Logistics of Leaving Full Service Broker

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Logistics of Leaving Full Service Broker

Post by Vogatrice »

I am finally emotionally ready for a breakup with my full service broker. The usual reason, he's been charging $10K/year in fees on my RRSP of approx $600K. I have a discount brokerage account at NBDB and I've looked at the form for registered account transfers. The form requires that I specify if I want to move all positions in-kind, all in cash, or submit a detailed list of what to transfer in-kind vs. what to sell and transfer the cash.

How the heck am I supposed to figure out what to do? The list of stocks/mutual funds/bonds in my existing account is quite long. I really just want to move it all to a simple ETF such as XBAL. But should I do that over time, if some of the existing holdings are doing fine? All at once? Be specific about individual holdings or just do dollar cost average over time by selling $X/month? It's all registered money, so no worry about capital gains/losses.

Moving the whole account to NBDB in-kind at least removes the AUM fee, which is a giant leap forward. But I can't manage the complexity of a long list of individual holdings on my own over time. I need a simple strategy to get this to one or a few ETFs, either all at once or over time. What have others done? What would you recommend?

I did do a search, but didn't find a discussion on this, sorry if I missed it. Thanks for your input.
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Shakespeare
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Re: Logistics of Leaving Full Service Broker

Post by Shakespeare »

Move all in-kind first. Then rearrange at the discount broker.

If you have GICs or bonds, you may need to wait till they mature before moving to XBAL or VBAL. Manage your risk by keeping the quity/bond split the same as you rearrange.
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Re: Logistics of Leaving Full Service Broker

Post by AltaRed »

I agree with Shakes. Move 'all in kind' first on the NBDB form and then you can start to consolidate your holdings a few at a time into a few simple ETFs if you wish to do it that way.

One thought: If you plan to go for an 'all in one' asset allocation ETF like XBAL or VBAL, it shouldn't matter about timing simply because you are going from 'in the market' to 'in the market'. In fact, the easiest way to think about it is to forget what has done well vs what has not done well and just make the entire switch ASAP once the assets have been transferred in.

Or if you want to essentially keep your allocations the same, then convert, for example, all of your Cdn equity mutual funds at one time into one Cdn equity ETF such as VCN. Do the same for all your global equity mutual funds. Sell them all and immediately buy XAW or VXC. Do the same with your fixed income if you have bond mutual funds. You are not winning or losing anything by taking everything out of the left pocket and simply putting it in your right pocket.
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Re: Logistics of Leaving Full Service Broker

Post by deaddog »

What does it cost you to trade at the full service broker. If you are being charged for AUM you might be getting no cost trades.

If it doesn't cost anything to trade you might consider selling everything before you move. Registered account so no tax consequences. Smoother transfer as very little chance of back-office screw up.

Trading cost of moving from stocks to ETFs should be considered if you have a good number of individual holdings.
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Re: Logistics of Leaving Full Service Broker

Post by Vogatrice »

Thanks to both of you. A simple strategy plus some useful considerations.

Would you add anything about strategies for selling mutual funds out of this portfolio? Or just take the exit fee hit, if any? I'm trying to figure out now if there are back-end loads on the stuff he's bought, but I'd be surprised if there weren't.

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Re: Logistics of Leaving Full Service Broker

Post by Vogatrice »

hmmm...deaddog, very good point. I'll look into transaction costs, I was curious about that on the NBDB end but hadn't really thought about saving the trade costs before moving.
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Re: Logistics of Leaving Full Service Broker

Post by AltaRed »

Agree it can make a difference if the OP is in a % of AUM relationship, but I don't know the implications of this ordering a sell of all holdings. Plus there will be time 'out of the market' for a week or two that can work for, or against, you. Take your pick.

If the OP is truly in a % of AUM relationship, all the mutual funds should be Class F with no trailers, and no DSC schedule, with no fee consequences.
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Re: Logistics of Leaving Full Service Broker

Post by kcowan »

AltaRed wrote: 15 Oct 2019 16:10If the OP is truly in a % of AUM relationship, all the mutual funds should be Class F with no trailers, and no DSC schedule, with no fee consequences.
Trust but verify! e.g. can a Class F be transferred out at no cost.
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Re: Logistics of Leaving Full Service Broker

Post by deaddog »

Another thing you might check is if NB will give any incentives for the transfer.

It is not uncommon for brokers to pick-up the transfer fee and give free trades to a transfer that size.

If not you might want to shop around for a different discounter.
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Re: Logistics of Leaving Full Service Broker

Post by pmj »

If you move the mutual funds, check whether the 30-day or 90-day (not sure which period applies at NBDB) "early-mutual-fund-sale penalty" applies if you sell within that period.
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Re: Logistics of Leaving Full Service Broker

Post by Vogatrice »

Thanks all, more new and useful information. I verified the account is indeed AUM-based. There are no transaction fees, just service fees, in the last 3 years (since the start of mandatory fee reporting in 2016). Fees are about 2.5%. Is there a way to determine if the mutual funds are Class F without asking the broker? I tried to look at the fund facts via the brokerage online site and the site went all wonky - pages started flashing and site locked up - I felt like I had tripped some secret alarm. But that's probably just a coincidence, right? :lol:
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Re: Logistics of Leaving Full Service Broker

Post by AltaRed »

Do a Google search on each mutual fund together with Morningstar to see if it is class F. For example, I owned TML232 for a long time. When I Google "TML232 Morningstar" I get the Morningstar page for that MF and it says F.

I thought it was now against 'regulations' for a "% of AUM" to double dip, i.e. to sell any mutual fund that has a trailer fee. It would be a travesty if that % of AUM broker was not selling F class funds.

I agree with others that NBDB should pick up the ~$150 in tranfer fees to get the account. Might even throw in 50 free trades if used within 3 month. I would also if NBDB will charge anything to sell mutual funds without a holding period. The bigger question may be whether they will accept Class F funds at all, but it shouldn't be any skin off their backs if you are going to sell them anyway and buy ETFs.
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Re: Logistics of Leaving Full Service Broker

Post by brucecohen »

Vogatrice, this site tracks discount brokerage promotions.
Expired Deals

HSBC InvestDirect’s 30 commission-free trades promotion expired at the end of September.

Extended Deals

Questrade has extended their transfer fee promotion indefinitely. The terms and conditions don’t specify an end date to this offer although Questrade states they can change the terms of the promo at any point. This promo continues to see traction and offers coverage of transfer fees of up to $150 for switching to Questrade with no minimum transfer amount required to qualify. Scroll down for more info!

*Update October 15 – Scotia iTrade has extended their $50 cash back offer, which also includes discounted commission pricing until March 2020. This promotion has been extended from October 15th to the end of the month; for those DIY investors that are looking to open a new account, this could be the promotion for you. Further details on the offer can be found below.

New Deals

*Update October 15 – RBC Direct Investing is offering a new deal on commission-free trades. If you open a new Direct Investing account by December 13th, you can qualify for 25 commission-free equity and ETF trades to use within a year. More details on this promotion can be found below.
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Re: Logistics of Leaving Full Service Broker

Post by formerpatriot »

Vogatrice wrote: 15 Oct 2019 14:50 I am finally emotionally ready for a breakup with my full service broker.
Good move!
Congratulations!

I have been with NBDB for years and I can't complain.
As you probably know, there are no fees/commissions for buying or selling ETFs as long as the following 3 conditions are satisfied:
(a) your transaction involves 100 shares or more;
(b) you do the transactions by yourself on the online platform;
(c) you have opted for electronic documents (no paper documents mailed to you).
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Re: Logistics of Leaving Full Service Broker

Post by Vogatrice »

Thank you all for the terrific and specific details. I've learned about Class F mutual funds, minimizing costs on transfer and a lot more, in addition to specific guidance on how to make this move. I'll get this done before the end of the year, I'm just finalizing closing my corporate investment account with the same guy and don't want him too pissed off while that's happening.
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Re: Logistics of Leaving Full Service Broker

Post by DanH »

Going DIY - particularly with one's life savings - can be intimidating. But if you're determined to make the leap you will figure it out - particularly with the support of this wonderful forum. This stuff isn't complicated but there is a learning curve; and anybody of reasonable intelligence can do it if they're interested and committed to it. That said, I agree with those that say that the securities should be moved in kind to your discount broker.

While your fee-based account has no transaction fees that is for the management of the account. Different provisions may apply if you're liquidating or transferring your account. If I was in your place, I'd see two choices. First is to read through your investment management agreement to see if liquidating your account (while still in a fee-based account) will give rise to trading costs. Also consider that taking the time to liquidate everything may also subject you to another month/quarter of advisory fees.

Second choice is to give notice of termination ASAP (there may be a requirement for 30 days written notice of termination of the fee based agreement); putting a freeze on the account so that no trades occur and no fees are charged longer than is necessary by virtue of your agreement. Then, once moved in kind to your discount broker you sell the securities. Now this may be a daunting task. I recall an old client having something like 150-200 stocks. In that case, the elderly couple had their son sell all of their stocks once they landed in their discount brokerage account. But another option is actually to speak to a trader at the discount broker and instruct them to sell everything - and maybe given them a time frame of a week or ten days particularly if there are some smaller/less liquid companies. The point is to pay a bit more than the standard discount broker commission but still at least half of what a discounted full service broker charge would be. And if it's in fact a very long list, ask for a more favourable trading cost based on the number of trades/commission the discount broker will collect.

Finally, if your full service broker is affiliated with a discount broker (e.g., RBC Dominion Securities and RBC Direct Investing) you can surely avoid transfer out costs by staying within the family whether that means covering your transfer out costs or avoiding it altogether.
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Re: Logistics of Leaving Full Service Broker

Post by pmj »

I have the impression that it's pretty well standard practice for a receiving broker to cover the "regular" close-out fee of the previous broker (within the broker's parameters of account size, etc.).
I recently moved an account from RBCDI to TDDI. I checked with TDDI in advance re covering the fee - I was told to call in once the transfer was complete, no need for any formal commitment. The agent who took the follow-up call only asked from where it was transferred, she looked up the fee herself, and issued a credit to the account. No paperwork, no evidence. Done.
It was an account with online statements. I took care to get a statement before the account closed, late enough that I was reasonably certain that there would be no more transactions. In fact a final paper statement was issued - which was useful.
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Re: Logistics of Leaving Full Service Broker

Post by gsp_ »

Any discount broker should easily cover the transfer costs and either provide a healthy sweetener or a boatload of free trades for a 600k account. I’ve received low 4 figures recently for transfers in the ballpark, during promotions.

At the very worst this transfer and realignment should be cost neutral for the OP, even if some negotiation is required. Providing examples of what the competition is offering can generally yield good results without the need for protracted back and forth.
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Re: Logistics of Leaving Full Service Broker

Post by AltaRed »

The OP seems committed to NBDB per the first post, but they should still cover transfer fees and offer some free trades over a limited period of time, e.g. 90 days or so. Which should be plenty of time to re-structure the portfolio once the assets are transferred.
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Re: Logistics of Leaving Full Service Broker

Post by Vogatrice »

NBDB says on their website they will cover $135 of transfer fees. No mention of free trades. That is pre-negotiation of course, but it's a start. I will call them to discuss an increase in their base offer. Thanks again for all the advice.
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Re: Logistics of Leaving Full Service Broker

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Vogatrice wrote: 18 Oct 2019 16:45 NBDB says on their website they will cover $135 of transfer fees. No mention of free trades. That is pre-negotiation of course, but it's a start. I will call them to discuss an increase in their base offer. Thanks again for all the advice.
Simply tell them you also need some free trades, e.g. 50 over 3-6 months, in order to re-organize your portfolio once you have transferred it. It will be worth it to them for a $600k account.
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Re: Logistics of Leaving Full Service Broker

Post by deaddog »

Any reason for NBDB?

I have had to deal with NBIN through a portfolio manager and if I had to describe them in one word I would say inept.
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Re: Logistics of Leaving Full Service Broker

Post by DanH »

A bank can be inept in one division and stellar in another. The reason - I believe - is that much of the banks' technology infrastructure is from the 1980s. Rather than a high level systems overhaul across all similar platforms. The discount broker interface and functionality is often much more advanced than the manner in which the back office and custodian function behind the scenes. But all will make mistakes from time to time - including big screw ups - because of the volume they deal with. I'm not familiar with NB's discount brokerage but my impression is that they've all good.
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Re: Logistics of Leaving Full Service Broker

Post by Vogatrice »

the reason for NBDB was free Cdn and US ETF trades forever...since that what I wanted to buy, and the user interface is nice and clean, I went ahead. All I have there now is a small TFSA to test it before moving in the big bucks. So far, moving funds in electronically and buying ETFs has been easy, no hiccups. Phone support for account opening has been good. I have no long-term attachment to them, and I haven't tried other discount brokers, but I'm satisfied enough at the moment. Is there another db you love?
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Re: Logistics of Leaving Full Service Broker

Post by AltaRed »

Everyone has a favorite for one reason or another. Many times it is the one associated with the bank one does business with for the convenience of one interface.

Otherwise look at Rob Carricks brokerage review or that of Moneysense.
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