“Upgrading” a regular Vanguard taxable account to a brokerage account

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CoastalWinds
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“Upgrading” a regular Vanguard taxable account to a brokerage account

Post by CoastalWinds » Fri Oct 11, 2019 12:30 pm

What are the implications of transitioning from a regular taxable account at Vanguard to a brokerage account?

1. Does it preserve the cost basis history of all holdings in the account?

2. Does it sell and re-buy, or just transfer? Are there any tax implications?

3. What steps do you recommend I take in advance to ensure a smooth process, and to make sure I have all necessary documentation in case VG messes it up?

4. Is there any particular reason to do this by phone instead of clicking the “Upgrade this Account” button?

Thank you

Rob1
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by Rob1 » Fri Oct 11, 2019 12:39 pm

One issue I know of: if someone was granted agent authorization on the account, they will not be granted agent authorization on the upgraded (actually new) account unless they were granted full agent authorization that specifies new accounts as well.

Geologist
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by Geologist » Fri Oct 11, 2019 12:45 pm

There are no particular implications. It is just a change of account form. It has no tax implications and there is no selling/buying: your holdings are just transferred as is from one to the other.

All the cost basis information was preserved in my case. You could always record your basis information (and it might be sensible to do so anyway because there can always be glitches).

I think if you call up, they will tell you to click the "upgrade" button on the web, so I don't think there is any point to calling. It does take a couple of days for the transition to occur so you can't institute transactions during the transition. Therefore, pick a moment when you aren't going to do anything.

You will probably have to re-institute checkwriting (if this matters to you) on the settlement account.

The only thing that I don't care for is the way transactions are displayed, but other than that, my opinion is that it is not a big deal. There are of course many threads on this topic.

rkhusky
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by rkhusky » Fri Oct 11, 2019 12:49 pm

CoastalWinds wrote:
Fri Oct 11, 2019 12:30 pm
What are the implications of transitioning from a regular taxable account at Vanguard to a brokerage account?

1. Does it preserve the cost basis history of all holdings in the account?

2. Does it sell and re-buy, or just transfer? Are there any tax implications?

3. What steps do you recommend I take in advance to ensure a smooth process, and to make sure I have all necessary documentation in case VG messes it up?

4. Is there any particular reason to do this by phone instead of clicking the “Upgrade this Account” button?

Thank you
1. Yes.
2. Transfer. No tax implications.
3. Download your most recent statements and take a screen shot of current Balances.
4. No.

lakpr
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by lakpr » Fri Oct 11, 2019 2:32 pm

*IF* you work in the financial world, make sure that Vanguard is in the list of approved brokers before you run the conversion to Brokerage platform. My MegaCorp does not approve of brokerage platforms at Vanguard, but if you are on a mutual fund platform at Vanguard they are ok. They specifically indicated this with an asterisk next to Vanguard's name, in the compliance booklet.

Edited to add: this restriction would be applicable not only to you, but members of immediate family (spouse, children, step-children, parents, step-parents).

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TomatoTomahto
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by TomatoTomahto » Fri Oct 11, 2019 2:49 pm

lakpr wrote:
Fri Oct 11, 2019 2:32 pm
[snio...]. Edited to add: this restriction would be applicable not only to you, but members of immediate family (spouse, children, step-children, parents, step-parents).
My wife falls into this category, so I do also. However, I’ve never inquired about her parents’ accounts, nor the details of our (adult) children’s accounts. Surely there must be some limit to who is restricted and in what way.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Artsdoctor
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by Artsdoctor » Fri Oct 11, 2019 2:52 pm

When you update to a brokerage account format, you will no longer be permitted to automatically invest the dividends from one mutual fund into another mutual fund. You will only have two options: you can automatically reinvest the dividends into the same fund or you can have the dividends dumped into the your settlement fund (and you will not be able to choose your settlement fund--it will be the Federal Money Market fund).

lakpr
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by lakpr » Fri Oct 11, 2019 2:58 pm

TomatoTomahto wrote:
Fri Oct 11, 2019 2:49 pm
lakpr wrote:
Fri Oct 11, 2019 2:32 pm
[snio...]. Edited to add: this restriction would be applicable not only to you, but members of immediate family (spouse, children, step-children, parents, step-parents).
My wife falls into this category, so I do also. However, I’ve never inquired about her parents’ accounts, nor the details of our (adult) children’s accounts. Surely there must be some limit to who is restricted and in what way.
I suppose any inquiry of the parents' and childrens' accounts comes into play only if there is suspicion of some wrongdoing (insider trading)

jeff1949
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by jeff1949 » Fri Oct 11, 2019 3:18 pm

One thing I have noticed is that the Brokerage Account transfers funds one day sooner to my outside bank account than does the old style mutual fund platform.

acshen
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by acshen » Fri Oct 11, 2019 3:49 pm

lakpr wrote:
Fri Oct 11, 2019 2:32 pm
*IF* you work in the financial world, make sure that Vanguard is in the list of approved brokers before you run the conversion to Brokerage platform. My MegaCorp does not approve of brokerage platforms at Vanguard, but if you are on a mutual fund platform at Vanguard they are ok. They specifically indicated this with an asterisk next to Vanguard's name, in the compliance booklet.

Edited to add: this restriction would be applicable not only to you, but members of immediate family (spouse, children, step-children, parents, step-parents).
Believe this is the case at my firm as well.

rkhusky
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by rkhusky » Fri Oct 11, 2019 7:24 pm

Geologist wrote:
Fri Oct 11, 2019 12:45 pm
The only thing that I don't care for is the way transactions are displayed,
+1
I don't bother to understand the two lines for each transaction - I just use what I intended to do in the transaction. If Vanguard mistakenly sells instead of buying, I might miss it for a few months.

TigerNest
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by TigerNest » Fri Oct 11, 2019 11:22 pm

lakpr wrote:
Fri Oct 11, 2019 2:32 pm
*IF* you work in the financial world, make sure that Vanguard is in the list of approved brokers before you run the conversion to Brokerage platform. My MegaCorp does not approve of brokerage platforms at Vanguard, but if you are on a mutual fund platform at Vanguard they are ok. They specifically indicated this with an asterisk next to Vanguard's name, in the compliance booklet.

Edited to add: this restriction would be applicable not only to you, but members of immediate family (spouse, children, step-children, parents, step-parents).
Yes, this applies to me as well.

I almost upgraded too -- glad I read the fine print.

SpideyIndexer
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by SpideyIndexer » Sat Oct 12, 2019 11:32 am

It have been thinking about this. If I already have a Vanguard brokerage account, would I just have the mutual fund holdings moved to the existing brokerage account? Or must it be a newer type of brokerage account which can contain both mutual fund and equity holdings?

Is there any negative with moving mutual fund holdings to an existing brokerage account?

The reason to do it would simplification and ease of rebalancing/reallocating/tax harvesting between mutual funds and ETFs.

Topic Author
CoastalWinds
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by CoastalWinds » Sun Oct 13, 2019 2:03 pm

SpideyIndexer wrote:
Sat Oct 12, 2019 11:32 am
It have been thinking about this. If I already have a Vanguard brokerage account, would I just have the mutual fund holdings moved to the existing brokerage account? Or must it be a newer type of brokerage account which can contain both mutual fund and equity holdings?

Is there any negative with moving mutual fund holdings to an existing brokerage account?

The reason to do it would simplification and ease of rebalancing/reallocating/tax harvesting between mutual funds and ETFs.
I’m in the same boat, and have the same questions as you.

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Cheez-It Guy
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by Cheez-It Guy » Sun Oct 13, 2019 2:19 pm

CoastalWinds wrote:
Sun Oct 13, 2019 2:03 pm
SpideyIndexer wrote:
Sat Oct 12, 2019 11:32 am
It have been thinking about this. If I already have a Vanguard brokerage account, would I just have the mutual fund holdings moved to the existing brokerage account? Or must it be a newer type of brokerage account which can contain both mutual fund and equity holdings?

Is there any negative with moving mutual fund holdings to an existing brokerage account?

The reason to do it would simplification and ease of rebalancing/reallocating/tax harvesting between mutual funds and ETFs.
I’m in the same boat, and have the same questions as you.
There may be some behind-the-scenes changes, but they merge into your existing brokerage account if you have one. However, like goes with like. That means the account ownership / registration and tax treatment types of the accounts to be merged have to match. For example, if you have existing individual taxable mutual fund and brokerage accounts, everything can be merged into your brokerage account. If you have an individual Roth IRA mutual fund account, but no corresponding brokerage account, they will create a new Roth IRA brokerage account for you, assuming you convert that account as well.

Teefer
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What user rights are lost on upgrading

Post by Teefer » Mon Nov 18, 2019 7:22 pm

"Upgrading" requires signing a brokerage user agreement. This potentially impacts the safety of the money going into the brokerage account. For example, any dispute regarding the money is subject to binding arbitration.

If there is a vanguard guru listening, can you outline for us the protections lost or risks assumed by the change in the user agreements governing the transferred funds.

I'd welcome any comments as to the legitimacy of this concern and why Vanguard doesn't address it upfront.

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LadyGeek
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by LadyGeek » Mon Nov 18, 2019 7:44 pm

This thread is now in the Investing - Theory, News & General forum (general question).

Teefer, Welcome!
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Makefile
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by Makefile » Mon Nov 18, 2019 7:56 pm

I got a physical mailing from Vanguard today asking to transition to brokerage, for what that's worth.

Those who work in the industry, Vanguard always makes it sound like it's no big deal to do this transition, but behind the scenes it's the same process as moving the mutual fund shares from own name to in street name at any other brokerage, right? In this case it just happens that the brokerage is Vanguard.

Big Dog
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Re: “Upgrading” a regular Vanguard taxable account to a brokerage account

Post by Big Dog » Mon Nov 18, 2019 8:17 pm

Simple process. All cost bases moved over. Stock/mutual funds just moved over, not sold/repurchased; thus, no tax implications.

I had the Rep walk me thru it on the phone, as we had a couple of accounts and I wanted to make sure the correct stuff was moved into the new, Community Property account.

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