Preparing for a brokerage transfer - a few questions

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UncleLeo
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Joined: Wed Jul 12, 2017 12:43 am

Preparing for a brokerage transfer - a few questions

Post by UncleLeo »

I'm in the process of consolidating 5 accounts into Etrade (and hopefully will get a transfer bonus along the way):
- Taxable brokerage account from Vanguard (currently has mostly mutual funds - VTSAX and VTIAX)
- Taxable brokerage account from Public
- 2 Roth IRAs from Vanguard
- Roth IRA from Fidelity

Since there are many potential ways to do this the wrong way and I'm not as experienced with brokerage transfers, I wanted to ask for the forum's wisdom and advice, specifically around the following:
1) Converting mutual funds to ETFs tax-free on Vanguard side before transferring - I can swear I saw an option to do this online, but I can find it now. I prefer to do this online (if possible) as it reduces the chance of a human error resulting in a taxable event. Is it possible/recommended to do it online or do I have to call? Is there a special number/department for this?
2) Since I'll be transferring two Roth IRAs from Vanguard, is it recommended to combine them first on Vanguard side or just initiate two separate transfers?
3) Does transferring RothIRA happen through ACAT transfer as well?
4) Is it ok to initiate all 5 ACAT transfers at about the same time, or is it recommended to do it "one by one" (wait until a transfer completes before initiating the next one)? If I do it "one by one" there's a chance I'll miss the bonus eligibility window.
5) Any other advice/recommendations would be greatly appreciated. First time I'll be making such a transfer.

Thanks!
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David Jay
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Location: Michigan

Re: Preparing for a brokerage transfer - a few questions

Post by David Jay »

UncleLeo wrote: Thu Jun 01, 2023 12:55 pm1) Converting mutual funds to ETFs tax-free on Vanguard side before transferring - I can swear I saw an option to do this online, but I can find it now. I prefer to do this online (if possible) as it reduces the chance of a human error resulting in a taxable event. Is it possible/recommended to do it online or do I have to call?
You must call. I would recommend the conversion because down-the-road you can buy and sell ETFs at any brokerage without fees.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
sycamore
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Joined: Tue May 08, 2018 12:06 pm

Re: Preparing for a brokerage transfer - a few questions

Post by sycamore »

UncleLeo wrote: Thu Jun 01, 2023 12:55 pm I'm in the process of consolidating 5 accounts into Etrade (and hopefully will get a transfer bonus along the way):
- Taxable brokerage account from Vanguard (currently has mostly mutual funds - VTSAX and VTIAX)
- Taxable brokerage account from Public
- 2 Roth IRAs from Vanguard
- Roth IRA from Fidelity

Since there are many potential ways to do this the wrong way and I'm not as experienced with brokerage transfers, I wanted to ask for the forum's wisdom and advice, specifically around the following:
1) Converting mutual funds to ETFs tax-free on Vanguard side before transferring - I can swear I saw an option to do this online, but I can find it now. I prefer to do this online (if possible) as it reduces the chance of a human error resulting in a taxable event. Is it possible/recommended to do it online or do I have to call? Is there a special number/department for this?
2) Since I'll be transferring two Roth IRAs from Vanguard, is it recommended to combine them first on Vanguard side or just initiate two separate transfers?
3) Does transferring RothIRA happen through ACAT transfer as well?
4) Is it ok to initiate all 5 ACAT transfers at about the same time, or is it recommended to do it "one by one" (wait until a transfer completes before initiating the next one)? If I do it "one by one" there's a chance I'll miss the bonus eligibility window.
5) Any other advice/recommendations would be greatly appreciated. First time I'll be making such a transfer.

Thanks!
1) I only ever did a share class conversion by calling Vanguard. I thought there was a Boglehead thread recently where someone reported seeing a conversion option online. Why not call Vanguard and ask if there's a way to convert online?
2) I don't think it matters. Are the two Vanguard Roth IRA titled identically?
3) Yes. I assume your Roth IRA accounts are brokerage accounts (as opposed to the old Vanguard "mutual fund only" accounts), yes?
4) Opinions vary on this. I think it's okay to do all at once.
5. Here's a general recipe for transferring an account:

1. Before transferring a taxable account, at your OLD brokerage be sure to download your cost basis information (purchase date, purchase amount, #shares). This could be a screenshot or spreadsheet download of your transactions, or perhaps the individual transaction confirmations. Also set up your cost basis election (specific ID versus average cost) if you haven't already done so.


2. Set up a new account at NEW brokerage. Make sure it's titled same as your account at OLD brokerage (same SSN, full name, Sr. Jr, etc.) to avoid any hiccups verifying it's a legit transfer request.


3. Initiate an online transfer at NEW brokerage to do a full account transfer, which should be transferred in-kind.
- With mutual fund, all shares will be transferred, including any fractional amount.
- With ETFS, unlike with mutual fund share, only whole shares of ETFs will be transferred. Any fractional ETF shares will be liquidated first, and the proceeds transferred as cash soon afterward. Example: you have two lots of 100.80 and 50.40 shares = 151.20 total shares. 151 shares will be transferred, and 0.20 shares will be liquidated. NOTE: The liquidation is a sale, and I believe the shares selected would be "first in first out" but best to double check with OLD brokerage. I'm not entirely sure if the liquidation/sale gets reported on a 1099-B but you're responsible for reporting any gain/loss on your tax return anyway.


4. At NEW brokerage, (a) validate that both the shares and cost basis info transferred correctly. Sometimes the cost basis info takes a week or two to be transferred. If the info is not correct, don't do the share class conversion. Work with Vanguard to get it corrected.

(b) Also check your cost basis election. If it's not correct, change it to be what you want. May have to work with customer support to do this.

(c) Also set up your dividend reinvestment election. It's possible you will get the shares transferred over to NEW brokerage right before dividends are paid out, so you should choose if you want the dividends in cash or reinvested.

(d) Make sure cash proceeds of any fractional share sale makes it over. This may take a week or two to show up. Sometimes it doesn't happen until the end of the month.


5. Be prepared for the OLD brokerage to close your online account. I'm not sure which ones might do this, but I seem to recall it's happened before. From their perspective, you're leaving them so why should they keep your account around. The downside for you is you might lose access to various records (transactions, tax forms for previous years, etc.) so download whatever you want before doing the transfer.

Some of the above only applies to taxable accounts (like cost basis). I've not transferred more than one account at a time. You probably have to fill out a separate form for each account (and type).
miket29
Posts: 1065
Joined: Tue Jun 20, 2017 9:07 pm

Re: Preparing for a brokerage transfer - a few questions

Post by miket29 »

UncleLeo wrote: Thu Jun 01, 2023 12:55 pm 1) Converting mutual funds to ETFs tax-free on Vanguard side before transferring - I can swear I saw an option to do this online, but I can find it now. I prefer to do this online (if possible) as it reduces the chance of a human error resulting in a taxable event. Is it possible/recommended to do it online or do I have to call? Is there a special number/department for this?
3) Does transferring RothIRA happen through ACAT transfer as well?
4) Is it ok to initiate all 5 ACAT transfers at about the same time, or is it recommended to do it "one by one" (wait until a transfer completes before initiating the next one)? If I do it "one by one" there's a chance I'll miss the bonus eligibility window.
5) Any other advice/recommendations would be greatly appreciated. First time I'll be making such a transfer.
1) You may have seen a thread from someone who was offered by Vanguard the opportunity to do the conversion online. The consensus was it was a pilot program Vanguard was offering. If they haven't offered it to you then you'll need to call.

3) Yes

4) I did a regular, IRA, Roth transfer at the same time and it all worked fine.

5) for your regular account(s) print out the cost basis of all your holdings prior to the transfer. My transfer went without problem and Fidelity got the correct values but if something happens you'll want those numbers.
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