Index Fund (FSKAX)
Fidelity ZERO International Index Fund (FZILX)[note 5][note 6] or Fidelity Total International Index Fund (FTIHX)
Fidelity U.S. Bond Index Fund (FXNAX)

[Mr. Rumples]

The funds can be kept at Fidelity. I know people, more than one, who transferred their Vanguard funds to Fidelity and Fidelity waived fees and the amounts involved were a lot less than that mentioned. I am pretty sure there are no ongoing fees - otherwise I would have heard about it.

Here is what Fidelity says about the funds:
https://fundresearch.fidelity.com/mutua ... /922908728
https://fundresearch.fidelity.com/mutua ... /921937603

The fee is minimal if necessary.

[retired@50]

Fees for in kind transfer?
Fees for new brokerage to execute RMD's or periodic rebalancing?
Fees because new brokerage is holding mutual funds from Vanguard?

No fees for transfer.
One can typically set up an automated RMD, regardless of custodian (Vanguard, Fidelity or Schwab).
I suspect re-balancing won't come without some sort of fee. It could be trivial if the account owner can decide which fund(s) need to be sold, they could place a phone-assisted trade.
I think the fees are typically levied when one buys a Vanguard fund at Fidelity or Schwab. Might be free to sell.

Regards,

[steadyosmosis]

I moved from Vanguard to Schwab maybe fifteen years ago.
No regrets.

[Watty]

They can likely get a good transfer bonus at either of those brokerages but they will need to be sure to ask about it to get it. With wherever they are they need to double check that their benifficaries are correct especially if they were set up years ago.

They also need to make sure that they have a POA set up in case they are incapacitated. People have posted that vanguard is very different to work with using a POA.

[quantAndHold]

It’s not a bad idea to transfer to a brokerage where they can get more handholding. But you should also help them to consider what will happen if they aren’t able to drive to get to the brokerage, and what to happen when they’re not able to manage the money themselves at all, and plan contingencies for that.

Both of those things happened to my dad. I had to completely take over for him about 18 months before he died. If I hadn’t been there, it would have been a mess. In one day, he went from being fully independent to not being able to pay bills or manage his pills. Not everyone has a competent child who’s willing to jump in. If they don’t, help them to work through that issue as well.

[Parkinglotracer]

Maybe vanguard PAS.

[1TheGame]

Fees for in kind transfer?
Fees for new brokerage to execute RMD's or periodic rebalancing?
Fees because new brokerage is holding mutual funds from Vanguard?

No fees for transfer.
One can typically set up an automated RMD, regardless of custodian (Vanguard, Fidelity or Schwab).
I suspect re-balancing won't come without some sort of fee. It could be trivial if the account owner can decide which fund(s) need to be sold, they could place a phone-assisted trade.
I think the fees are typically levied when one buys a Vanguard fund at Fidelity or Schwab. Might be free to sell.

Regards,

Most of my funds are now at Fidelity. I recently inquired to find out if it would be possible to get my Fidelity self-managed accounts rebalanced by Fidelity. I was asking for the scenario in which I would be unavailable due to being dead. The answer was no.

One other thought, in order to rebalance Vanguard mutual funds in a Fidelity account, a $75 fee (I think that amount is correct) would need to be paid to buy into a Vanguard mutual fund. This is because while there is no cost for the initial transfer of Vanguard MFs into Vanguard, or to re-invest dividends, there is a fee to buy additional shares. So I recommend that Vanguard funds first be converted to the equivalent Vanguard ETF before transferring, or once at Fidelity sell the Vanguard MFs and buy the equivalent Fidelity MFs. I ended up with a hybrid approach - once at Fidelity I sold VTSAX and bought FSKAX (= Fidelity Total Stock Market MF, 0.015% ER) and sold Vanguard MFs and bought the Vanguard BIV ETF.

[bonesly]

Fees because new brokerage is holding mutual funds from Vanguard?

Fidelity will let you hold VTSAX and VBTLX with an on-going fee. When you look at the "Fee & Distributions" tab of those links, it's $100 initial and then Note 2 suggests $5 for each transaction thereafter. That's the online fee; if they need a customer service rep to do this it may cost more (up to $250). However, Fido might well waive all fees and even give him/her a bonus for rolling in $9M in assets (you just have to ask for it).

2. Transaction Fee:

A transaction fee is similar to a brokerage fee or commission which you pay when you buy or sell a stock. For some funds available through Fidelity you are required to pay a transaction fee. However, you will not pay a sales load on Transaction Fee (TF) funds. You will only be charged a transaction fee when you buy a FundsNetwork TF fund, not when you sell one. All other fees and expenses described in a fund's prospectus still apply. You can choose to buy or sell shares directly from the fund itself or its principal underwriter or distributor without paying a transaction fee to Fidelity.

Online Transaction Fees: $49.95 for most funds. Certain funds will have a transaction fee up to $100. To identify any applicable transaction fees associated with the purchase of a given fund, please refer to the "Fees and Distributions" tab.

Fidelity Automated Service Telephone (FAST): 25% off representative-assisted rates, Maximum: $187.50, Minimum: $75
Representative-Assisted: 0.75% of principal, Maximum: $250, Minimum: $100
Automatic Investment: $5 per transaction, after the initial investment.

Schwab will also let you hold VTSAX and VBTLX with an on-going fee. When you look at the "Fund Facts & Fees" tab of those links, it's $74.95 initial. I could not easily find if there is a fee for transactions after the initial transfer. Like Fido, Schwab might well waive all fees and even give him/her a bonus for rolling in $9M in assets.

----------
A $25 savings for each of the two funds is an insignificant difference on a $9M asset total. It seems more likely the decision should be based on which shop has offices close by, and if they both do, then I'd likely suggest Fidelity over Schwab (since Fido gets more positive comments here on customer service than Schwab or Vanguard).

[jebmke]

Fees because new brokerage is holding mutual funds from Vanguard?

Fidelity will let you hold VTSAX and VBTLX with an on-going fee. When you look at the "Fee & Distributions" tab of those links, it's $100 initial and then Note 2 suggests $5 for each transaction thereafter. That's the online fee; if they need a customer service rep to do this it may cost more (up to $250). However, Fido might well waive all fees and even give him/her a bonus for rolling in $9M in assets (you just have to ask for it).

2. Transaction Fee:

A transaction fee is similar to a brokerage fee or commission which you pay when you buy or sell a stock. For some funds available through Fidelity you are required to pay a transaction fee. However, you will not pay a sales load on Transaction Fee (TF) funds. You will only be charged a transaction fee when you buy a FundsNetwork TF fund, not when you sell one. All other fees and expenses described in a fund's prospectus still apply. You can choose to buy or sell shares directly from the fund itself or its principal underwriter or distributor without paying a transaction fee to Fidelity.

Online Transaction Fees: $49.95 for most funds. Certain funds will have a transaction fee up to $100. To identify any applicable transaction fees associated with the purchase of a given fund, please refer to the "Fees and Distributions" tab.

Fidelity Automated Service Telephone (FAST): 25% off representative-assisted rates, Maximum: $187.50, Minimum: $75
Representative-Assisted: 0.75% of principal, Maximum: $250, Minimum: $100
Automatic Investment: $5 per transaction, after the initial investment.

Schwab will also let you hold VTSAX and VBTLX with an on-going fee. When you look at the "Fund Facts & Fees" tab of those links, it's $74.95 initial. I could not easily find if there is a fee for transactions after the initial transfer. Like Fido, Schwab might well waive all fees and even give him/her a bonus for rolling in $9M in assets.

----------
A $25 savings for each of the two funds is an insignificant difference on a $9M asset total. It seems more likely the decision should be based on which shop has offices close by, and if they both do, then I'd likely suggest Fidelity over Schwab (since Fido gets more positive comments here on customer service than Schwab or Vanguard).

Can't each of them be converted to equivalent ETFs with no tax consequences and transferred to other brokers?

[jdibber]

Unless I'm missing something, moving brokerages seems like overkill. If they're looking for simplicity, then just buy a 60/40 balanced fund, eg VBIAX (er 0.07) and call it a day.

https://testfol.io/?s=h3ykaTY3OrS

[Chogy]

Maybe I missed it, but is the $9M qualified? I assume so if they are taking RMD. Or is it a total $9M mixed with some taxable, some qualified?

If retirement funds, why not liquidate to cash (no taxes), transfer, and buy the equivalent Fido funds? If they have significant taxable holdings with large capital gains, maybe it'd be best to leave it with Vanguard so a step-up in basis takes place at a later date, being sure beneficiaries are updated.

[bonesly]

Unless I'm missing something, moving brokerages seems like overkill.

The investor is starting to have cognitive decline. They want in-person hand-holding; a brick & mortar office to go to for help (with basic transactions it seems). Vanguard doesn't have that any offices clients can visit and all the assets are at Vanguard; thus why they're looking for a brokerage that does have offices.

The issues that @quantAndHold brings up are also valid... what happens when they move brokerages, but are no longer able to physically get to the brokerage's office or able to do any financial management on their own?

Maybe I missed it, but is the $9M qualified? I assume so if they are taking RMD. Or is it a total $9M mixed with some taxable, some qualified?

Open didn't say if it's all Taxable or a mix of Taxable & tax-advantaged, but they did say they know they need to transfer in-kind to avoid tax consequences. That could mean it's most/all Taxable or that the OP wrongly assumes that in-kind transfers are required for tax-advantaged accounts.

I know they would have to be extremely careful in transferring their holdings In Kind to avoid immediate tax consequences.

[mkc]

I have a friend with a $9 million portfolio at Vanguard (simple 60/40 VTSAX/VBTLX).
They are getting old and get confused on the website with annual RMD's and rebalancing.
They are thinking they should go to a Merrill Lynch or Fidelity where they can have walk-in service when they need help.
But they want to keep the VTSAX/VBTLX for the low costs.

The person doesn't want to pay an advisory fee as they are very happy with their allocation and holdings.

They will likely not get walk-in assistance with Merrill Lynch unless they have an AUM/advisor account, and you definitely don't want to go there. 90+ year old family member was paying around 1.5% AUM and ML salesperson had their asset allocation at 95% cash with enough account churn that they ended up with IRMAA charges.

[delamer]

Vanguard has a free RMD service, so that can ge handled where he is.

The suggestion of using the Vanguard Balanced Index fund for the IRA is excellent.

But without knowing how much is in taxable and what that cost basis is, it’s hard to give more advice.

I’d think the stress of moving accounts for someone with some cognitive decline — especially given the amount — would be worse than working out a solution at Vanguard.

[Watty]

Except for converting a mutual fund to an equivalent ETF any big changes in a taxable account could have a huge tax cost.

There is a quote you will often see here;

“The greatest enemy of a good plan is the dream of a perfect plan."

People sometimes post some pretty bad portfolios which should be improved but this is not one of them.

At 90 if they just;

1) Set the dividends and interest to not be automatically reinvest and to be put into a 4%+ money market fund.

2) Set up any RMDs to be automatically done each year and be put into a 4%+ money market fund

3) Check each year to make sure that the RMD actually got done because there can be glitches. Doing the RMD in January might work well because if there was a problem it likely would be noticed when the income tax return is being done so there would be plenty of time to fix any problem.

4) Set up an automatic transfer each month to a checking account at local brick and mortar bank or credit union that they can go into.

Then they would be doing great because it would be easier for them to follow as they get older.