Advice needed on how to liquidate financial broker account
April 6, 2017 8:16 AM   Subscribe

Please hope me financial gurus. I need some advise on how to sell or convert some stocks and mutual funds. Several years ago I was gifted an account with a large national financial advisor/broker. This account contains money that is allocated to a handful of mutual funds and different stocks. It is not a large amount of money. Give or take 10K. I would like to sell/convert the money in this account and invest in just one or two stocks of my choosing.

What would be the best way to do this? Should I just ask the existing broker to liquidate everything and purchase the stock I choose and keep the stocks in that account. I am assuming there is some sort of fees and or tax implications involved in the transaction. Or would it be more advisable to have the broker liquidate and close the accounts and send a check and then open an account with E-Trade or other internet broker and invest in the stocks myself? Once I have purchased the stocks I intend to hold on to them long term and not trade in individual stocks on a regular basis.
posted by Justin Case to Work & Money (4 answers total) 2 users marked this as a favorite
(a) Your ultimate destination should be Vanguard rather than whatever overpriced broker you're using now.

(b) When you sell your current holdings, you will be subject to taxation on whatever gains they have accrued. If the stock was actually a gift rather than an inheritance, the "starting point" for calculating gains (called the "basis") will usually be the original donor's cost to acquire the stock, but there are some wrinkles. An income tax program can easily calculate what you will owe, but the main point is: you will most likely owe something. The taxes will be the same whether you sell the stocks and reinvest the money with the same broker or sell the stocks and invest with a different broker. The usual transaction fees will also apply (unless you are in a peculiar fund that charges a fee on redemption, which I hope you are not, in which case you will have to pay an additional fee to the fund you're in).
posted by praemunire at 8:34 AM on April 6, 2017 [2 favorites]

In addition to what praemunire says (which is all good advice), the amount of tax you will owe depends on your overall income (you might owe 0% tax if you're in a low tax bracket).

Because you will likely owe tax, you might want to look at the funds that you own now and think about whether you really want/need to sell them. You can transfer the actual stocks and mutual funds holdings to a different broker (a transfer "in-kind") without selling them and then make the transition to your ideal portfolio over time, which you might want to do if the gift holdings are *sort of* what you want but just not exactly what you would choose (i.e. it might be worth holding on to a fund with higher-than-ideal fees for a year or two if you will be able to save a lot on tax).
posted by mskyle at 9:02 AM on April 6, 2017

whatever overpriced broker you're using now

We don't know your broker, so it depends on what fees they would charge you for purchasing and holding the stocks you want to buy. (Obligatory reminder that index funds are better than individual stocks for most investors.) Commissions on trades tend to be pretty low, especially if you're going to buy and hold for years. Discount brokers charge in the $5-$10 range. Maintenance fees might be more important. But if your balance is high enough to avoid ongoing fees and the trading fees aren't crazy, it might be worth paying an extra few bucks to avoid the hassle of changing brokers. But if you have an existing account with another firm or plan to build up your investments, then consolidating them in one (low-cost) place like Vanguard would probably be easier.
posted by Mr.Know-it-some at 9:11 AM on April 6, 2017

> Several years ago I was gifted an account with a large national financial advisor/broker.

Just checking: Are you sure that this is not a Beneficiary IRA account? Are you required to take annual distributions from it, for example? Capital gains within IRA accounts are (usually; I'm not an accountant) shielded from taxes, so you could buy or sell within the account, although you'd be subject to taxes on the annual distributions.

If it is a gift (a whole account? How did that work?) and the amount is small enough, consider the costs and tax implications of selling and buying carefully, because the transaction costs are significant. $10K over 8 stocks, say - selling costs you $10 each for $80 and then buying two things costs you another $20, so you've spent $100 on moving $10K around.

If you don't have accurate basis information, you might have to pay capital gains taxes on the whole amount, which adds up to quite a bit depending on your tax bracket - I'd consider that prohibitive.

However, you could transfer a securities account to a lower cost broker. Vanguard is great if you'll be investing in their index funds; if not, something like ETrade is probably fine. That won't cost you money, but the paperwork is fiddly and takes time (signatures with medallion guarantees from your local bank, for example). That's worth it if you're getting charged account fees at the current broker.
posted by RedOrGreen at 2:53 PM on April 6, 2017

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