Today, I agree with most of your 'When it should be' comments except for number 1 which I strongly disagree with. I do not believe that you can get an appropriate amount of diversification with six or less equities.
You said six maximum which implies that 4 or 5 would be fine. Out of interest what 4 or 5 'good blue chip' stocks would you suggest? 
  
Not trying to be snarky, but it's just that I don't think the couple should go from 27 MFs to just 6 or less individual stocks. I do, however,  think that they should exit MFs totally and go to individual stocks once they have done some research and learning.

They perhaps don't even realise that under CRM2 the fees that they see on the report are just the fees that the adviser gets, not the total amount of fees that they pay.