Need to help parents move assets out of Edward Jones
Retired parents often end up with complex, expensive portfolios simply because they didn’t know where to start and trusted a familiar financial adviser. That’s essentially the situation here: your parents have several accounts at Edward Jones, managed by a financial professional who’s done an acceptable job in terms of basic guidance, but who has them in a patchwork of mutual funds, bonds, ETFs and individual stocks that carry noticeable fees and commissions.
Your parents don’t spend from these investments beyond their required minimum distributions (RMDs). Your dad has a pension, and their plan is to ultimately leave the portfolio to their children. You’ve already encouraged them to feel free to spend the money on themselves, but they’re comfortable with the idea of passing on an inheritance, especially since much of the money originated from your mother’s parents.
Given that long‑term, leave‑it‑to-the-kids objective, you’ve suggested a much simpler and cheaper approach: consolidate into a broad total market or S&P 500 index fund, eliminate the actively managed mutual funds, and stop paying a financial planner for performance that has lagged those basic benchmarks by hundreds of thousands of dollars over the last several years.
The question now is: what’s the most efficient and least painful way to move their assets out of Edward Jones and into a simpler, low‑cost portfolio at a firm like Fidelity or Vanguard?
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Step 1: Clarify goals, time horizon, and risk
Before moving anything, you and your parents should be completely aligned on:
– Primary goal: preserving and growing the portfolio mainly for inheritance, not day‑to‑day spending
– Time horizon: likely decades, depending on their ages and expected lifespan
– Risk tolerance: they started risk‑averse, hence the bonds and conservative tilt, but with a pension and no need to draw from the portfolio, they may be able to accept more stock exposure than they initially thought
– Simplicity: minimizing the number of positions, statements, and moving parts, so the portfolio is easy to understand and manage, especially if someone has to step in later
This clarity will drive the target allocation (for example, a simple 60/40 stock-bond mix, or even a higher equity allocation if appropriate) and the choice of index funds.
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Step 2: Understand exactly what they own now
You’ve already gathered a high‑level inventory of their holdings at Edward Jones, totaling about $659,000, spread across multiple accounts.
1) Living Trust – Guided Solutions Flex Account (~$100,000)
Objective: Balanced Growth and Income
– Individual stocks:
– Microsoft (MSFT) – about $6,000
– Nvidia (NVDA) – about $5,000
– Tesla (TSLA) – about $5,000
– ETFs:
– IWM – around $2,000
– VEU – about $3,000
– BND – about $15,000
– Mutual funds:
– GAFFX – ~$8,500
– FWMIX – ~$16,000
– FDTRX – ~$3,500
– JHBSX – ~$20,000
– JPPEX – ~$8,000
– LBNOX – ~$5,000
– Cash: ~ $3,000
2) Living Trust – Select Account (~$362,000)
Objective: Growth Focus
– Individual stocks:
– AT&T – ~$15,000
– Costco – ~$53,000
– Verizon – ~$41,000
– Visa – ~$44,500
– Disney – ~$12,000
– Wells Fargo – ~$17,500
– Mutual funds:
– American Capital Income Builder A – ~$51,000
– American Capital World Growth & Income A – ~$29,000
– Federated Prime Cash Obligations Ws – ~$23,500
– Franklin High Yield Tax‑Free Income A – ~$34,750
– Hartford Dividend & Growth A – ~$32,000
– Hartford Growth Opportunities A – ~$14,700
– Hartford International Opportunities A – ~$15,000
– Hartford Short Duration A – ~$10,500
– Lord Abbett Bond Debenture C – ~$9,500
3) Traditional IRA – Guided Solutions Fund Account (~$50,500)
4) Roth IRA – Select (~$13,300)
5) Traditional IRA – Guided Solutions Flex Account (~$133,000)
You don’t yet have a breakdown of the investments held in accounts 3-5, but they’re likely similar mixes of mutual funds, some bonds, and maybe a few individual stocks. You’ll need to log into their accounts with them to see the exact positions.
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Step 3: Decide on the new target structure
For their situation and goal, a very simple, low‑cost structure might look like:
– Taxable / trust accounts:
– One or two broad, low‑cost stock index funds (e.g., total US market or S&P 500, plus optionally a total international stock index)
– A bond index fund, if you want to maintain some fixed income for stability
– IRAs (traditional and Roth):
– Similar index funds, with bond exposure primarily in the traditional IRAs for tax efficiency
– Possibly all‑in‑one balanced funds or target‑date funds if you want “set it and forget it” simplicity
The key is: far fewer line items, rock‑bottom expense ratios, and no front‑end loads or ongoing advisory commissions on each fund.
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Step 4: Understand the transfer options (in‑kind vs selling)
You do not necessarily have to meet with the existing advisor and ask him to sell everything. In most cases, the new brokerage (Fidelity, Vanguard, Schwab, etc.) can pull the assets over directly from Edward Jones.
Two main approaches:
1. In‑kind transfer (no selling at Edward Jones)
– You open corresponding accounts at the new brokerage (trust account, IRAs, Roth IRA).
– You request an “ACAT” transfer of assets “in kind,” meaning the current holdings move over as they are, without being sold first.
– Once the positions arrive in the new accounts, you can then sell unwanted mutual funds/stocks and reinvest into your chosen index funds.
Advantages:
– Avoids potential transaction fees at Edward Jones.
– Keeps more control over timing of sales (helpful for managing capital gains in taxable accounts).
2. Liquidate at Edward Jones, then transfer cash
– The advisor sells current holdings at Edward Jones.
– After trades settle, you transfer cash to the new brokerage and buy your new funds.
Downsides:
– You may incur trading fees or sales charges at Edward Jones.
– The advisor might try to talk your parents out of leaving or delay the process.
– Realizing capital gains in taxable accounts could create a tax bill in a single year, rather than allowing for a more deliberate, phased approach.
For tax‑advantaged accounts (traditional IRAs and Roth IRAs), capital gains on sales inside the account are not a concern; only withdrawals from traditional IRAs create taxable income. That makes simplification inside those accounts much easier.
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Step 5: Address taxes and account types separately
You must treat each type of account according to its tax rules:
– Traditional IRAs (accounts 3 and 5)
– You can transfer traditional IRA to traditional IRA at a new firm as a direct trustee‑to‑trustee transfer.
– Inside the IRA, you’re free to sell the current holdings and buy new funds with no immediate tax consequences.
– RMDs must continue to be taken when required, but you can do that from any IRA after consolidation.
– Roth IRA (account 4)
– Similarly, do a direct Roth‑to‑Roth transfer.
– You can completely overhaul the investments inside the Roth without triggering taxes as long as the money stays inside Roth accounts.
– Living Trust / taxable accounts (accounts 1 and 2)
– Here, capital gains matter. Selling long‑held mutual funds and stocks at a profit generates taxable gains.
– An in‑kind transfer lets you move everything first, then plan the sale of high‑gain positions over multiple tax years if needed.
– Also consider the “step‑up in basis” at death: if your parents never need this taxable money, expensive taxable holdings with large unrealized gains might be worth holding until they pass, because heirs typically receive a stepped‑up cost basis. In that case, you might prioritize selling higher‑cost or lower‑gain positions and keep some appreciated positions, while still simplifying where possible.
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Step 6: Choose the new brokerage and open matching accounts
Once the plan is clear:
1. Select the brokerage you want to use (for example, Fidelity, Vanguard, or another low‑cost provider).
2. Open:
– A trust account matching the existing living trust ownership
– Traditional IRAs for each parent, if applicable
– Roth IRAs for each parent, as needed
3. During the account opening process, indicate that you want to transfer assets from an existing broker. You’ll be asked for your parents’ Edward Jones account numbers and possibly recent statements.
Typically, the new brokerage will walk you through the transfer forms. They handle most of the interaction with Edward Jones.
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Step 7: Initiate ACAT transfers and monitor the move
With new accounts established:
– Request in‑kind ACAT transfers for each Edward Jones account to its corresponding new account.
– Do this per account type (trust‑to‑trust, IRA‑to‑IRA, Roth‑to‑Roth).
– Expect the process to take about one to two weeks, sometimes a bit longer. During the transfer, some or all of the positions may be temporarily “frozen” and not tradeable.
Keep an eye on:
– Whether all positions successfully move (occasionally a proprietary fund or certain share class can’t transfer and must be liquidated).
– Whether any transfer fees are charged by Edward Jones; the new brokerage sometimes offers to reimburse these, but that depends on the firm and amount transferred.
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Step 8: Simplify and reinvest at the new firm
Once everything arrives in the new accounts:
1. IRAs and Roth IRAs
– Immediately sell the high‑fee mutual funds and any unwanted individual stocks.
– Consolidate into your chosen index funds or a simple combination of stock and bond indexes.
– Aim to reduce the number of holdings dramatically, while keeping an allocation that matches your parents’ risk profile.
2. Trust / taxable accounts
– Review each holding’s unrealized gain or loss.
– Prioritize selling positions with minimal gains or even losses to simplify with little or no tax cost.
– For positions with big gains, weigh:
– Your parents’ current and future tax brackets
– The possibility of spreading sales across several calendar years
– The value of a future step‑up in basis if they hold the investment until death
– Replace sold positions with your chosen low‑cost index funds.
3. Consolidate cash
– Any idle cash should be put to work per the new target allocation, except for a reasonable emergency or near‑term spending reserve.
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Step 9: Plan communication with the current advisor strategically
You’re not obligated to have a long conversation with the Edward Jones advisor, but it can be courteous and may avoid confusion:
– Once transfers are underway or nearly complete, your parents can inform him that they’ve decided to simplify their finances, reduce costs, and manage things differently.
– Be clear that this is a long‑term decision and not an invitation to be “re‑pitched” on complex products.
– Avoid getting drawn into performance debates; focus on goals: simplicity, low fees, and a structure that aligns with their desire to leave assets to heirs.
If you expect pushback or emotional pressure, consider limiting communication to a brief written notice and let the transfers speak for themselves.
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Step 10: Revisit the inheritance and estate plan
Because your parents’ intent is to leave the portfolio to their children, the move away from Edward Jones is also a good time to:
– Review the living trust to ensure it reflects their current wishes, beneficiaries, and successor trustees.
– Confirm that beneficiary designations on IRAs and Roth IRAs are up to date and align with the broader estate plan.
– Discuss how the simplified investment structure will make it easier for you or siblings to manage things smoothly if one or both parents become incapacitated or pass away.
– Consider whether each child wants to keep inherited assets invested in similar index funds or will need guidance on their own financial plans.
Simplifying now can dramatically reduce the stress and confusion on heirs later.
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Additional considerations for a smoother transition
– Fee awareness: Your parents have been paying both an annual advisory fee (around 0.5%) and built‑in mutual fund expenses and possibly commissions or loads. Moving to low‑cost index funds can drop total costs to a fraction of a percent, potentially saving tens of thousands of dollars over time.
– Asset location: Concentrate bonds in tax‑advantaged accounts when possible, and hold stock index funds primarily in taxable accounts for tax efficiency.
– Ongoing management: Once the new allocation is set, the main ongoing task is periodic rebalancing (for example, once a year or when allocations drift significantly). This can be done very simply within the new brokerage account.
– Documentation and passwords: Make sure account access, login credentials, and key documents are organized and safely stored so that if you or someone else needs to assist in the future, everything is straightforward.
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By approaching this as a step‑by‑step project-clarifying goals, transferring accounts in kind, simplifying investments inside each account type, and keeping a close eye on taxes-you can help your parents move away from a costly, complicated Edward Jones setup to a clean, low‑maintenance index‑based portfolio that aligns directly with their real plan: preserving wealth and passing it on to their children with as little friction as possible.