Can no longer purchase Admiral Shares at Schwab

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lkisnowindexing
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Can no longer purchase Admiral Shares at Schwab

Post by lkisnowindexing »

I have held a significant position in Vanguard Intermediate Term Tax Exempt fund through my Schwab account for several years. Last year I unhooked from my advisor and now manage the account myself. For the past year I have been able to continue purchasing VWIUX in the account with the only inconvenience being that I can not place the trades online but have had to call them in. Now after having my trade today rejected, I am being told that as of April 15th 2014 Vanguard is no longer allowing the purchase of Admiral shares through an outside broker (although it is unclear if this would still be available to me though the advisor). Is that a Vanguard policy or a Schwab policy? In essence I am being given the choice to open a separate account directly at Vanguard if I would like to continue purchasing Admiral share class which i dont want to do for reasons of keeping everything consolidated OR I can now begin purchasing Investor Class shares at Scheab with their higher expense ratio in a fund that I have over 1MM invested in. Who's interest is this serving and is there a workaround? Thanks
dbr
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Re: Can no longer purchase Admiral Shares at Schwab

Post by dbr »

That's interesting. In the past it has been clear that Vanguard would not sell Admiral share classes of index funds through brokers. This would seem to mean they will also not sell Admiral share classes of any funds through brokers. This would be a Vanguard policy and it has nothing to do with working with an adviser.

A common alternative is to buy the ETF version of the fund, but Vanguard does not offer VWIUX as an ETF. The interest that this is serves is Vanguard being able to have your account to hold Vanguard mutual funds. Given the investor owned structure at Vanguard, that is also in your interest unless you have an incentive, such as yours, not to hold your Vanguard funds at Vanguard.
steve_14
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Re: Can no longer purchase Admiral Shares at Schwab

Post by steve_14 »

Don't know if what the rep told you is true, but I'd move my assets to Vanguard, if Vanguard funds are what I wanted.
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lkisnowindexing
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Re: Can no longer purchase Admiral Shares at Schwab

Post by lkisnowindexing »

The account has funds other than Vanguard in it and more importantly Schwab offers me other benefits such as ability to borrow money against the assets at very competitive rates that i might not be able to get at Vanguard. Also the consensus here seems to be that Schwab customer service is much better than Vanguard's which is not something that i want to give up.
livesoft
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Re: Can no longer purchase Admiral Shares at Schwab

Post by livesoft »

So just leave it at Schwab and start a new smaller one at Vanguard. Having $50,000 over at Vanguard is no big deal. You probably have more in your checking account right now anyways.

I have multiple brokerage accounts. It doesn't mean that I place trades in them. For instance, I placed no trades in 2013 in my Fidelity and in my TDAmeritrade taxable brokerage accounts. No 1099B to mess with. I have the dividends transferred out to one of my other accounts.
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Rick Ferri
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Re: Can no longer purchase Admiral Shares at Schwab

Post by Rick Ferri »

Some advisers do have access to various Vanguard funds and share classes through Schwab whereas an individual may not. Depending on the adviser and the fund, an adviser usually has to be approved for this access by Vanguard (they don't want advisers who trade a lot.)

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Re: Can no longer purchase Admiral Shares at Schwab

Post by dbr »

Rick Ferri wrote:Some advisers do have access to various Vanguard funds and share classes through Schwab whereas an individual may not. An adviser usually has to be approved for this access by Vanguard (they don't want advisers who trade a lot.)

Rick Ferri
Access surely does not mean that you don't have to pay someone for that. Are you saying that I can use an adviser at Schwab and get a Vanguard Admiral share class at Vanguard's ER and pay Schwab nothing for the deal? Surely Vanguard does not ask Schwab to pay a fee to carry that share class for them nor do they pay Schwab a marketing fee to sell the fund.
stlutz
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Re: Can no longer purchase Admiral Shares at Schwab

Post by stlutz »

It's unfortunate that Vanguard never launched the muni bond ETFs it has planned 5 or 6 years ago. Last year they closed IT-TE to new accounts from advisors because it's getting too big.

Still, the fact is that IT-TE Admiral Shares is by far the best muni bond option out there. Livesoft has a good suggestion--if you want to add new money, do it directly at VG.

At some point, there probably will be an ETF that is offered at lower cost than MUB is currently.
Dandy
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Re: Can no longer purchase Admiral Shares at Schwab

Post by Dandy »

Vanguard offers a great product at a very low price 10 or 12 basis points. Maybe they feel if they had more of your business directly at Vanguard they would make more profit and maintain or lower costs. Maybe if many people who hold VG Admiral shares remotely came to Vanguard the ER would be 8 basis points :sharebeer

Fidelity and Schwab are worthy competitors so having some incentive to get the lowest price by buying direct makes some business sense. Have they grandfathered you existing assets as Admiral? If so, that is at least reasonable. I'm surprised Schwab didn't let it's VG Admiral share customers know of the change.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by placeholder »

Dandy wrote:Vanguard offers a great product at a very low price 10 or 12 basis points. Maybe they feel if they had more of your business directly at Vanguard they would make more profit and maintain or lower costs..
Why would that be?
stlutz
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Re: Can no longer purchase Admiral Shares at Schwab

Post by stlutz »

Maybe they feel if they had more of your business directly at Vanguard they would make more profit and maintain or lower costs..
Seems like it would raise costs. Servicing accounts costs money.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by madbrain »

stlutz wrote:
Maybe they feel if they had more of your business directly at Vanguard they would make more profit and maintain or lower costs..
Seems like it would raise costs. Servicing accounts costs money.
Are you saying costs would be higher for Vanguard if the funds were held indirectly at Schwab as opposed to held directly ? I don't think so.
There are costs for indirect accounts too.
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lkisnowindexing
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Re: Can no longer purchase Admiral Shares at Schwab

Post by lkisnowindexing »

Seems unfortunate that Vanguard would not allow grandfathering at Schwab for existing shareholders rather than force them to have to open new accounts to avoid paying the higher ER for a second fund. But if I do in fact need to start a new holding, I was looking at the NY Long Term TE fund (VNYUX) which I have not seen much discussion of here but which might be a smart option given my NY residency that the advisor did not originally put me in. Would appreciate input on that option. Thanks
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Re: Can no longer purchase Admiral Shares at Schwab

Post by Rick Ferri »

dbr wrote:
Rick Ferri wrote:Some advisers do have access to various Vanguard funds and share classes through Schwab whereas an individual may not. An adviser usually has to be approved for this access by Vanguard (they don't want advisers who trade a lot.)

Rick Ferri
Access surely does not mean that you don't have to pay someone for that. Are you saying that I can use an adviser at Schwab and get a Vanguard Admiral share class at Vanguard's ER and pay Schwab nothing for the deal? Surely Vanguard does not ask Schwab to pay a fee to carry that share class for them nor do they pay Schwab a marketing fee to sell the fund.
Clients pay a commission to buy Vanguard funds through Schwab. The commission rate is negotiated with each adviser.

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dbr
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Re: Can no longer purchase Admiral Shares at Schwab

Post by dbr »

Rick Ferri wrote:
dbr wrote:
Rick Ferri wrote:Some advisers do have access to various Vanguard funds and share classes through Schwab whereas an individual may not. An adviser usually has to be approved for this access by Vanguard (they don't want advisers who trade a lot.)

Rick Ferri
Access surely does not mean that you don't have to pay someone for that. Are you saying that I can use an adviser at Schwab and get a Vanguard Admiral share class at Vanguard's ER and pay Schwab nothing for the deal? Surely Vanguard does not ask Schwab to pay a fee to carry that share class for them nor do they pay Schwab a marketing fee to sell the fund.
Clients pay a commission to buy Vanguard funds through Schwab. The commission rate is negotiated with each adviser.

Rick Ferri
Right, that is true for all funds that are not NTF. An investor can buy Vanguard funds at Fidelity for a commission without an advisor. But the question is about Admiral share classes of Vanguard funds. Are you actually saying that the customer can negotiate a commission rate with the adviser that gets the customer access to ADMIRAL SHARE CLASSES that you don't have if you don't have an adviser. If you don't have an adviser at Fidelity then we presume the commission is the published commission for Vanguard funds, but Vanguard Admiral share classes of index funds were never available to such a customer, and now Admiral share classes of all Vanguard funds are not available to such a customer.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by Rick Ferri »

Are you actually saying that the customer can negotiate a commission rate with the adviser that gets the customer access to ADMIRAL SHARE CLASSES that you don't have if you don't have an adviser.
Clients don't negotiate a mutual fund commission rate with an adviser. Advisers negotiate this commission rate with custodians for ALL client accounts. This is one their fiduciary duties (for fee-only RIAs).

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Re: Can no longer purchase Admiral Shares at Schwab

Post by dbr »

Rick Ferri wrote:
Are you actually saying that the customer can negotiate a commission rate with the adviser that gets the customer access to ADMIRAL SHARE CLASSES that you don't have if you don't have an adviser.
Clients don't negotiate a mutual fund commission rate with an adviser. Advisers negotiate this commission rate with custodians for ALL client accounts. This is one their fiduciary duties (for fee-only RIAs).

Rick Ferri
Ok, got that.

But can we address the question on this thread, which is about Admiral share class at Schwab, and now as to whether or not people who work with advisers at Schwab will still have access to buy Admiral share classes while people who are not working with advisers at Schwab will no longer be able to buy Admiral share classes of non-index funds that they were able to buy previously. All of those transactions involve a commission, but the exisitence of a commission is not the question.

For me, for example, I have a directed brokerage option with Schwab in my 401K. Up till recently I could buy Admiral share classes of Vanguard non-index funds (for a commission) and not Admiral share classes of Vanguard index funds (not at any commission). Apparently it will now be the case that I cannot buy Admiral share classes of Vanguard non-index funds either. Now you say that I could make those purchases if I worked through a Schwab advisor working under an agreement between Schwab and Vanguard. Can you address the specific question of how this can work exactly for the details I am descibing which you continue to ignore in your answers, . . . or I can eventually call Schwab myself and get it straightened out. If you don't know, then fine; we can find out.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by Rick Ferri »

But can we address the question on this thread, which is about Admiral share class at Schwab, and now as to whether or not people who work with advisers at Schwab will still have access to buy Admiral share classes while people who are not working with advisers at Schwab will no longer be able to buy Admiral share classes of non-index funds that they were able to buy previously.
It isn't a Schwab decision to cut out independent investors from Admiral Shares. It's a Vanguard decision. They tell Schwab which funds will be available to each class of investors. You would need to address your concerns to Vanguard.

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dbr
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Re: Can no longer purchase Admiral Shares at Schwab

Post by dbr »

Rick Ferri wrote:
But can we address the question on this thread, which is about Admiral share class at Schwab, and now as to whether or not people who work with advisers at Schwab will still have access to buy Admiral share classes while people who are not working with advisers at Schwab will no longer be able to buy Admiral share classes of non-index funds that they were able to buy previously.
It isn't a Schwab decision to cut out independent investors from Admiral Shares. It's a Vanguard decision. They tell Schwab which funds will be available to each class of investors. You would need to address your concerns to Vanguard.

Rick Ferri
I give up. I'll call Schwab and see if I can get a direct answer to my actual questions. Your answers continue to not clarify what applies to funds that are or are not index funds of Admiral share classes, what applies to customers that have an adviser at Schwab and what applies to customers that do not have an adviser at Schwab, whether or not we are talking about having to pay a commission of one kind or another kind, what applies prior to a recent change in Vanguard policy and what applied before that change. I see 2^4 = 16 combinations there that could be different answers although the variations could collapse into a smaller number of answers.

I understand Vanguard could tell Schwab what is available to different classes of investors, but that is not the question. The questions are what are the classes of investors and what in fact has Vanguard told Schwab as to what the rules are. Also I don't have concerns; I just want to know what the facts are.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by livesoft »

You want the corporate communication from Vanguard to Schwab where all this is detailed --- even if it may not exist. :)
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Re: Can no longer purchase Admiral Shares at Schwab

Post by dbr »

livesoft wrote:You want the corporate communication from Vanguard to Schwab where all this is detailed --- even if it may not exist. :)
Or, alternatively a posting at Schwab that tells me as the customer what these details are.

I know what I have and haven't been able to buy at Schwab in the past, as a customer not in an advisory relationship, because I have purchased the Admiral share class of a non-index fund and have been told that the Admiral share class of two three index funds that I tested were "not available" at Schwab. Naturally I have no interest in hiring an adviser at Schwab, and the fact that the account is in a PCRA might invoke different rules, somehow.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by livesoft »

It is entirely possible that all this is a "play it by ear" for all the parties involved.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by dbr »

livesoft wrote:It is entirely possible that all this is a "play it by ear" for all the parties involved.
I think I could pretty easily find acceptable ETF's for everything I want and just screw it, and maybe get Vanguard out of the picture as well.

Getting rid of Schwab is harder because that would take rolling over the 401K, which has more complicated implications.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by derosa »

I find it interesting that in this whole thread about 2 companies and their respective policies no one has talked with either company.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by livesoft »

derosa wrote:I find it interesting that in this whole thread about 2 companies and their respective policies no one has talked with either company.
I am not surprised because of the holiday. Vanguard is not known for having reasonable phone hours. My spouse could not reach Fidelity Charitable either this holiday.
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Re: Can no longer purchase Admiral Shares at Schwab

Post by stlutz »

Admiral Shares still show up as being purchasable though my 401K's brokerage option (not Schwab).
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Re: Can no longer purchase Admiral Shares at Schwab

Post by Rick Ferri »

I understand Vanguard could tell Schwab what is available to different classes of investors, but that is not the question. The questions are what are the classes of investors and what in fact has Vanguard told Schwab as to what the rules are. Also I don't have concerns; I just want to know what the facts are.
Contact Schwab to find out which funds are available and how investors are classified; contact Vanguard to find out why.

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Re: Can no longer purchase Admiral Shares at Schwab

Post by dbr »

derosa wrote:I find it interesting that in this whole thread about 2 companies and their respective policies no one has talked with either company.
My story is that Megacorp has discontinued the SV fund and put the money in a "team managed" intermediate term bond fund with an ER of 0.29%. No withdrawals can be made for the next ninety days. At that point a likely option will be to put the money in the PCRA with Schwab and pick a bond fund or bond ETF there. Sometime between now and then I will find out what the policy is and what the applicable transaction costs will be.

I haven't called Schwab now because so far I have gotten what I thought I would get from Schwab, which is to purchase non-index Admiral class of Vanguard funds in the PCRA and they haven't told me I have to get rid of those holding or that I can't buy more.
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