Transfer from Betterment to Vanguard

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Frugalchicos
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Transfer from Betterment to Vanguard

Post by Frugalchicos »

Looking for first person experiences transferring your investments from Betterment to Vanguard. I would appreciate if you can detail the steps to do it successfully without loosing money/paying unnecessarily

We currently have close to 600K in Betterment and would like to transfer everything to Vanguard to avoid future higher management fees. We are planning in saving 1MM and we don't want management fees being the biggest expense line in our future budget

Also, Betterment doesn't allow investors to have the money invested in that platform and live out of the US. Not sure if that is also the case for Vanguard?

I understand I need to do an in-kind transfer, it also requires to have all the paperwork be medallion signature guaranteed (how much this cost?)


I saw this post https://www.ajourneytofi.com/moving-a-t ... -vanguard/ which is helpful but I still have a lot of questions especially when not wanting to trigger taxable events.

Gilberto de Piento
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Re: Transfer from Betterment to Vanguard

Post by Gilberto de Piento »

I haven't tried it but I suspect Vanguard could help you with this. They are generally known for good customer service and they may be interested in helping to bring a new customer onboard.

Hristo Botev
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Re: Transfer from Betterment to Vanguard

Post by Hristo Botev »

Agree with @GdP. I transferred old 401Ks/rollover IRAs to Vanguard (from Fidelity) and I just called their customer service folks and they walked me through it. Easy peasy.

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Lemur
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Re: Transfer from Betterment to Vanguard

Post by Lemur »

Vanguard user here as well. +1 Hristo's comment.

Qazwer
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Re: Transfer from Betterment to Vanguard

Post by Qazwer »

You can transfer in kind items to Vanguard but not something that only Betterment has. What investments do you have at Betterment?
You can start with new money anywhere you want.

The Old Man
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Re: Transfer from Betterment to Vanguard

Post by The Old Man »

Betterment: Are these proprietary investments or your standard mutual funds, stocks, & bonds? If it is proprietary, then it would need to be converted to cash before it could be transferred to Vanguard.

Vanguard & living outside of the country: You will need to have a USA mailing address. If you do not, then there will be some restrictions. I have not explored this myself, but have heard about this from other investors. This is due to the regulatory environment. See links below.

Why US Brokerage Accounts of American Expats are Being Closed (2015)
http://ThunFinancial.com/us-brokerage-a ... osed-2015/

American Expats Scramble to Keep U.S. Investment Accounts
http://blogs.wsj.com/expat/2015/09/20/a ... -accounts/

If it is important to you, then you should have a discussion with a Vanguard representative. Don't tell them you will be living outside of the country, but do say you are exploring the hypothetical scenario.

Gilberto de Piento
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Re: Transfer from Betterment to Vanguard

Post by Gilberto de Piento »

If this is 401k, IRA or similar rollover I believe you need to transfer directly from betterment to Vanguard. Don't move to cash or you will be penalized due to it being considered a withdrawal from a tax advantaged account.

jacob
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Re: Transfer from Betterment to Vanguard

Post by jacob »

Some stuff that hasn't been mentioned enough:

If you're seriously planning on expat living, it's easier to deal with financial institutions that have made expats their business. Others might drop you as a customer when you become inconvenient for regulatory reasons.

Transfers are best initiated from the receiving end. A competent receiver will be able to handle everything including making the arrangements with the sender. You may have to sign stuff (or verify your existence on the phone for legal reasons) but the receiver should take care of getting that from/to you. A Medallion signature is a fancy version of a notary public... cost may be a little higher so expect a 2-3 fig fee.

My main concern insofar this is a taxable account (you mentioned in-kind) would be that the cost-basis doesn't transfer correctly or at all! It will be absolute hell tracking down the original numbers when it comes to selling decades or even years from now insofar you don't have a record. Make sure everything (a complete record of all transactions) is printed out at the sender before that account is closed.

Hence my own preference for old-school brick&mortar institutions with an international footprint over local or "innovative" app/phone based financial techmology. This is opinionated experience talking :mrgreen:

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Ego
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Re: Transfer from Betterment to Vanguard

Post by Ego »

The Old Man wrote:
Mon Sep 13, 2021 9:46 pm
Why US Brokerage Accounts of American Expats are Being Closed (2015)
http://ThunFinancial.com/us-brokerage-a ... osed-2015/

American Expats Scramble to Keep U.S. Investment Accounts
http://blogs.wsj.com/expat/2015/09/20/a ... -accounts/
Old Man provided some really good info.

Plan ahead. Start using a mail scanning/forwarding service now. It takes a little time to setup and costs money but you have time now and the important stuff (driver's license, bank, credit cards, taxes, insurance, voter registration) can be shifted gradually over the next few years. You cannot do it from abroad because setting up the service requires you both to complete USPS form 1583 and your signatures must be notarized. Look at every piece of mail you get over then next year and decide if it is something you would want to continue receiving after the move abroad.

It may be tempting to save the $180/year and use the address of a family member. Caution! If something happens and the address suddenly changes or is no longer available, you will be forced to change your mailing addresses with all of those services while living abroad. Next to impossible for some. Ask me how I know.

Some of these mailbox providers have specific services for expats like check deposits, parcel forwarding and pdf print & mail service that gives the appearance that you actually sent a letter (or your tax forms) from the US.

jacob
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Re: Transfer from Betterment to Vanguard

Post by jacob »

@Ego - +1 as an expat from another country. The shitshow is real.

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Seppia
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Re: Transfer from Betterment to Vanguard

Post by Seppia »

I’ve already recommended this, but as a serial expat that has needed to move investments across the globe multiple times, HSBC is the ONLY institution I have found to more or less be capable of doing the job.
Vanguard is very USA centric and will not want you as a customer once you move out.
Also, be very careful what you are invested in
USA stocks/ETFs held abroad pay 30% tax on the dividends in the USA before paying any local dividend tax, effectively negating any TER advantage.

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unemployable
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Re: Transfer from Betterment to Vanguard

Post by unemployable »

jacob wrote:
Tue Sep 14, 2021 2:35 pm
Transfers are best initiated from the receiving end. A competent receiver will be able to handle everything including making the arrangements with the sender.
The obvious reason for this is they're trying to add a customer. The outgoing custodian otoh would be biased towards making the process harder.

A few months ago I transferred a Roth IRA to Vanguard. It didn't go smoothly, but I never talked to anyone at the old custodian or even did anything to my account on the old custodian's website. Everything I did from start to finish was on the Vanguard side. I had to make a couple calls to Vanny and it turned out I needed a medallion signature guarantee where I thought I didn't, but Vanny's service was fine.
You may have to sign stuff (or verify your existence on the phone for legal reasons) but the receiver should take care of getting that from/to you. A Medallion signature is a fancy version of a notary public... cost may be a little higher so expect a 2-3 fig fee.
Many brick-and-mortar banks offer this service for free if you have a large enough account with them (a few thousand). In the case I mentioned above, my mom put my name on her account so I could get the MSG for free. Be prepared to make an appointment; you may not be able to just walk into a branch and get one.
My main concern insofar this is a taxable account (you mentioned in-kind) would be that the cost-basis doesn't transfer correctly or at all! It will be absolute hell tracking down the original numbers when it comes to selling decades or even years from now insofar you don't have a record.
If you can't find your cost basis the IRS probably can't either... hint hint.

Frugalchicos
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Re: Transfer from Betterment to Vanguard

Post by Frugalchicos »

Thank you all for your answers and tips. TBH, one of the main reasons we were thinking in moving all our taxable accounts to Vanguard was because of being able to "legally" use it when living abroad. However, I see Vanguard has the same restrictions than Betterment when it comes to living out of the US. We did use Betterment while living in Spain and never had any problem since I am not sure how they would find out.

We are planning in always having a physical mail address and a bank account in the US since chica's parents and siblings live here.

@jacob - Any recommendation for an old-school brick and mortar institution with an international footprint? Charles Schwab perhaps? I believe they are expat friendly - would you like to get a beer and talk about it? :)

anesde
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Re: Transfer from Betterment to Vanguard

Post by anesde »

I had issues trying to open a Charles Schwab account while abroad. It might be different if you already have one open and just decide to move.

What I wanted at the time was a free checking account that wouldn’t charge me for international ATMs. After being denied by CS I did some more research and found out that Fidelity had the same type of account (it’s actually slightly better) although they don’t advertise it as much.

I was already a long term customer of Fidelity which made it all very easy. I never explicitly told them I lived abroad but I have accessed my accounts regularly while living out of the US, and I’ve had to use their (very good!) customer service on more than one occasion. I’ve never had any problems and would recommend them highly. I do still use a US address and still have a legacy non-Fidelity checking account.

The Old Man
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Re: Transfer from Betterment to Vanguard

Post by The Old Man »

@anesde: Fidelity is very aggressive about not supporting non-resident Americans. They will close your account if they find you are no longer resident in the USA. You are flying under the radar. I cannot recommend them.

Charles Schwab has an international division which can be availed of by non-resident Americans. The debit card is also available to non-resident Americans. They are very friendly to American expats.
https://americanexpatfinance.com/news/i ... e-presence

Schwab One International Account
https://international.schwab.com/brokerage-account

Schwab Expat Information
https://international.schwab.com/expatriate-essentials
Last edited by The Old Man on Thu Sep 16, 2021 9:00 am, edited 2 times in total.

The Old Man
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Re: Transfer from Betterment to Vanguard

Post by The Old Man »

@frugalchicos: ERE is not a finance site and you are asking a very specific question with significant ramifications. I would suggest the Bogleheads site. They have a wealth of knowledge about finance and are international in scope. The question you are asking has been asked before in their forums.

The Old Man
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Re: Transfer from Betterment to Vanguard

Post by The Old Man »

Seppia wrote:
Tue Sep 14, 2021 4:29 pm
Vanguard is very USA centric and will not want you as a customer once you move out.
Vanguard is a global firm.
https://global.vanguard.com/portal/site/home

Example: Vanguard UK
https://www.vanguardinvestor.co.uk/home

However, it is not a simple matter. Finance is a very heavily regulated industry. As an example USA mutual funds are generally not available to non-residents as a matter of regulation. Their purpose can be accomplished by similar foreign funds. As far as Vanguard is concerned I have heard that if you are non-resident they will not close your account, but you will be unable to contribute further to your USA mutual funds. They will have foreign funds available. However, be mindful of the tax complications of foreign registered mutual funds.

Exchange traded funds are different and may simplify matters, but I am not an international tax expert.

The Old Man
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Re: Transfer from Betterment to Vanguard

Post by The Old Man »

Of the global firms it would appear that Charles Schwab is most supportive of USA expats. Vanguard funds are available at Charles Schwab. Vanguard, while it operates globally, seems to be focused more on foreign residents rather than USA expats. Again, be mindful of the tax consequences of what you do and be aware of the applicable double taxation treaty.

The Old Man
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Re: Transfer from Betterment to Vanguard

Post by The Old Man »

Finance is a heavily regulated industry. The firms will develop a compliance plan appropriate to their risk profile which is then approved by the regulators. In audits, they demonstrate to the government that they are following their plan.

For a particular firm if you are not their typical customer, then from a compliance aspect you will be problematic and it is likely your account will be closed or not even opened in the first place. While some of these rules have been on the books for decades the regulatory environment including enforcement has changed greatly in the last ten years.

There are firms that will accept non-resident Americans. The real problem is USA taxation of foreign registered securities. I think that Schwab is the best firm for dealing with these issues. It appears they have USA securities that are available to expat Americans. It would be worth a phone call.

To simplify matters you could also fly under the radar. Have a USA mailing address and a USA phone number to give the impression of USA residency. The problem is using ATMs as both the Fidelity and Schwab (USA) debit cards are not designed for expats; although, as noted earlier the Schwab (International) debit card would be available.

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Seppia
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Re: Transfer from Betterment to Vanguard

Post by Seppia »

@Old Man offering ETFs in different places doesn’t mean they aren’t heavily US centric.
Vanguard doesn’t offer any brokerage services in most of Europe and in Asia.
Don’t know about the UK (I believe they have a decent presence there), but in the rest or Europe they are way behind blackrock and lyxor in terms of what they offer, and in Asia they are almost non existent (I think they recently delisted a few ETFs from the HK exchange).

What they offer in the USA is dramatically different compared to what they offer in 90% of the remaining developed world.

With HSBC you can bank, trade stocks and ETFs pretty much anywhere in the civilized world.

I have moved across three continents in the last 10 years and speak from experience.

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