Vanguard Vs Fidelity Vs Schwab Vs ETrade Vs Other? Best In Class At What?

[TripleB]

It's recommended to diversify your PP amongst two or more custodians/brokers for several risk mitigation purposes. While you may be putting your eggs equally separated into four different baskets, if you leave all four of your baskets under one tree, they can all be crushed in a single event.

For the purposes of this thread, assume you believe in splitting assets amongst more than one firm. If you'd like to argue against this premise, please start a different thread or read Craig and MT's book that discuss why it's a good idea. Given this, what do each of the major custodians/brokers do that is considered "best in class" such that you would preferentially hold a specific asset within that firm?

Vanguard is likely considered the best or one of the best for index mutual funds and Fidelity is a very close second.

Vanguard offers free Treasury bond purchases at auction, but I doubt they are best at holding individual government bonds. For one, the bond values don't update until around 4am Eastern time the day after trading, around 12 hours after market close. That makes rebalancing very challenging, especially if you decide to do so on a day with significant bond fluctuation (3% swings in either direction are not uncommon). Is there another firm that tracks real-time individual treasury bond prices in your account view? Or perhaps another firm is superior to hold individual bonds for another reason?

Gold will be held in ETFs if it isn't held in coins. I think one or more of the firms offers free ETF trades of one or more of the Gold ETFs. Perhaps that makes holding the gold allocation superior in a place that allows free ETF trades of that type.

Cash is best held in direct T-Bills or a Treasury Money Market Fund (that actually holds treasuries only). Vanguard's T-MMF is closed to new investors until rates rise. Perhaps another firm has an open T-MMF that is superior in this regard.

Further, how do you decide how to split your assets across firms? It seems to make the most sense to have a rebalancing strategy in place. If you decided to split each of your assets across 4 firms, one for each of the 4 assets in the PP, then rebalancing would be a nightmare. Especially if you're rebalancing due to a crash of one asset.

It might make some sense to keep cash within each of your brokers for rebalancing back into the main asset held there. For example, split between 3 brokers where each of the 3 holds one of the main assets (gold, stocks, bonds), and each of the 3 equally splits the 25% cash portion such that it can easily rebalance back into the main asset from the cash, or rebalance out of the main asset into cash. New contributions could go towards the broker account that is most skewed from a cash perspective.

Then again maybe you chose to split assets between only 2 firms, perhaps for simplicity because the marginal benefit of going from 2 to 3 brokers may not be worth the marginal cost of maintaining paperwork/documents/etc. The marginal benefit of going from 1 to 2 accounts is huge. Going from 2 to 3 accounts is less. Going from 3 to 4 accounts is even less. At a certain point, the hassles of managing multiple accounts outweighs the gain.

Maybe you have a strategy to keep enough in each account to get a specific tier of customer level. For example, maybe you keep all of your money in Vanguard until you hit $50k for the lowest Voyager level. Then you open a Schwab Account for the next $50k to hit some status level with them, etc, and so forth.

Perhaps you legitimately have all of your gold coins in physical possession such that only 75% of your assets are "digital". And perhaps you've decided to hold a large chunk of your cash portion in I-Bonds or EE-Bonds at Treasury Direct for "deep storage". Then maybe only 60% of your assets are in a third party broker and maybe you feel safe enough keeping them all in one place because in this example you do have a 3-way split between gold coins at home, Treasury Direct, and a brokerage.

Curious to hear everyone's thoughts and strategies.

[Pointedstick]

Schwab is nice because they offer a commission-free gold ETF (SGOL). Only brokerage I know of that does that. The downside is that you can't sell bonds online; you have to call someone up and they charge you a ridiculous fee per bond!

TDAmeritrade is nice because they have a large assortment of PP-friendly commission-free ETFs (e.g. VTI, TLT, EDV, SHY), and you can both buy and sell bonds in the secondary market. The downside is relatively high commissions ($10) for regular trades.

Vanguard is nice because they have highly-regarded PP-friendly mutual funds for everything but gold, and their auto-investment features make it very simply to put most of the portfolio on autopilot. The downside is that trades often take days to settle rather than seconds. It's definitely not a platform designed or optimized for ETF trading.

eTrade is nice because they offer PERM commission-free. Not sure on the status of PERM these days, though. A little after I bailed on it it really became a stinker during the 2013 down year for the PP.

Never used Fidelity.

Personally, I try to set up a PP in each individual account, within reason. My two primary accounts are Schwab and TDAmeritrade. Schwab is a 401k and everything in there is commission-free, which is awesome because of the regular contributions. TDAmeritrade is my taxable account and I use it to buy everything but gold, which is held as physical instead. And my Roth IRA is held with Vanguard and I have it set up as a fairly traditional BH stock/bond portfolio to try to capture some more gains during times of prosperity.

[Libertarian666]

I use Fidelity, and they have pretty good customer service.
You might also want to consider getting certificates for long-term storage of some of your securities where you can still do that, e.g., Canadian issues like Central Fund. That takes a couple of weeks and you may be charged a small fee, but you have removed one layer of intermediary between you and your assets.

Once you have the certificate(s), if you need money rapidly, you can deposit a certificate and sell it immediately at Fidelity, at least if you have a margin account.

[sophie]

Fidelity and Vanguard.

I might have shifted more into Vanguard except that Fidelity now has lots of decent commission-free, PP-friendly funds, including a treasury MMF with checkwriting privileges ($25K minimum though) and ability to buy AND sell treasury bills and bonds.  A commission free gold ETF would be nice, but gold in taxable is such a headache that I decided not to bother with monthly autoinvesting.  Outside of that, I do so few gold ETF trades/year that expense ratio matters more to me than commission.  I currently have mostly GTU in tax-deferred because of the discount, and otherwise use IAU.

[barrett]

Don't know how many self-employed people are on here but I recently ran into a problem with Fidelity when trying to open a solo 401(k) Roth for my wife. I was told that they don't yet offer it! WTF? When confronted with the obvious fact that they were losing business (I plan to set up a solo 401(k) Roth for myself as well), the folks I spoke with were apologetic and said that I was not the first person they had to turn down business from. I then went to Vanguard who said they would be glad to help me open an account, but that we would also have to move my wife's regular 401(k) over there (insert expletive here). Also, they said with a solo 401(k) Roth, one is restricted buying only Vanguard Funds, so individual LTTs. I called TD Ameritrade and they were able to do it. Their only caveat is that one also has to open a regular 401(k) with them, but it doesn't have to be funded... it can just exist. So we have a TD Ameritrade account set up with a decent PP mix. Incidentally, the guy I spoke with when trying to figure out how to buy LTTs on the TD Ameritrade site strongly recommended that I not buy them now - he suggested ten-year CDs - because of the direction that interest rates are going in the near future. Just thought you might all profit from that insider information.

With that all being said, I have been with Fidelity for over 20 years and they have gotten better with time. Some of that has to do with the fact that I am just barely over their "premium service" threshold. For a long time they used to treat me as some sorry, uninformed, drooling, sad sack of financial incompetence whenever I held a relative large cash position. In fairness, they were correct (except that I don't drool), but not always for the right reasons.

Anyway, 1.5 thumbs up for Fidelity but it sure is good to have options. This situation has actually pushed us toward institutional diversification for whatever that is worth.

[TripleB]

Barrett,

Call ETrade. They have a fantastic Solo 401k plan.

As far as Vanguard, they do not allow rollovers INTO their solo 401k which makes them worthless to me. Fidelity does offer rollovers into the 401k. This is important for back door Roth contributions.

ETrade offers a plan that lets you do whatever you want... literally. And zero fees except $10 commissions per trade. The downside is that it's ETrade and I don't trust them like I trust a Vanguard or a Fidelity.

[barrett]

Thanks for the recommendation, TripleB. I think I am OK with TD Ameritrade for now. It's specifically a solo 401(k) Roth that I was struggling to set up. Is that what you understood from my post? Those plans go by so many different names that it's hard to even talk about them properly. I know what you mean though about not trusting the other companies as much as Fidelity and Vanguard.

Can you explain what a "Back door Roth contribution" is? I'm 55 now and would love to get more of my retirement savings in my Roth & solo 401(k) Roth before I need to get access to these funds. I have the majority of my retirement savings in a regular IRA because the tax deductions were helpful most years, and I also started contributing to that account in 1982. Also have some in a SEP but the smallest of my retirement accounts is my Roth. Thanks for your help.

[TripleB]

Can you explain what a "Back door Roth contribution" is? I'm 55 now and would love to get more of my retirement savings in my Roth & solo 401(k) Roth before I need to get access to these funds. I have the majority of my retirement savings in a regular IRA because the tax deductions were helpful most years, and I also started contributing to that account in 1982. Also have some in a SEP but the smallest of my retirement accounts is my Roth. Thanks for your help.

Backdoor Roth is used when you are ineligible to contribute to take a tax deduction from a Traditional IRA because your income is too high but you're also ineligible to contribute to a Roth IRA directly either. So you contribute to a "Traditional" IRA but without the tax deduction and it's a "Non Deductible IRA" contribution. Technically, it's a Traditional IRA but there's a basis for it of your contribution so when you eventually withdraw, instead of paying taxes on the whole amount, you subtract out your contribution basis.

Backdoor Roth is when you make a non-deductible IRA contribution and then convert it into a Roth IRA by paying taxes on the conversion, which is $0 since the basis is the full amount of the IRA. This is a new thing allowed under recent rules that relaxes the income-test to do a Roth IRA conversion.

The problem is if you convert a traditional IRA to a Roth IRA, you can't selectively decide to convert this year's non-deductible contributions. You have to convert equally from all traditional IRA money you have.

The solution is to rollover all of your existing deductible traditional IRA money into a solo 401k. Then you have $0 in traditional IRA money. Then you make a contribution to the non-deductible IRA. And you can convert it to a Roth for free since the totality of your Traditional IRA money at that point in time was 100% contributions.

[rocketdog]

A mere $10,000 holding would cost an additional $14/year in expenses if held in Schwab's commission free SGOL vs paying the commission and buying IAU. If you have more than 10k to invest in gold ETFs, find a place with low commissions and buy the ETF with the lower expense ratio.

True, but you can do what I do to mitigate the costs:  buy SGOL commission-free until your holdings add up to around $6,400*, then shift it all into IAU.  Rinse and repeat as needed.  You'll pay a $8.95 commission to make the shift into IAU, but you'll also be paying 25bp instead of 39bp, making IAU cheaper to own at that point. 

* At one trade per year costing $8.95, the break-even point between SGOL and IAU at Schwab is $6,400.  What that means is that it's cheaper to own SGOL until your holdings surpass $6,400, at which point it becomes cheaper to own IAU, due to the lower cost basis.  If you make multiple trades in IAU each year, then multiply your number of trades by $6,400 to find your break-even point with SGOL. 

[MachineGhost]

T-Bonds: Fidelity
Gold: Schwab*
Stocks: E*Trade, Motif Investing

I don't find TD Ameritrade or Vanguard to be best in class at anything.

Interesting on the Solo Roth 401(k) drama.  From the looks of it, E*Trade is the best option for it.

* Didn't account for rocketdog's $6400 thingy.

[TK3]

Only good things to say about Fidelity

Superb web site that allows full view of all assets( home mortgage, insurance, etc.) whether held at Fidelity or not
Great customer service
Banking services if you want it
Broad range of no commission ETFs at lots of fund families
Easy to transfer money out to other institutions

While I understand the idea behind diversification across fund familes,  I don't find it practical or necessary with a PP holding strategy

[MachineGhost]

How do you figure E*trade is best for stocks? Not by commission. Ameritrade has the largest list of commission-free ETFs for the stock portion AND includes most of Vanguard's offerings [AND one of the best trading platforms out there IMO]. So if you want to use ETFs, I would argue Ameritrade is best. For individual VP stocks, I have a legacy OptionsHouse account that charges $2.95/trade [now $4.75 for new accounts].

You know what, you got me.  I can't remember exactly why, but E*Trade is setup for my equity allocation disbursement.  It may have had free quant ETF's that I'm interested in.  But I agree with you the TDA has a better list of commission-free ETF's.  However, they have very high lock-in fees to close or transfer an account.  Unless the receiving broker agrees to refund your TDA fees (not common anymore), its a huge disincentive.  My mutual funds are at TDA from them buying out TOS and I'm stuck.  TDA has outrageous, old school mutual fund trading fees.

I just realized this sounds weird, but I'm not currently invested in equity so it's just building up in cash.  Since the ETF landscape changes so much, I decided to worry about getting up to speed when it was actually time to buy equity.