If you’re reading this, kudos for reading the fine print. Please allow me to do my best in describing what is – and what isn’t – included in the flat rate.
All One-Day Financial Reviews include model portfolios (if applicable) for all your accounts. If you haven’t already, you can review sample write-ups at www.JonLuskin.com/sample to help you understand what is included in the flat rate.
The distinction I make is writing line-by-line trade orders. Calculating this would require creating a custom spreadsheet. That takes more time; I charge for that additional time.
Unless you have a very complicated taxable account with significant unrealized gains, and you yourself want to manage the process of unwinding it, then that additional service is optional. I’ll note that it usually only makes sense for less than 1% of the people I work with.
To be clear, guidance for unwinding a taxable account is included in the One-Day Financial Review. Yet, given a very complicated portfolio, it won’t include line-by-line trade orders.
Said differently still, I’ll tell you what portfolio you want to get to. But, explicit instructions on how to get there (trade orders) won’t necessarily be included.
Let’s give a couple of (real) examples. The following (snippet from a write-up) is included as part of the flat rate in addition to model portfolios for all accounts:
As mentioned, depending upon your sensitivity to taxes versus your desire for simplicity, you could keep more of those funds worth keeping in your taxable account, those that are lower-cost and more diversified. That includes SCHWAB US LARGE CAP ETF (SCHX) in your managed account, and VANGUARD S&P 500 ETF (VOO) and VANGUARD TOTAL STOCK MARKET ETF (VTI) in your own non-managed taxable account at Schwab. You don’t have to do that. But, you could. Moreover, it would be reasonable.
Of course, that catch is that you’ll overweight your portfolio in favor of those asset classes – U.S. large-cap stock. That increased weight increases the risk that your portfolio will underperform when U.S. stocks underperform.
You could keep going with this sell-less-to-defer-taxes approach, deciding to keep more of those broader, lower-cost funds from Schwab’s intelligent portfolio. That includes keeping:
· CHARLES SCHWAB US REIT ETF (SCHH)
· SCHWAB INTERNATNAL SMALLCAP EQY ETF (SCHC)
· VGRD FTSE ALL WRLD EX USSML CAP ETF (VSS)
· SCHWAB EMERGING MARKETS EQUITY ETF (SCHE)
· SCHWAB INTERNATIONAL EQUITY ETF (SCHF)
· SCHWAB US SMALL CAP ETF (SCHA)
Now, the following would not be included in the flat rate, reflecting trade orders created to manage capital gains and work within the limited investment options of a workplace retirement plan (i.e., across-account rebalancing):
Your Roth IRA at TD Ameritrade
Sell all existing positions. Invest using the following mix:
Fund Ticker Approximate Value, $ Vanguard Total International Stock Index Fund ETF VXUS $53,114 Vanguard Emerging Markets Stock Index Fund ETF VWO $75,975 Spouse’s Roth IRA at TD Ameritrade
Sell all existing positions. Invest the balance in the Vanguard Total International Stock Index Fund ETF (VXUS).
Your Health Savings Account
Sell all existing positions. Invest the balance in the VANGUARD TOTAL INTL STK IDX I (VTSNX).
Your 401(k) at Schwab
Sell all existing positions. Invest the balance in the VANGUARD TOTAL INTL STK IDX I (VTSNX).
Utsaver 457(b)
Sell all existing positions. Invest the balance in the FID INTL INDEX (FSPSX).
U of Texas ORP 403(b)
Sell all existing positions. Invest the balance in the FID INTL INDEX (FSPSX).
Your Joint Taxable Account at TD Ameritrade
Sell all but the following positions. Just mentioned: ideally, transfer your individual stocks to a separate account. Keep the following positions:
Fund Ticker Approximate Value, $ iShares MSCI EAFE ETF EFA $ 102,693 Vanguard Developed Markets Index Fund ETF VEA $ 143,900 Vanguard Real Estate Index Fund ETF VNQ $ 110,942 Vanguard Total Stock Market – ETF VTI $ 861,612 Fidelity® Extended Market Index Fund FSMAX $ 267,293 Home Depot HD $ 210,783 Microsoft MSFT $ 164,480 Starbucks SBUX $ 165,920 After placing the sales, you will be left with ~$5,399,497 in cash in the account. Set aside $342,813.54 in cash for taxes.
Use the balance of the cash to make the following purchases:
Fund Ticker Approximate Value, $ Vanguard Intermediate-Term Treasury Index ETF VGIT $ 2,087,683 Vanguard Total Stock Market – ETF* VTI* $ 1,774,627* Vanguard S&P 500 Index – ETF VOO $ 723,180 Vanguard Total International Stock – ETF VXUS $ 471,194 *Buy $1,774,627 more of VTI. Add to your existing position of $861,612 of VTI already in the account, for a net position of $2,636,239.
To be clear, I include guidance on across-account balancing in the flat rate. The distinction is that I won’t write the line-by-line trade orders. Of course, should you decide you want that additional service, it is available. Yet – as already mentioned, this only makes sense for less than 1% of the people I work with.