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Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 11:15 am
by deanmoriarty
Hi,

I got a windfall a few months ago that I parked in my Vanguard Brokerage Account under VMMXX (Vanguard Prime Money Market Fund). I'm planning to DCA what's left of that windfall into the market over the next 12-15 months, in amounts of ~$50,000 every month.

To make things simpler, I've been trying to set up an automatic transaction every month, and the only option available under my account was "Automatic Withdrawal" ("Automatic Exchange" is not available for brokerage accounts apparently).

To my surprise, in the "Edit automatic withdrawal" I'm not able to move the money to the settlement fund in the same account where VMMXX is: the only option I have available is to send it to my bank checking account, which is cumbersome and slow for money that I would invest anyway shortly in the same account.

In particular, when I select "Move money to a Vanguard brokerage non-retirement account", it says "You have no eligible Vanguard nonretirement brokerage account on file."

Have you experienced anything similar? How is this even possible? I have a few other brokerage accounts with other firms and I've always been able to set up automatic withdrawals and by default they always go to the settlement fund.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 11:33 am
by goingup
My understanding is that the Vanguard brokerage platform does not support auto-exchanges from one fund to another. That's the big reason why I'm still on the old platform as I have several auto-exchanges programmed quarterly.

I'm not sure there's an automatic solution available for you. :|

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 11:55 am
by deanmoriarty
goingup wrote:
Thu Nov 08, 2018 11:33 am
My understanding is that the Vanguard brokerage platform does not support auto-exchanges from one fund to another. That's the big reason why I'm still on the old platform as I have several auto-exchanges programmed quarterly.

I'm not sure there's an automatic solution available for you. :|
Thanks, I knew about the limitation of the auto-exchange (which is outrageous in itself), but I didn't think it would extend also to the inability of simply automatically selling a fund and have the proceeds go into the settlement fund, I thought that was the entire purpose of having a settlement fund. :?

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 12:01 pm
by Nummerkins
Are you looking in the right place? I have no issues in my brokerage Rollover or Roth IRAs.
You can only do automatic transactions on Vanguard mutual funds, not ETFs even in a brokerage account.

My Accounts > Account Maintenance > Automatic Investment

I choose the destination and then the source (settlement fund).

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 12:03 pm
by deanmoriarty
Nummerkins wrote:
Thu Nov 08, 2018 12:01 pm
Are you looking in the right place? I have no issues in my brokerage Rollover or Roth IRAs.
You can only do automatic transactions on Vanguard mutual funds, not ETFs even in a brokerage account.

My Accounts > Account Maintenance > Automatic Investment

I choose the destination and then the source (settlement fund).
I'm not looking for Automatic Investment, I'm looking to automatically sell a portion of my mutual fund and have the proceeds directed into the settlement fund in Vanguard as opposed to my external bank account, which is the only option Vanguard is giving me. So no "Automatic Investment", but "Automatic Withdrawal".

I don't understand why automatic investments can be sourced from either a bank account or the settlement fund, but automatic withdrawals can just be directed to a bank account.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 12:42 pm
by CRTR
deanmoriarty wrote:
Thu Nov 08, 2018 12:03 pm
Nummerkins wrote:
Thu Nov 08, 2018 12:01 pm
Are you looking in the right place? I have no issues in my brokerage Rollover or Roth IRAs.
You can only do automatic transactions on Vanguard mutual funds, not ETFs even in a brokerage account.

My Accounts > Account Maintenance > Automatic Investment

I choose the destination and then the source (settlement fund).
I'm not looking for Automatic Investment, I'm looking to automatically sell a portion of my mutual fund and have the proceeds directed into the settlement fund in Vanguard as opposed to my external bank account, which is the only option Vanguard is giving me. So no "Automatic Investment", but "Automatic Withdrawal".

I don't understand why automatic investments can be sourced from either a bank account or the settlement fund, but automatic withdrawals can just be directed to a bank account.
I'm sorry. I guess I'm not clear on what exactly you're trying to do. It sounds like I'm doing the same thing . . . . I just cashed in a CD for my Mom and put the $$ in her brokerage settlement account (VMMXX). I set up an automatic investment (VMMXX to VHGEX every month).

It sounds like you're trying to sell $50K of VMMXX and buy some unspecified fund(s) every month. Maybe you can answer a couple questions so I can see what the issue is?
1. What is your "settlement fund"? Is it not VMMXX?
2. What fund are you selling? What exactly are you trying to buy every month?
3. All taking place in the same brokerage account as VMMXX?

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 12:47 pm
by deanmoriarty
CRTR wrote:
Thu Nov 08, 2018 12:42 pm
deanmoriarty wrote:
Thu Nov 08, 2018 12:03 pm
Nummerkins wrote:
Thu Nov 08, 2018 12:01 pm
Are you looking in the right place? I have no issues in my brokerage Rollover or Roth IRAs.
You can only do automatic transactions on Vanguard mutual funds, not ETFs even in a brokerage account.

My Accounts > Account Maintenance > Automatic Investment

I choose the destination and then the source (settlement fund).
I'm not looking for Automatic Investment, I'm looking to automatically sell a portion of my mutual fund and have the proceeds directed into the settlement fund in Vanguard as opposed to my external bank account, which is the only option Vanguard is giving me. So no "Automatic Investment", but "Automatic Withdrawal".

I don't understand why automatic investments can be sourced from either a bank account or the settlement fund, but automatic withdrawals can just be directed to a bank account.
I'm sorry. I guess I'm not clear on what exactly you're trying to do. It sounds like I'm doing the same thing . . . . I just cashed in a CD for my Mom and put the $$ in her brokerage settlement account (VMMXX). I set up an automatic investment (VMMXX to VHGEX every month).

It sounds like you're trying to sell $50K of VMMXX and buy some unspecified fund(s) every month. Maybe you can answer a couple questions so I can see what the issue is?
1. What is your "settlement fund"? Is it not VMMXX?
2. What fund are you selling? What exactly are you trying to buy every month?
3. All taking place in the same brokerage account as VMMXX?
1) My Vanguard settlement fund is VMFXX (federal money market), not VMMXX.
2) The fund where I parked my money (that I'm selling every month) is VMMXX (prime money market). I'm not looking to buy anything automatically. I'm just looking to sell those $50,000 every month and put them in the settlement fund, ready for my next purchase transaction which will happen manually. I just don't want every month to see my checking account with $50,000 balance and have to wait days.
3) Yes, all taking place in the same account.

Thanks a lot

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 12:54 pm
by vineviz
deanmoriarty wrote:
Thu Nov 08, 2018 12:47 pm
I'm just looking to sell those $50,000 every month and put them in the settlement fund, ready for my next purchase transaction which will happen manually. I just don't want every month to see my checking account with $50,000 balance and have to wait days.
You can enter a sale for VMFXX and a purchase of the new fund at the same time: the money won’t cycle through your checking account.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 1:01 pm
by deanmoriarty
vineviz wrote:
Thu Nov 08, 2018 12:54 pm
deanmoriarty wrote:
Thu Nov 08, 2018 12:47 pm
I'm just looking to sell those $50,000 every month and put them in the settlement fund, ready for my next purchase transaction which will happen manually. I just don't want every month to see my checking account with $50,000 balance and have to wait days.
You can enter a sale for VMFXX and a purchase of the new fund at the same time: the money won’t cycle through your checking account.
Well that works, but the whole point is that I don't want to manually enter a sale every time. Your workflow in particular has some issues if I want to buy ETFs (which I do for small cap value quite often): in that case, as far as I'm aware, I can't just enter in a single step a sale of VMFXX and then a purchase of the ETF without waiting at least a day, so that would complicate my current workflow.

Overall what I'm asking is pretty basic: sell every month and transfer to settlement fund.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 1:08 pm
by vineviz
deanmoriarty wrote:
Thu Nov 08, 2018 1:01 pm
Well that works, but the whole point is that I don't want to manually enter a sale every time. Your workflow in particular has some issues if I want to buy ETFs (which I do for small cap value quite often): in that case, as far as I'm aware, I can't just enter in a single step a sale of VMFXX and then a purchase of the ETF without waiting at least a day, so that would complicate my current workflow.
Actually I’m pretty sure you can do this in one session, even with an ETF.
Overall what I'm asking is pretty basic: sell every month and transfer to settlement fund.
I can understand your frustration, but it’s not an issue of Vanguard being unnecessarily obtuse: there are regulatory challenges that make your preferred solution problematic even though it is theoretically elegant.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 2:12 pm
by sport
OP, you have the money in a MM fund, and you want to make automatic transfers into the settlement fund. Well, the settlement fund is just another MM fund. It is the Federal MM fund instead of the Prime MM fund. Since you have the money in a MM anyway, why not just put it all into the settlement fund. It will continue to earn interest there, just a slightly lower rate. However, part of that yield may be exempt from state income tax. This will eliminate your concern about making transfers, automatically or manually.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 2:20 pm
by deanmoriarty
sport wrote:
Thu Nov 08, 2018 2:12 pm
OP, you have the money in a MM fund, and you want to make automatic transfers into the settlement fund. Well, the settlement fund is just another MM fund. It is the Federal MM fund instead of the Prime MM fund. Since you have the money in a MM anyway, why not just put it all into the settlement fund. It will continue to earn interest there, just a slightly lower rate. However, part of that yield may be exempt from state income tax. This will eliminate your concern about making transfers, automatically or manually.
Thanks, but not a viable option: come January 2019, I plan on moving it all to VCTXX (California Municipal Money Market) as that will give me a considerable advantage considering my tax situation next year while the DCA process goes through. If I used the federal MM I would be overpaying, and since I'm dealing with high 6 figures it's not negligible.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 3:44 pm
by CRTR
deanmoriarty wrote:
Thu Nov 08, 2018 12:47 pm
CRTR wrote:
Thu Nov 08, 2018 12:42 pm
deanmoriarty wrote:
Thu Nov 08, 2018 12:03 pm
Nummerkins wrote:
Thu Nov 08, 2018 12:01 pm
Are you looking in the right place? I have no issues in my brokerage Rollover or Roth IRAs.
You can only do automatic transactions on Vanguard mutual funds, not ETFs even in a brokerage account.

My Accounts > Account Maintenance > Automatic Investment

I choose the destination and then the source (settlement fund).
I'm not looking for Automatic Investment, I'm looking to automatically sell a portion of my mutual fund and have the proceeds directed into the settlement fund in Vanguard as opposed to my external bank account, which is the only option Vanguard is giving me. So no "Automatic Investment", but "Automatic Withdrawal".

I don't understand why automatic investments can be sourced from either a bank account or the settlement fund, but automatic withdrawals can just be directed to a bank account.
I'm sorry. I guess I'm not clear on what exactly you're trying to do. It sounds like I'm doing the same thing . . . . I just cashed in a CD for my Mom and put the $$ in her brokerage settlement account (VMMXX). I set up an automatic investment (VMMXX to VHGEX every month).

It sounds like you're trying to sell $50K of VMMXX and buy some unspecified fund(s) every month. Maybe you can answer a couple questions so I can see what the issue is?
1. What is your "settlement fund"? Is it not VMMXX?
2. What fund are you selling? What exactly are you trying to buy every month?
3. All taking place in the same brokerage account as VMMXX?
1) My Vanguard settlement fund is VMFXX (federal money market), not VMMXX.
2) The fund where I parked my money (that I'm selling every month) is VMMXX (prime money market). I'm not looking to buy anything automatically. I'm just looking to sell those $50,000 every month and put them in the settlement fund, ready for my next purchase transaction which will happen manually. I just don't want every month to see my checking account with $50,000 balance and have to wait days.
3) Yes, all taking place in the same account.

Thanks a lot
OK, I get it now. I was getting confused (not your fault, but mine) with the different MM funds.

Wow, you are correct. I just spent 30 minutes farting around on the website and couldn't find a built in answer. Called my Flagship rep and she confirmed that auto-redemptions are not possible within brokerage account. She offered a couple onerous solutions though . . .

1. Open a second brokerage account. You can schedule automatic withdrawals from the VMMXX to the settlement fund in the new brokerage account. For reasons neither she nor her colleagues could explain, automatic redemptions/withdrawals are allowed across accounts but not within a single one.
2. Every month, manually enter SELL order for VMMXX and the proceeds will automatically be deposited into the settlement fund.

Sorry, not really great solutions. If it's any solace, the issue was forwarded to their tech department . . . maybe a solution in the future but won't help you now.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 3:49 pm
by deanmoriarty
CRTR wrote:
Thu Nov 08, 2018 3:44 pm

OK, I get it now. I was getting confused (not your fault, but mine) with the different MM funds.

Wow, you are correct. I just spent 30 minutes farting around on the website and couldn't find a built in answer. Called my Flagship rep and she confirmed that auto-redemptions are not possible within brokerage account. She offered a couple onerous solutions though . . .

1. Open a second brokerage account. You can schedule automatic withdrawals from the VMMXX to the settlement fund in the new brokerage account. For reasons neither she nor her colleagues could explain, automatic redemptions/withdrawals are allowed across accounts but not within a single one.
2. Every month, manually enter SELL order for VMMXX and the proceeds will automatically be deposited into the settlement fund.

Sorry, not really great solutions. If it's any solace, the issue was forwarded to their tech department . . . maybe a solution in the future but won't help you now.
Wow, I really appreciate the help here, especially for the part where you say "For reasons neither she nor her colleagues could explain...", I searched on all the forum archives but couldn't find details about this one odd behavior, so I hope that people who'll stumble across this problem in the future will be able to use this very useful reply as a reference.

Thanks again.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 4:20 pm
by sport
deanmoriarty wrote:
Thu Nov 08, 2018 2:20 pm
sport wrote:
Thu Nov 08, 2018 2:12 pm
OP, you have the money in a MM fund, and you want to make automatic transfers into the settlement fund. Well, the settlement fund is just another MM fund. It is the Federal MM fund instead of the Prime MM fund. Since you have the money in a MM anyway, why not just put it all into the settlement fund. It will continue to earn interest there, just a slightly lower rate. However, part of that yield may be exempt from state income tax. This will eliminate your concern about making transfers, automatically or manually.
Thanks, but not a viable option: come January 2019, I plan on moving it all to VCTXX (California Municipal Money Market) as that will give me a considerable advantage considering my tax situation next year while the DCA process goes through. If I used the federal MM I would be overpaying, and since I'm dealing with high 6 figures it's not negligible.
What is the reason for dollar cost averaging from one MM fund to another? If you want it in the settlement fund now, put it all there. If you want it all in the California MM fund, you can put it all there now or next year. Why not just put it where you want it now and be done with the process? There are no price fluctuations in MM funds, so dollar cost averaging should not be a consideration. There are also no tax implications from MM fund transactions.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 4:31 pm
by deanmoriarty
sport wrote:
Thu Nov 08, 2018 4:20 pm
deanmoriarty wrote:
Thu Nov 08, 2018 2:20 pm
sport wrote:
Thu Nov 08, 2018 2:12 pm
OP, you have the money in a MM fund, and you want to make automatic transfers into the settlement fund. Well, the settlement fund is just another MM fund. It is the Federal MM fund instead of the Prime MM fund. Since you have the money in a MM anyway, why not just put it all into the settlement fund. It will continue to earn interest there, just a slightly lower rate. However, part of that yield may be exempt from state income tax. This will eliminate your concern about making transfers, automatically or manually.
Thanks, but not a viable option: come January 2019, I plan on moving it all to VCTXX (California Municipal Money Market) as that will give me a considerable advantage considering my tax situation next year while the DCA process goes through. If I used the federal MM I would be overpaying, and since I'm dealing with high 6 figures it's not negligible.
What is the reason for dollar cost averaging from one MM fund to another? If you want it in the settlement fund now, put it all there. If you want it all in the California MM fund, you can put it all there now or next year. Why not just put it where you want it now and be done with the process? There are no price fluctuations in MM funds, so dollar cost averaging should not be a consideration. There are also no tax implications from MM fund transactions.
I'm not DCAing from MM fund to MM fund, it goes like this:

1) The first of the month, I sell $50,000 MM and put it in the settlement fund.
2) The first of the month, my employer deposits my paycheck and it goes into my settlement fund.
3) The first/second of the month, I log into my Vanguard account and take all that's into my settlement fund (so $50,000 + paycheck + dividend distributions from the previous months) and I invest it according to my asset allocation (changes every month, since I contribute to the asset class that's the most out of balance at the time).

So, having the $50,000 going into my bank account first and me having to manually transfer it to the settlement fund introduces more manual steps for me, as well as more confusion since I track my "contributions & withdrawals" spreadsheet purely by looking at the activity of my checking account so I don't have to deal with dividends distributions and such. In this case, the checking activity gets polluted by the series of quick $50k transfers.

Re: Automatic withdrawal with Vanguard

Posted: Thu Nov 08, 2018 5:20 pm
by vineviz
CRTR wrote:
Thu Nov 08, 2018 3:44 pm
For reasons neither she nor her colleagues could explain, automatic redemptions/withdrawals are allowed across accounts but not within a single one.
The new money market fund rules adopted in 2014 severely curtailed the freedom of financial institutions to sweep money into and out of money market funds.

https://www.occ.treas.gov/news-issuance ... 16-17.html

In this case, because the prime money market fund holds commercial paper it is subject to liquidity fees and/or redemption gate they are prevented from automatically moving the money to a sweep account that is NOT subject the other same safeguards.

Re: Automatic withdrawal with Vanguard

Posted: Fri Nov 09, 2018 12:08 am
by CRTR
vineviz wrote:
Thu Nov 08, 2018 5:20 pm
CRTR wrote:
Thu Nov 08, 2018 3:44 pm
For reasons neither she nor her colleagues could explain, automatic redemptions/withdrawals are allowed across accounts but not within a single one.
The new money market fund rules adopted in 2014 severely curtailed the freedom of financial institutions to sweep money into and out of money market funds.

https://www.occ.treas.gov/news-issuance ... 16-17.html

In this case, because the prime money market fund holds commercial paper it is subject to liquidity fees and/or redemption gate they are prevented from automatically moving the money to a sweep account that is NOT subject the other same safeguards.
That's interesting. Not sure it applies here though. They do allow automatic prime money market (or any Vanguard fund) redemptions and deposits into a sweep fund as long as it isn't in the same brokerage account (to another brokerage account or to an IRA, for example). I'm guessing it is just a web site design issue in this case

Re: Automatic withdrawal with Vanguard

Posted: Fri Nov 09, 2018 12:20 am
by vineviz
CRTR wrote:
Fri Nov 09, 2018 12:08 am
vineviz wrote:
Thu Nov 08, 2018 5:20 pm
CRTR wrote:
Thu Nov 08, 2018 3:44 pm
For reasons neither she nor her colleagues could explain, automatic redemptions/withdrawals are allowed across accounts but not within a single one.
The new money market fund rules adopted in 2014 severely curtailed the freedom of financial institutions to sweep money into and out of money market funds.

https://www.occ.treas.gov/news-issuance ... 16-17.html

In this case, because the prime money market fund holds commercial paper it is subject to liquidity fees and/or redemption gate they are prevented from automatically moving the money to a sweep account that is NOT subject the other same safeguards.
That's interesting. Not sure it applies here though. They do allow automatic prime money market (or any Vanguard fund) redemptions and deposits into a sweep fund as long as it isn't in the same brokerage account (to another brokerage account or to an IRA, for example). I'm guessing it is just a web site design issue in this case
It's certainly possible that it's an IT issue, but I have a vague recollection that the regulations are worded in such a way that sweeping to an external account (even if its another brokerage account for the same investor) doesn't trigger the same fiduciary responsibilities as sweeping to a fund in the same account. I'll try to dig through my notes tomorrow to see if I have a reference or it I'm just misremembering.

Re: Automatic withdrawal with Vanguard

Posted: Fri Nov 09, 2018 12:30 am
by 3504PIR
This is a really valid example of why Vanguard is such a poor platform. People are refusing upgrades and migration to the brokerage option, which I’ve read about in several threads. My wife has an IRA account with Vanguard and the methodology of buying and selling, exchanging and all the rest is ridiculous. My IRA is at fidelity, and while fidelity has its problems, their problems don’t even begin to touch the interface and functionality of Vanguard.

I recognize the loyalty many here have with Vanguard, but there are much better options for investing in index funds from the interface perspective alone without sacrificing low cost. I’m amazed so many people put up with it, including my wife :D

Re: Automatic withdrawal with Vanguard

Posted: Fri Nov 09, 2018 8:30 am
by onourway
We have accounts with Vanguard, Schwab, Fidelity, TIAA, Wells Fargo, Capital One, and so on. All of these sites have their own peculiarities and I don't find Vanguard's particularly worse than any of the other ones. Some of their system is a little bit dated (mobile apps, mostly) but the core functionality of the site for the kind of needs the typical buy-and-hold investor needs is good, and in my opinion, often easier to navigate than competing platforms (try searching for something at Schwab).

Vanguard is by design a low cost provider. They are never going to have the most cutting edge IT infrastructure because that costs a lot of money - money that would have to directly come in the form of higher fees on their products. They don't have any high-fee products to cover these costs.

That said, I do not see any way to do this at Schwab either. In fact I can't find any interface at all there to do an automatic, regular withdrawal of funds, let alone a swap.

Re: Automatic withdrawal with Vanguard

Posted: Fri Nov 09, 2018 10:25 am
by CRTR
vineviz wrote:
Fri Nov 09, 2018 12:20 am
CRTR wrote:
Fri Nov 09, 2018 12:08 am
vineviz wrote:
Thu Nov 08, 2018 5:20 pm
CRTR wrote:
Thu Nov 08, 2018 3:44 pm
For reasons neither she nor her colleagues could explain, automatic redemptions/withdrawals are allowed across accounts but not within a single one.
The new money market fund rules adopted in 2014 severely curtailed the freedom of financial institutions to sweep money into and out of money market funds.

https://www.occ.treas.gov/news-issuance ... 16-17.html

In this case, because the prime money market fund holds commercial paper it is subject to liquidity fees and/or redemption gate they are prevented from automatically moving the money to a sweep account that is NOT subject the other same safeguards.
That's interesting. Not sure it applies here though. They do allow automatic prime money market (or any Vanguard fund) redemptions and deposits into a sweep fund as long as it isn't in the same brokerage account (to another brokerage account or to an IRA, for example). I'm guessing it is just a web site design issue in this case
It's certainly possible that it's an IT issue, but I have a vague recollection that the regulations are worded in such a way that sweeping to an external account (even if its another brokerage account for the same investor) doesn't trigger the same fiduciary responsibilities as sweeping to a fund in the same account. I'll try to dig through my notes tomorrow to see if I have a reference or it I'm just misremembering.
No doubt in my mind that you're right about money market funds. I remember there being a bunch of new regs for MM funds. This glitch, however, isn't just limited to money market funds. When working with my Flagship rep, we weren't able to perform automatic redemptions with other Vanguard mutual funds either.

Re: Automatic withdrawal with Vanguard

Posted: Fri Nov 09, 2018 11:27 am
by vineviz
CRTR wrote:
Fri Nov 09, 2018 10:25 am
vineviz wrote:
Fri Nov 09, 2018 12:20 am
CRTR wrote:
Fri Nov 09, 2018 12:08 am
vineviz wrote:
Thu Nov 08, 2018 5:20 pm
CRTR wrote:
Thu Nov 08, 2018 3:44 pm
For reasons neither she nor her colleagues could explain, automatic redemptions/withdrawals are allowed across accounts but not within a single one.
The new money market fund rules adopted in 2014 severely curtailed the freedom of financial institutions to sweep money into and out of money market funds.

https://www.occ.treas.gov/news-issuance ... 16-17.html

In this case, because the prime money market fund holds commercial paper it is subject to liquidity fees and/or redemption gate they are prevented from automatically moving the money to a sweep account that is NOT subject the other same safeguards.
That's interesting. Not sure it applies here though. They do allow automatic prime money market (or any Vanguard fund) redemptions and deposits into a sweep fund as long as it isn't in the same brokerage account (to another brokerage account or to an IRA, for example). I'm guessing it is just a web site design issue in this case
It's certainly possible that it's an IT issue, but I have a vague recollection that the regulations are worded in such a way that sweeping to an external account (even if its another brokerage account for the same investor) doesn't trigger the same fiduciary responsibilities as sweeping to a fund in the same account. I'll try to dig through my notes tomorrow to see if I have a reference or it I'm just misremembering.
No doubt in my mind that you're right about money market funds. I remember there being a bunch of new regs for MM funds. This glitch, however, isn't just limited to money market funds. When working with my Flagship rep, we weren't able to perform automatic redemptions with other Vanguard mutual funds either.
I think the commonality is that ANY automatic redemption that settles into the MMF is prohibited. Automatic redemptions settling into external accounts still are allowed, right?

Re: Automatic withdrawal with Vanguard

Posted: Fri Nov 09, 2018 12:30 pm
by CRTR
vineviz wrote:
Fri Nov 09, 2018 11:27 am
CRTR wrote:
Fri Nov 09, 2018 10:25 am
vineviz wrote:
Fri Nov 09, 2018 12:20 am
CRTR wrote:
Fri Nov 09, 2018 12:08 am
vineviz wrote:
Thu Nov 08, 2018 5:20 pm


The new money market fund rules adopted in 2014 severely curtailed the freedom of financial institutions to sweep money into and out of money market funds.

https://www.occ.treas.gov/news-issuance ... 16-17.html

In this case, because the prime money market fund holds commercial paper it is subject to liquidity fees and/or redemption gate they are prevented from automatically moving the money to a sweep account that is NOT subject the other same safeguards.
That's interesting. Not sure it applies here though. They do allow automatic prime money market (or any Vanguard fund) redemptions and deposits into a sweep fund as long as it isn't in the same brokerage account (to another brokerage account or to an IRA, for example). I'm guessing it is just a web site design issue in this case
It's certainly possible that it's an IT issue, but I have a vague recollection that the regulations are worded in such a way that sweeping to an external account (even if its another brokerage account for the same investor) doesn't trigger the same fiduciary responsibilities as sweeping to a fund in the same account. I'll try to dig through my notes tomorrow to see if I have a reference or it I'm just misremembering.
No doubt in my mind that you're right about money market funds. I remember there being a bunch of new regs for MM funds. This glitch, however, isn't just limited to money market funds. When working with my Flagship rep, we weren't able to perform automatic redemptions with other Vanguard mutual funds either.
I think the commonality is that ANY automatic redemption that settles into the MMF is prohibited. Automatic redemptions settling into external accounts still are allowed, right?
Automatic redemptions are allowed into other Vanguard accounts. For example, if I open 2 taxable brokerage accounts, I can make automatic redemptions from any fund in account #1 and deposit them into MM settlement fund of account #2 but NOT to MM settlement fund in account #1.

Re: Automatic withdrawal with Vanguard

Posted: Fri Nov 09, 2018 1:26 pm
by vineviz
CRTR wrote:
Fri Nov 09, 2018 12:30 pm
vineviz wrote:
Fri Nov 09, 2018 11:27 am
I think the commonality is that ANY automatic redemption that settles into the MMF is prohibited. Automatic redemptions settling into external accounts still are allowed, right?
Automatic redemptions are allowed into other Vanguard accounts. For example, if I open 2 taxable brokerage accounts, I can make automatic redemptions from any fund in account #1 and deposit them into MM settlement fund of account #2 but NOT to MM settlement fund in account #1.
Right. For regulatory purposes, AFAIK, "external account" (my words, not the SEC's) can be a second account for the same customer at the same brokerage. Something in the regulations (can't recall precise what, but I think it is related to fiduciary duty) makes possible the loophole you describe.