New Vanguard Account Structure

[Another Reader]

I received an unsolicited letter from Vanguard requesting that I "upgrade" my mutual fund accounts to brokerage accounts. Letters like this are suspicious, because I usually get them from cable providers and the like, and they involve additional costs. In this case, I was pleased to see the "upgrade" because of the cumbersome buy and sell processes between the accounts.

I have a brokerage account for the taxable side that holds Vanguard ETF's. There was a money market core account that got moved. No problem with what got moved.

To move the rolled over IRA, Vanguard revived an account number that was never used and had been "dead" for over 5 years. This concerns me. The account appears to be titled correctly, but the account number has not been reported on the paperwork for several years. Is this going to cause me a problem?

In addition, one of my taxable mutual funds did not get "upgraded." I tried to do so, but the process wanted to open another brokerage account. My guess is that there is a problem with the title on that account and I will spend a few days on the phone with Vanguard's unflaggingly pleasant but not authorized to do anything customer service people to fix this.

I know most folks here have an almost religious preference for Vanguard, but problems like this are why most of my money resides at Fidelity's house.

 

[jim584672]

I have a small TradIRA, RothIRA with them. Did the upgrade. I was concerned it might be considered a rollover. They assured me it will not be. So now I can trade stocks in the accounts.

 

[Another Reader]

My biggest concern is the dead account number from many years ago that was set up for a rollover that was never completed. Why would Vanguard dredge up an account that supposedly no longer exists instead of creating a new account? My fear is that some housekeeping program will delete this account as dead, along with the funds in the account.

 

[W2R]

I got a similar letter but ignored it. I couldn't figure out any advantage at all that converting to their brokerage accounts would give me, as a buy-and-hold investor. Basically I am happy with the status quo.

Never had any but the very most pleasant results/interactions with Vanguard. Sorry you are having difficulties with them!

 

[Another Reader]

You are going to be "converted" involuntarily in the near future, per the CSR I spoke to yesterday. All mutual fund accounts will eventually be moved over to brokerage accounts.


I called again this morning and was told by the rep I would likely have to create another brokerage account for the fund that was not "upgraded" and then merge the two accounts. He said it was because the treasuries mutual fund account could not be used as a settlement account. Well, duh, that's why there is a money market account in the brokerage account already. Then he checked and discovered it could all be done over the phone now. So that's now done.


I figure by Monday or Tuesday the dust will have settled and any problems can be fixed. At least I did not accept the CSR's original suggestion of moving the money in the treasuries mutual fund over to the prime money market settlement account.

 

[Mulligan]

I have a small TradIRA, RothIRA with them. Did the upgrade. I was concerned it might be considered a rollover. They assured me it will not be. So now I can trade stocks in the accounts.

Same here and glad I did it. The process was cumbersome to me before. I like the new set up better. Of course I buy a few securities in addition to holding one mutual fund.


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[kevink]

I was 100% with Vanguard for years, then moved everything to Schwab and recently decided to transfer one account to Vanguard just in order not to have all of my eggs in one basket. In talking with the Vanguard rep they confirmed that the reason they're doing this is to be competitive with the Schwab's and Fidelity's of the world, where you just have one account.

I remember what a PITA it was to transfer my wife's IRA, mine and our joint account to Schwab way back when due to the fact that Vanguard considered that we had not 3 accounts but 6, since the mutual fund accounts and VBS (Vanguard Brokerage Services) were entirely separate. It took weeks for the transfer to happen.

I've had excellent customer service at both Vanguard and Schwab, but over time I've come to appreciate John Bogle and Vanguard more and more, realizing that we simply wouldn't have low-cost mutual funds if it weren't for Vanguard's wonderfully disruptive effect on the mutual funds industry. They're still the only company, due to their unique structure, where shareholder and client interests are 100% aligned and IMHO that makes them uniquely worthy of patronage.

 

[jim584672]

I am puzzled by Vanguard's brokerage restriction:

"If you buy and sell the same Vanguard ETF in a Vanguard Brokerage Account more than 25 times in a 12-month period, you may be restricted from purchasing that Vanguard ETF through your Vanguard Brokerage Account for 60 days."

This makes no sense. I could understand it for an open ended fund where excessive trading can create challenges for the fund's money management. But a market traded ETF has no impact on the underlying fund. It is like they are trying to impose their vision of how you should trade. This is a brokerage account, they get paid with every trade. Also they base commissions on how much you have invested in Vanguard funds. Again for a brokerage this is strange and puzzling to me.

 

[Koolau]

Every time I check my account, I am prompted to make this change. I DO already have a brokerage account in addition to my non-brokerage accounts. So far, I have not accepted their prompt. I don't understand exactly why they want me to do it nor what the ramifications will be - all their "assurances" to the contrary. Any one had a good experience with accepting their prompt?

 

[Mulligan]

I thought the it made more sense they did it and wondered why it hadn't been done before. Instead of 4 separate "accounts" (2 mutual funds and 2 brokerages), I only had 2 now (the Ira and the regular). Very painless process.


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[donheff]

Odd that I wasn't even aware of this. What does the change actually do - just move your mutual funds intact into a brokerage account? I don't want to change my mutual funds in any way.

 

[easysurfer]

Is this the same letter that happened close to a year ago? I ignored that and didn't switch over and haven't got too many nagging prompts since. Maybe it's nag time again?

 

[target2019]

Odd that I wasn't even aware of this. What does the change actually do - just move your mutual funds intact into a brokerage account? I don't want to change my mutual funds in any way.

That is what happens. Funds go onto the brokerage. You also get a money market fund.

I have not been converted yet. I am in no hurry. I will end up with 5 more funds, as MMF will be added to each account. None of my accounts can be co-mingled.

 

[target2019]

Is this the same letter that happened close to a year ago? I ignored that and didn't switch over and haven't got too many nagging prompts since. Maybe it's nag time again?

Same here. It sounded like an urgent matter when that first letter or email arrived, But I'm just waiting.

 

[easysurfer]

Same here. It sounded like an urgent matter when that first letter or email arrived, But I'm just waiting.

On the letter, I'm keying in on the word change "requested" instead of "required". Thus, I'm in no rush.

 

[MichaelB]

Why not call Vanguard and ask why they want this change?

 

[donheff]

Why not call Vanguard and ask why they want this change?

When we can endlessly speculate here? What are you thinking?

 

[REWahoo]

I suspect it has something to do with the disappearance of Malaysia Airlines Flight 370.

 

[gauss]

I'll keep my legacy mutual fund structure at Vanguard. I believe the option to have distributions automatically distributed to your bank account goes away with the brokerage setup (ie the brokerage account has a required money market instead).


Also, I always find brokerage statements more challenging to read than a simple mutual fund statement.


-gauss

 

[kevink]

I am puzzled by Vanguard's brokerage restriction:

"If you buy and sell the same Vanguard ETF in a Vanguard Brokerage Account more than 25 times in a 12-month period, you may be restricted from purchasing that Vanguard ETF through your Vanguard Brokerage Account for 60 days."

This makes no sense. I could understand it for an open ended fund where excessive trading can create challenges for the fund's money management. But a market traded ETF has no impact on the underlying fund. It is like they are trying to impose their vision of how you should trade. This is a brokerage account, they get paid with every trade. Also they base commissions on how much you have invested in Vanguard funds. Again for a brokerage this is strange and puzzling to me.

Vanguard ETFs, uniquely among ETFs to the best of my knowledge, are actually a share class of the corresponding mutual funds. Same management - and same dim view of active trading of index funds. Personally I see it as an advantage, in that you're far less likely to see your Vanguard ETFs trading at a steep discount during times of market panic. Active traders have the entire rest of the ETF world open to them (which is of course one of the main reasons Vanguard founder John Bogle has such a negative view of ETFs).

 

[jim584672]

Vanguard ETFs, uniquely among ETFs to the best of my knowledge, are actually a share class of the corresponding mutual funds. Same management - and same dim view of active trading of index funds. Personally I see it as an advantage, in that you're far less likely to see your Vanguard ETFs trading at a steep discount during times of market panic. Active traders have the entire rest of the ETF world open to them (which is of course one of the main reasons Vanguard founder John Bogle has such a negative view of ETFs).

Anything that restricts my ability to change a position is never an advantage. Also your point that Vanguard's restriction will result in less of a discount in down turns simply doesn't hold water. What percentage of the brokerage world does Vanguard hold? Minimal. Therefore the restriction will have no impact on premium/discounts. ETFs are great because they are liquid, Vanguard doesn't see this as a virtue, weird.

 

[Markola]

When I moved my money from Schwab to Vanguard, I was surprised that Vanguard required two accounts for each IRA. All of those dual accounts were clunky. I received the same letter the OP received, gave Vanguard approval to combine the series of dual accounts to one, and it was a non-event. I'm glad for any pain-free opportunities to keep finances simple.


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[Mulligan]

When I moved my money from Schwab to Vanguard, I was surprised that Vanguard required two accounts for each IRA. All of those dual accounts were clunky. I received the same letter the OP received, gave Vanguard approval to combine the series of dual accounts to one, and it was a non-event. I'm glad for any pain-free opportunities to keep finances simple.


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+1.... I do not like change and do not particularly like to lift a finger in effort to assist in change. But even I did this. Easy to do, and like you said...simpler.


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[pb4uski]

I logged onto Vanguard today and noticed for the first time an "Upgrade" option on each mutual fund account where I could upgrade from a mutual fund account to a brokerage fund account online.

Curious about the experience of people who have converted and any benefits or detriments.

 

[braumeister]

Many of us did that in the last year. Simplicity is a good thing.