Vanguard Reducing the Admiral Shares Threshold

[TromboneAl]

For those of you with Vanguard investments, starting May 10 the threshold for Admiral shares (lower expenses) will be reduced from $250,000 to $100,000.

Here's a link to the article.

 

[BigMoneyJim]

Woo hoo! That puts it a lot closer for me...several years closer. A nice goal to shoot for, and I can be there in 3 years of flat returns if I keep up my savings rate.

 

[cute fuzzy bunny]

I was pretty happy when I saw this on bloomberg this am...finally the last few funds I own that arent already admiral will qualify! I had a couple I was going to have to wait another year and a half to get in there.

This should take my aggregate expenses from .24% down to about .21%!

 

[Sheryl]

Humph. I only have two funds at Vanguard and it looks like one of them doesn't have Admiral Shares (the STAR fund). Bummer.

 

[BUM]

The rich get richer.... But seriously, I thought I qualified for admiral shares until I learned that they meant per investment - not the value of your account. So being well diversified that leaves me

a Voyager adrift.

 

[BigMoneyJim]

I didn't realize that until I read th's post, so Admiral funds are still a number of years away for me. Bummer.

 

[cute fuzzy bunny]

Yep, vanguard uses the term "account' interchangeably with the word "fund". Confused the crap out of me when I went to open my second fund with them and the online dingy said "Do you want to open a new account?" and I thought "nooo...I want to add a fund to my existing account". Around and round and round we went until I called them and they said "oh, each fund is a separate account in your account".

Right.

I suggested they not confuse customers by having them have a taxable account, an IRA account, a roth account, and each fund be an 'account' within those accounts...

 

[preben]

If one holds the Vanguard fund through a (USA based) online broker - will one then still obtain the Admiral share status? (provided have 100k in the fund)?
Cheers!

 

[cute fuzzy bunny]

No idea, but it should. As long as vanguard is 'aware' of your ownership of the fund. Even if they dont, vanguard does have a conversion process which does not create a taxable event, so you can probably ask for it to happen if it isnt automatic.

Perhaps I've discovered vangards secret intentions here...I had a couple of 'minority holdings' that were ~5-10k below 100k and stuffed them up to 100 in anticipation of the conversion...

 

[ESRBob]

Perhaps I've discovered vangards secret intentions here...I had a couple of 'minority holdings' that were ~5-10k below 100k and stuffed them up to 100 in anticipation of the conversion...

Sure - I'll be doing the same. It also seems to be a trend out there to lower fees, and Vanguard, which has pretty much owned this 'space' for years, is getting competition from ETFs, Fidelity and others for lowest-costs index status. (I've been drinking the Vanguard Kool-Aid for 20 years now.)

All in all, I think some healthy competition will ensue which can't hurt us investors. Still, if Vanguard is really akin to a 'co-op' or non-profit, there won't be too much fee-reduction: We've already got it. So now it looks like they'll be fee reducing bigger clients at the expense of smaller ones. Client, of course, meaning how much you have in an individual fund.

TIme to start consolidating, and maybe even moving a little money back to Vanguard?

 

[Sheryl]

Yep, vanguard uses the term "account' interchangeably with the word "fund".  Confused the crap out of me

Yeah, me too.       Franklin Templeton does the same thing, and it drives me crazy.  When I was still getting paper statements from them, I'd get three envelopes, three separate pieces of paper, one for each fund.

But Vanguard puts the statements from both "accounts" on the same piece of paper in the same envelope, so silly me,  I though they were the same "account."

I won't be an Admiral any time soon either!   on them.

 

[TromboneAl]

will one then still obtain the Admiral share status?

Note that conversion to Admiral shares isn't generally automatic. Years ago I had been eligible without knowing it, and the shares weren't converted until I asked for it.

 

[cute fuzzy bunny]

That is correct, however they noted in their press release that this round will be done automatically for any qualifying shares...I think it said may 5th or may 10th?

 

[ESRBob]

That is correct, however they noted in their press release that this round will be done automatically for any qualifying shares...I think it said may 5th or may 10th?

The letter I got from them today said that while the new rates and eligibility are effective May 10, you'd need to ask for the conversions to have them take effect then. Otherwise, you can wait and 'This summer" they will automatically convert any eligible accounts.

I did a bit of digging and found that since Vanguard's fees are already so low, the savings of going to Admiral averages a little less than 0.1% a year.

Let's see, what is .1% of xxx for 2 months...

At least it should pay for a dinner out on Brennan!

 

[ESRBob]

Just a reminder, Vanguard has just confirmed for me that converting from regular investor shares to Admiral shares is not a taxable event, and likewise, converting from a regular fund to the corresponding Viper shares is also not a taxable event. (I guess the wash sale rule applies)

My understanding is that Vipers, like other ETFs, do not distsribute capital gains but just let them accumulate in the share price, which means they would not be taxable until you sell the Viper shares. If anybody knows otherwise, would be grateful to hear. If true, this could be a nice way, as the next bull cranks up and we use up our tax loss carryforwards from 2000, to avoid being taxed on fund distributions.

 

[TromboneAl]

Today's the day to convert them.

 

[cute fuzzy bunny]

Oh shoot, sorry Al, I started another thread on this in 'fire and money'...