VG brokerage conversion - status

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RCharles
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VG brokerage conversion - status

Post by RCharles » Wed Mar 02, 2016 8:43 am

Hello

I recently learned about Vanguard's effort to convert mutual fund accounts into brokerage accounts. I've been with Vanguard while I was working and during fifteen years of retirement, I have three IRA fund accounts and each has a related brokerage account. But I've never been contacted about the conversion.

Some searching here tells me this effort started in 2013 but I've never been invited. I'm finding reports of the occasional problem or, at least, folks who wish they did not convert. Other comments here suggest not everyone is "eligible".

For now I'm asking for anyone familiar with the conversion to comment, pros and cons. I suspect it will, eventually, be required but I'll wait until they ask and until the process seems foolproof.

Thanks

Ray

acr123
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Re: VG brokerage conversion - status

Post by acr123 » Wed Mar 02, 2016 9:56 pm

For your information, I was told that certain types of IRAs, for instance SEP IRA's, at this time are not eligible for the conversion. I use Quicken and the separation of the different accounts is more complex but at least it works and is consistent. I foresee problems using Quicken, even if there were no exclusions and would be reluctant to change unless forced to

dl42
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Re: VG brokerage conversion - status

Post by dl42 » Thu Mar 03, 2016 1:49 am

I converted my taxable Fund account (~3 year history) at the end of last year into my existing Brokerage account. I had no issues with the Vanguard conversion and everything went smoothly. I've not tried converting my T-IRA or Roth accounts; I was under the impression that eventually I'd be forced to convert my taxable account so I went ahead and did it and I thought it would also simplify future tax filings by having one account.

The only negative I can think of is that you can no longer re-direct distributions from one fund into another fund; that can't be done automatically now but must be done manually via the money market account. I only used that in one specific case though and no longer need to do so.

I use Quicken too and surprisingly, Quicken 2015 handled the conversion well for the most part. I just had to manually correct some transactions (partial distributions) around the date of the conversion itself. It has made the taxable account a little easier to manage in Quicken since there's just one account.

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celia
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Re: VG brokerage conversion - status

Post by celia » Thu Mar 03, 2016 3:13 am

I haven't been invited by them to convert either, but I've been with them for 25 years or so and have many accounts and agent authorization for some family member accounts. Because our situation with them is so complex, I fear something is bound to go wrong if we convert. For example, since we convert tIRAs to Roths several times a year, when is a good time for us to convert to make sure potential re-characterizations (in the following calendar year) don't go wrong? (I always do conversions into empty Roth accounts already so any re-characterizations can be "clean".)

I also have an issue with paying again for notary stamps ($10 per signature in California) for each agent authorization form and forms to authorize linking between individual Vanguard accounts and our bank's joint checking.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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Toons
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Re: VG brokerage conversion - status

Post by Toons » Thu Mar 03, 2016 6:25 am

Quite a few threads on the topic you mentioned.
Here is one. :happy
viewtopic.php?t=175609
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

RCharles
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Re: VG brokerage conversion - status

Post by RCharles » Thu Mar 03, 2016 8:49 am

Hi Toons

Thanks for the link to other threads on my topic. As noted in my post, I had done some searches and found some details but your link provides more comprehensive discussions.

My goal was to get current status both in terms of problems and if Vanguard was or would demand the conversion. I have a message into my Vanguard agent to get their answer directly.

For now i plan to wait and watch.

Regards

Ray

PS - off topic but one thread I found mentions that the new VG agreement includes an arbitration clause that blocks customers from going to court over conflicts with Vanguard. The use of arbitration has been in the news recently because it is now widely used to block the use of class action suites.

jimkinny
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Re: VG brokerage conversion - status

Post by jimkinny » Thu Mar 03, 2016 9:12 am

In another thread I had indicated that I had a problem, after converting, that had to do with a slight difference in 1099s vs statement dividend income. I converted in early Dec 2015

I did not have any conversion problem. It was my mistake. I eventually realized the supposed discrepancy had to do foreign tax paid.

If you have taxable investments, this is a good time to convert in that Vanguard sent 2 sets of 1099 DIV and 1099 B: one for div/cap gains/loss before and then one set for after conversion. It would just be a bit simpler with few or no transactions prior to conversion.

If every thing is in tax protected accounts it likely does not matter when one converts. The taxable account conversion only mattered to me because I had to document quarterly income for tax reasons.

I too had IRAs and associated brokerage accounts. I like the viewing simplicity post conversion and how the MM settlement account is set off from the rest of assets in each account.

Dan999
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Re: VG brokerage conversion - status

Post by Dan999 » Thu Mar 03, 2016 11:57 am

I was invited to convert to the brokerage account last week. I told the guy that since my 1099's would be out in February instead of late January, I was going to decline their invitation.
He said fine, but eventually I would have to convert.

RCharles
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Re: VG brokerage conversion - status

Post by RCharles » Fri Mar 04, 2016 3:09 am

Thanks to all who responded.

My Vanguard rep called yesterday to discuss the conversion as follows:
1. Vanguard began with the simple accounts. I have monthly RMD distributions which are more complicated to convert; the distributions must be cancelled, the accounts converted, then the distributions re-established. This might require some changes regarding the distribution targets, which for me are a bank and a credit union.
2. My accounts have very low activity and he agreed there was no serious benefit for me.
3. He was ready to begin my conversion until I protested, then he was fine with my deciding to wait.
4. He agreed it would eventually be required.

I mentioned the issue of required arbitration and blocking of class action suites, which is part of the conversion documentation. He agreed but explained that it is part of a standard agreement with any brokerage. It is NOT part of existing Vanguard fund accounts.

Ray

columbia
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Re: VG brokerage conversion - status

Post by columbia » Fri Mar 04, 2016 10:05 am

I made a deposit to my newly converted taxable account. It indicates that the funds aren't available for investing for a week. Is this an initial thing related to the conversion or just how it works?

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jhfenton
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Re: VG brokerage conversion - status

Post by jhfenton » Fri Mar 04, 2016 10:14 am

columbia wrote:I made a deposit to my newly converted taxable account. It indicates that the funds aren't available for investing for a week. Is this an initial thing related to the conversion or just how it works?
It's probably because it's a new account. I had that happen my first few days. The CSR said it was a temporary fraud-prevention measure for new accounts. The restriction disappeared fairly quickly, but I don't know exactly when it happened.

fposte
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Re: VG brokerage conversion - status

Post by fposte » Fri Mar 04, 2016 10:14 am

I was told I'd have to convert by February somethingorother, so I did. It went smoothly. The inherited IRA needed paperwork, rather than just clicking the button, and verbal acceptance of the different settlement account, and I found it really annoying that a settlement account was required for it at all.

It's a visually more cluttered overview, since I have four different Vanguard accounts and each has a multiple-line entry for its settlement account; I also don't understand why my inherited IRA settlement account had to be the federal money market (which is the new approach, I think) and the new settlement accounts for the other three are still the prime, but I guess that will be worked out in the fullness of time.

columbia
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Re: VG brokerage conversion - status

Post by columbia » Fri Mar 04, 2016 10:16 am

jhfenton wrote:
columbia wrote:I made a deposit to my newly converted taxable account. It indicates that the funds aren't available for investing for a week. Is this an initial thing related to the conversion or just how it works?
It's probably because it's a new account. I had that happen my first few days. The CSR said it was a temporary fraud-prevention measure for new accounts. The restriction disappeared fairly quickly, but I don't know exactly when it happened.
Ok, thanks!

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midareff
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Re: VG brokerage conversion - status

Post by midareff » Fri Mar 04, 2016 10:21 am

I was told by my Flagship rep and by a downloaded VG brochure that dividends could be directed to my bank, a settlement account or reinvested. Last time I looked VG required you to sign off in the conversion process that the only alternatives were settlement account or reinvest. I'm retired and don't want to be bothered with the extra steps to send settlement money to the bank they would have gone to directly in the first place. Until they get their act together on this I'm not converting and not interested. It is of no benefit to me.

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SpringMan
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Re: VG brokerage conversion - status

Post by SpringMan » Fri Mar 04, 2016 10:22 am

I had authorization on my spouse's IRA to view and make trades under my Vanguard logon. When they converted it, I lost the privilege to trade on it. Vanguard requested a 10 page signature authorization form be filled out, notarized and mailed in. I complied getting my bank to notarize the form. Two witnesses were required. The notary was also one of the witnesses. According to my google searches, it is perfectly legal for the notary to also be a witness. Vanguard rejected the form. I asked to have it escalated and am waiting to hear back. IMO Vanguard has changed, it has become too big to fast and customer service has suffered. It is a shame.
Best Wishes, SpringMan

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dm200
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Re: VG brokerage conversion - status

Post by dm200 » Fri Mar 04, 2016 10:33 am

For an organization I manage (part time), we hold several Vanguard Bond Funds, a MM fund (brokerage sweep account) and Brokered CDs. We converted in December.

Disadvantages:
1. I used to be able to see the total "value" of the brokered CDs on the screen, but now the CDs are lumped together with the funds.
2. The month end dividend on the GNMA fund used to be posted to the MM Fund on the last business day of the month. Now, it is not posted/credited until the first day of the next month.
3. Because this is a "business" account, I must keep the books in balance - to the penny. Posting the transactions and keeping everything in balance is a bit more difficult. [This probably is not an issue for most personal account holders]


Don't know yet:
1. Funds available may be a day sooner from some distributions - but not sure
2. Not sure, but seems like funds sent to my bank (ACH) may get there 1 day earlier
3. It seems that sometimes available funds may be held in the situation when the settlement MM fund has a balance, but you purchase a brokered CD with expected funds from a maturing CD

Advantages:
1. MAYBE #1 under "Don't know yet"

Be aware that if you have a settlement fund for brokerage, sometime in the next few months, Vanguard will only allow/use the Federal MM Fund for this. On Vanguard's "schedule" (according to what I was told), Vanguard will convert your brokerage account to this Federal MM as the settlement account. I asked if we could start using the Federal MM fund now (we used to have the Federal MM as our settlement acct, but stopped any activity/balances when it was restricted by Vanguard a few years ago) since the Federal MM now pays better and has reopened. Vanguard told me that if we used the Federal MM fund before this conversion to the Federal MM fund as the settlement account, Vanguard would create another, new Federal MM fund/account as the settlement account - and we would end up with two Federal MM funds. [That may actually happen to us since we still show the Federal MM fund with zero balance]

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dm200
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Re: VG brokerage conversion - status

Post by dm200 » Fri Mar 04, 2016 10:41 am

SpringMan wrote:I had authorization on my spouse's IRA to view and make trades under my Vanguard logon. When they converted it, I lost the privilege to trade on it. Vanguard requested a 10 page signature authorization form be filled out, notarized and mailed in. I complied getting my bank to notarize the form. Two witnesses were required. The notary was also one of the witnesses. According to my google searches, it is perfectly legal for the notary to also be a witness. Vanguard rejected the form. I asked to have it escalated and am waiting to hear back. IMO Vanguard has changed, it has become too big to fast and customer service has suffered. It is a shame.
For the organization I manage (part time), we must have an annual audit by the organization's audit committee. Part of that annual audit is to have investment and deposit accounts mail balance confirmations directly to the Audit Committee Chairman. Years ago, I would just make this request, and Vanguard did it. Then, we needed notarized signature requests. Finally, Vanguard wanted us to get medallion signature guarantees and (if I recall correctly) then wanted some kind of "process" that would have required paying some kind of fee PLUS be a real pain.

I "solved" the problem very easily and a NO COST. I noticed that you can have statements, etc. send to another party automatically at NO EXTRA COST. So, I just put the Audit Committee Chairman as the other party. Now Vanguard spends a lot for US mail of all confirmations, monthly statements, etc. :beer :sharebeer

niven
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Re: VG brokerage conversion - status

Post by niven » Fri Mar 04, 2016 12:29 pm

midareff wrote:I was told by my Flagship rep and by a downloaded VG brochure that dividends could be directed to my bank, a settlement account or reinvested. Last time I looked VG required you to sign off in the conversion process that the only alternatives were settlement account or reinvest. I'm retired and don't want to be bothered with the extra steps to send settlement money to the bank they would have gone to directly in the first place. Until they get their act together on this I'm not converting and not interested. It is of no benefit to me.
I converted my VG accounts (IRA, Roth IRA, taxable) to brokerage in 2014 without issue, and have been automatically sending dividends to my bank - no extra steps required.

Not to direct this at you, but there is a lot of FUD on this board about the conversion to brokerage accounts at VG. Of course, I realize on any board people with issues are more likely to post and magnify the perception of major problems. And there are people with legitimate concerns about having to go through paperwork, medallion signatures, etc. again to grant others access on the new accounts. In my case, all I wanted to do is grant view access to my wife on my accounts and the reverse. As has been mentioned in other threads, you can do this online without any paperwork.

Just my two cents.

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