[Mel]

Asking for a friend – she’s been investing for 10 years via a Morgan Stanley financial advisor who charges 1% and the mutual fund investments have performed at an average of 5.2% annually.

Obviously she can do better but shes wondering what her next steps would be.

Is it: Sell the funds, end relationship with financial advisor, pay taxes on gains and then move the funds into VTI on the Vanguard platform instead of Morgan Stanley?

She’s worried about cost and complexity.

Thanks for your inputs!

[Bill]

The s&p is up about 12% over the last 10 years. So let’s say she had $100k to start.

Her brokerage would have grown to $166k.

If it has been in index funds, $310k.

That’s just a massively bigger number than any tax issues.

Anyway, The taxes depend on whether this was a retirement account or a brokerage.

If it’s all retirement accounts, they won’t be taxed at all.

[Jared]

All she needs is her account information to roll everything into a vanguard brokerage or fidelity or schwab

[Tammy]

If she’s decided Vanguard, she can call them for first steps for account rollovers.

Some funds can transfer in kind.

If Vanguard doesn’t have some of the funds she holds at Morgan Stanley, she will need to sell those funds (keep the money in the account), transfer the cash and reinvest at Vanguard.

If she has a brokerage account, there will be taxable gains/losses.

If it’s IRAs, the rollover isn’t taxable as long as she opens the same type of account(s) at Vanguard and follows the instructions for direct rollovers.

She is most likely invested in managed funds with high fees, so she will want to reallocate to lower fee ETFs.

[Greg]

Morgan Stanley now owns Etrade, the easiest switch would be to keep the funds as is for now, and move everything to a self managed brokerage account with Etrade.

From there I’d start by assessing taxes and probably selling off the lowest gains positions / losses and the most expensive funds.

With a goal of completing the rebalance between now and this time next yr (two tax yrs)

[Bill]

Cost and complexity will only get worse the longer she waits.

[Author]

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