Vanguard has switched to brokerage only accounts

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House Blend
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Re: Vanguard has switched to brokerage only accounts

Post by House Blend » Wed Apr 26, 2017 5:44 pm

pkcrafter wrote:
FreeAtLast wrote:What happens if I refuse to give Vanguard permission to switch my mutual fund accounts (which is what they all are) to brokerage? :annoyed
I don't think they are going to ask for your permission.
Whether they are required by law to ask, or not, at some point they could switch their incentive model from carrots to sticks by turning off features that you rely on [*]. They could start charging account servicing fees. In theory I suppose that they could even cash you out and mail a check, but that would be public relations disaster.

Simpler from their perspective to let evolution run its course.

[*] It appears that at least one feature has already been turned off: no new mutual fund only accounts.

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Re: Vanguard has switched to brokerage only accounts

Post by *3!4!/5! » Wed Apr 26, 2017 5:55 pm

*3!4!/5! wrote:Why does this thread even exist? The title makes it sound like it is reporting some news. :confused
To expand: Newly opened accounts must be brokerage accounts, and this has been the case for a year or so. It's not news.

Old accounts are gradually being switched over, and this has been ongoing for a number of years - again not news.

There are multiple previous threads about this, some quite long. Maybe this one should be merged.

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Re: Vanguard has switched to brokerage only accounts

Post by richardglm » Wed Apr 26, 2017 6:24 pm

I held off for a long time, especially while the converted accounts didn't yet have all the same features as the old mutual fund only accounts.

I finally caved in and upgraded in January of this year. I knew it will become difficult, at some point in the future, to avoid upgrading and I decided to do it on my own terms, at a time convenient to me. And by doing it very early in the year, I should also only get one 1099 for the entire tax year 2017.

No problems so far with the upgrade, it was very seamless. Definitely glad I decided to make the jump.

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Re: Vanguard has switched to brokerage only accounts

Post by Gnirk » Wed Apr 26, 2017 7:03 pm

We have both the regular and brokerage account (holds individual munis and a few legacy stocks) and we received three "corrected" brokerage statements for the brokerage account, one in early March, one in late March, and one in early April, after we had filed our tax return. I'm not moving my regular account to my brokerage until forced to do so. Also, I can automatically reinvest the dividends from one mutual fund into a different one, which my Flagship rep said they can't do if I combine my Vanguard mutual fund account into the brokerage account.

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Re: Vanguard has switched to brokerage only accounts

Post by LadyGeek » Wed Apr 26, 2017 10:10 pm

*3!4!/5! wrote:
*3!4!/5! wrote:Why does this thread even exist? The title makes it sound like it is reporting some news. :confused
To expand: Newly opened accounts must be brokerage accounts, and this has been the case for a year or so. It's not news.

Old accounts are gradually being switched over, and this has been ongoing for a number of years - again not news.

There are multiple previous threads about this, some quite long. Maybe this one should be merged.
Have patience and remember that it's difficult to find information if you're not familiar with the concept. If someone needs assistance, we will help educate them.

See: Please Do Not Bite the Newcomers

Here's a google search that might help. vanguard brokerage - Google Search
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Re: Vanguard has switched to brokerage only accounts

Post by tooluser » Wed Apr 26, 2017 10:21 pm

This thread comes up every few months for the past few years at least. For what it's worth, I have four different mutual fund accounts with Vanguard (3 variations of tax-deferred, plus 1 taxable), and have not yet been asked to switch to a brokerage account. The oldest account is about 20 years old. I think it would be fine if they switched me. It might even lead me to consolidate more accounts there; simplicity is good. Too much work to initiate on my end though. I let the sleeping bear lie.
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Re: Vanguard has switched to brokerage only accounts

Post by *3!4!/5! » Wed Apr 26, 2017 11:02 pm

LadyGeek wrote:
*3!4!/5! wrote:
*3!4!/5! wrote:Why does this thread even exist? The title makes it sound like it is reporting some news. :confused
To expand: Newly opened accounts must be brokerage accounts, and this has been the case for a year or so. It's not news.

Old accounts are gradually being switched over, and this has been ongoing for a number of years - again not news.

There are multiple previous threads about this, some quite long. Maybe this one should be merged.
Have patience and remember that it's difficult to find information if you're not familiar with the concept. If someone needs assistance, we will help educate them.

See: Please Do Not Bite the Newcomers

Here's a google search that might help. vanguard brokerage - Google Search
The point I want to make is that the wording of the thread title
"Vanguard has switched to brokerage only accounts"
really leads one to believe that there has been a new development that has just occurred.
I wanted to point out that whether we're considering newly opened accounts, or transition of old accounts, this is quite old news. Even if the OP didn't realize this, anyone reading the thread needs to be alerted that there is no new development, in contrast to the impression created by the thread title.

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Thu Apr 27, 2017 6:09 am

tooluser wrote:This thread comes up every few months for the past few years at least. For what it's worth, I have four different mutual fund accounts with Vanguard (3 variations of tax-deferred, plus 1 taxable), and have not yet been asked to switch to a brokerage account. The oldest account is about 20 years old. I think it would be fine if they switched me. It might even lead me to consolidate more accounts there; simplicity is good. Too much work to initiate on my end though. I let the sleeping bear lie.
If you only have Vanguard mutual funds there is no reason to move to brokerage except to reduce your 1099's to one from a gazillion. However if you have any brokerage assets having your settlement account in another account sometimes means is takes 4 days to make a buy/sell pair of trades. That's unacceptable in the same world with ETFs.
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Re: Vanguard has switched to brokerage only accounts

Post by BrandonBogle » Thu Apr 27, 2017 7:47 am

goingup wrote: Thanks! I'm not sure now where I got the idea that I'd have to give up auto-exchanges if the account was upgraded to brokerage. This will spur more research on my end! Appreciate that you plunked around in your own account to find the answer. :beer
You likely got mixed up by a different, similar function. On the MF platform, you can tell fund A's dividends and/or capital gains to be 1) reinvested, 2) sent to a linked bank account, or 3) invested into fund B. On the Brokerage platform, you cannot do #3. (Maybe someone can confirm if you can do #2, I don't recall (I'm still MF-only).) Thus, you have to let the dividends and/or cap gains settle as cash in your settlement fund, then manually buy or automatically buy a set dollar amount of fund B.

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Thu Apr 27, 2017 8:35 am

BrandonBogle wrote: On the MF platform, you can tell fund A's dividends and/or capital gains to be 1) reinvested, 2) sent to a linked bank account, or 3) invested into fund B. On the Brokerage platform, you cannot do #3. (Maybe someone can confirm if you can do #2, I don't recall (I'm still MF-only).) Thus, you have to let the dividends and/or cap gains settle as cash in your settlement fund, then manually buy or automatically buy a set dollar amount of fund B.
VBS: Reinvest, Transfer to settlement fund, Transfer to a bank account, Send me a check

Edit: What's a check?
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Re: Vanguard has switched to brokerage only accounts

Post by goingup » Thu Apr 27, 2017 9:07 am

BrandonBogle wrote:
goingup wrote: Thanks! I'm not sure now where I got the idea that I'd have to give up auto-exchanges if the account was upgraded to brokerage. This will spur more research on my end! Appreciate that you plunked around in your own account to find the answer. :beer
You likely got mixed up by a different, similar function. On the MF platform, you can tell fund A's dividends and/or capital gains to be 1) reinvested, 2) sent to a linked bank account, or 3) invested into fund B. On the Brokerage platform, you cannot do #3. (Maybe someone can confirm if you can do #2, I don't recall (I'm still MF-only).) Thus, you have to let the dividends and/or cap gains settle as cash in your settlement fund, then manually buy or automatically buy a set dollar amount of fund B.
Thanks BrandonBogle-
I consider not being able to automatically direct dividends to another fund a drawback of upgrading to the brokerage platform. It seems the more we automate our investing the better!

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Re: Vanguard has switched to brokerage only accounts

Post by FrugalInvestor » Thu Apr 27, 2017 9:17 am

pkcrafter wrote:
FreeAtLast wrote:What happens if I refuse to give Vanguard permission to switch my mutual fund accounts (which is what they all are) to brokerage? :annoyed
I don't think they are going to ask for your permission. :happy
Paul
Early on in their conversion process I called and asked if I could delete my brokerage account instead of consolidating. I had never used it and never intended to. My request was accommodated and I now have only the mutual fund accounts that I use.
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Re: Vanguard has switched to brokerage only accounts

Post by bayview » Thu Apr 27, 2017 9:44 am

We have four accounts, his tIRA and rIRA and her tIRA and rIRA. When we opened his rIRA last year, it was a brokerage account. We called and asked that they make it under the original structure, and they did.

We have no taxable accounts at VG.

There are no "upgrade" buttons, or if there are, I've ignored them so long that I don't even see them.

Maybe they've given up on us. :-)
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Re: Vanguard has switched to brokerage only accounts

Post by Atgard » Thu Apr 27, 2017 10:27 am

It made things a lot simpler for me. Basically it cut the number of accounts (taxable, Roth, etc.) in half. It makes account balances and tax forms and statements and such easier to read and work with. No problems for me during the upgrade, I only wished they would have let me do it sooner.

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"Invited" to change to Vang Brokerage

Post by grandmacassie » Thu Apr 27, 2017 10:56 am

[Thread merged into here, see below. --admin LadyGeek]

Hi, all

W have received an e-mail from Vanguard "inviting" us to switch from a mutual fund account to a brokerage account. My sense, from what I have read on this forum, is that Vanguard will be requiring this of all accounts moving forward. Am I correct in this assumption?

To give you perspective, we have about 2.5M in taxable mutual funds at VG, 401K is with another institution. We have a few shares (less than 100) of an individual stock which were received after an insurance company de-mutualized. There is a possibility that we might inherit some individual stocks at some point. All to say we might need a brokerage account at sometime in the future.

If I do have the option of switching or not switching, what are the pros and cons, o wise ones?

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Thu Apr 27, 2017 11:14 am

Atgard wrote:I only wished they would have let me do it sooner.
This whole thread is confusing me. We converted in November 2014 and that was after several months of adding and "fixing" some accounts because we had to do all or none.
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Re: Vanguard has switched to brokerage only accounts

Post by rkhusky » Thu Apr 27, 2017 11:41 am

I prefer the old mutual fund accounts and haven't upgraded. I created one new IRA account and it is of the brokerage variety. The transaction reporting seems backward with minus signs on the wrong transactions, but I figured it out.

I also do not like the new account summary page format with the huge fonts. For some reason my wife's accounts still have the old format.

Frankly, I would prefer that Vanguard stop reducing ER's and put the money towards IT improvements.

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Re: Vanguard has switched to brokerage only accounts

Post by Kevin M » Thu Apr 27, 2017 12:45 pm

Doc wrote:
Atgard wrote:I only wished they would have let me do it sooner.
This whole thread is confusing me. We converted in November 2014 and that was after several months of adding and "fixing" some accounts because we had to do all or none.
The rollout was done in phases. Some of my accounts became eligible before others (at least they showed the Upgrade button sooner). I have been able to upgrade only one account and leave the others as is.

Kevin
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Re: Vanguard has switched to brokerage only accounts

Post by hushpuppy » Thu Apr 27, 2017 4:03 pm

delete
Last edited by hushpuppy on Fri Nov 17, 2017 11:25 am, edited 1 time in total.
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Re: Vanguard has switched to brokerage only accounts

Post by BrandonBogle » Thu Apr 27, 2017 4:14 pm

Doc wrote:
BrandonBogle wrote:On the MF platform, you can tell fund A's dividends and/or capital gains to be 1) reinvested, 2) sent to a linked bank account, or 3) invested into fund B. On the Brokerage platform...
VBS: Reinvest, Transfer to settlement fund, Transfer to a bank account, Send me a check
Thanks Doc!

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Re: "Invited" to change to Vang Brokerage

Post by bloom2708 » Thu Apr 27, 2017 4:38 pm

You can put off not switching. Eventually (I am guessing), they will probably convert any stragglers.

viewtopic.php?f=10&t=217437

This is another thread.

I welcomed the conversion and did it as soon as available. If you hold only Vanguard mutual funds, you will have a regular account and a brokerage version for each. I had several empty brokerage accounts.

I converted to the brokerage accounts and then closed all the empty accounts. It was good to be rid of those extra, empty accounts.

Some have had issues (read in thread above or search for others). For most, it is simply a small change that you likely won't notice.
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Re: "Invited" to change to Vang Brokerage

Post by AAA » Thu Apr 27, 2017 5:01 pm

[quote="bloom2708" For most, it is simply a small change that you likely won't notice.[/quote]

When my Prime Money Market Fund was moved into the "new" account, I had to reapply for check writing privileges and it had to be done in paper mail.

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Re: "Invited" to change to Vang Brokerage

Post by lakpr » Thu Apr 27, 2017 5:02 pm

Personally I would not bother. I don't see any specific benefit by upgrading. On the contrary I have only downside

I work in the financial industry, and in my line of work one must disclose all "brokerage accounts" where one has the ability to trade individual stocks, to the Compliance office. Whether or not one does trade is irrelevant, just the ability to do so in that account requires the account to be disclosed

I don't trade individual stocks so having an "upgrade"d brokerage account only causes me unnecessary trouble. If forcibly upgraded I will either need to submit statements monthly or give up the user login and password to the Compliance office. I believe that what I have in my retirement accounts and taxable accounts should be nobody's business.

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Re: "Invited" to change to Vang Brokerage

Post by KyleAAA » Thu Apr 27, 2017 5:15 pm

You get $500k in SIPC coverage with the brokerage account.

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Re: "Invited" to change to Vang Brokerage

Post by Christine_NM » Thu Apr 27, 2017 5:51 pm

KyleAAA wrote:You get $500k in SIPC coverage with the brokerage account.
Does anyone know if this is $500k for all accounts a customer holds at one institution, or is it $500k limit per brokerage account (IRA, Roth, taxable, etc.) per customer?

I found Vanguard's page on account protection, but it is really vague. As for a rep knowing the details, I'll have pity on them and not ask. But maybe a BH or two knows?
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Re: "Invited" to change to Vang Brokerage

Post by dratkinson » Thu Apr 27, 2017 6:29 pm

^^^ Did Vanguard lose your cost basis information during the conversion to a brokerage account? I ask because Vanguard lost my cost basis information when they converted all my uncovered investor shares to a single lot of admiral shares. To make matters worse, they require three dates for the same converted lot:
--My original transaction date/cost basis information to sell shares out of the converted admiral lot.
--Vanguard's website says the original purchase date is "various" and the cost basis is the "average" of the converted shares.
--The 1099B listed the "average" cost basis, but the "admiral conversion date", not various as listed on the website.

Fortunately, my original investor shares cost basis plus the 8949 "B" code correction, seems to have satisfied the IRS.

I would really hate to compound my above remaining problems by converting to a brokerage account and have Vanguard lose more of cost basis information.
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Re: Vanguard has switched to brokerage only accounts

Post by LadyGeek » Thu Apr 27, 2017 6:39 pm

FYI - I merged grandmacassie's thread into here, which is a similar discussion. This thread is in the Investing - Theory, News & General forum (general investing).
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Re: "Invited" to change to Vang Brokerage

Post by KyleAAA » Thu Apr 27, 2017 7:36 pm

Christine_NM wrote:
KyleAAA wrote:You get $500k in SIPC coverage with the brokerage account.
Does anyone know if this is $500k for all accounts a customer holds at one institution, or is it $500k limit per brokerage account (IRA, Roth, taxable, etc.) per customer?

I found Vanguard's page on account protection, but it is really vague. As for a rep knowing the details, I'll have pity on them and not ask. But maybe a BH or two knows?
http://www.sipc.org/for-investors/inves ... e-accounts

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Re: Vanguard has switched to brokerage only accounts

Post by Christine_NM » Thu Apr 27, 2017 8:11 pm

^^ Thank you, Kyle. Good to know. This is the only reason Vanguard could get me to agree to upgrade. Of course they could reaccommodate me without my consent, but you know how that sort of thing worked for United Airlines.
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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 7:50 am

dratkinson wrote:Did Vanguard lose your cost basis information during the conversion to a brokerage :happy o account?
No. Nor did they loose the lot data on admiral conversions or when moving shares from "hers to ours". Maybe your "to" account had an average share default set on the account basis. (IIRC all our brokerage accounts were set up before the mutual funds were moved. One with no assets except maybe for a little cash.)

I've never used average cost in taxable. In tax advantaged you don't always get to choose. We have IRAs at 3 brokers and all 3 have different methods.
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Re: Vanguard has switched to brokerage only accounts

Post by DaleMaley » Fri Apr 28, 2017 8:10 am

My wife's account was upgraded around April of 2016.

We wrote checks drawn on her Vanguard money market fund to pay unusual large bills, like property tax. Vanguard bounced 1 of our checks for property tax.

After researching it and phone calls to Vanguard, found out that your money market checks are no good after 45 days from the conversion, and you must file a form to get new checks from the settlement fund.

Now I electronically move money from her money market fund to my local bank checking account, then pay the bill using my local bank check, to avoid all the hassle.

I have about 6 other family members, and several of them use Vanguard money market checks for big expenses. Assuming they get upgraded at some point, I will have to help them either get the new form and new checks, or link their Vanguard money market account to their local bank checking account.
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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 9:43 am

DaleMaley wrote:Now I electronically move money from her money market fund to my local bank checking account, then pay the bill using my local bank check, to avoid all the hassle.
Right.

Bogleheads don't make mutual fund investments through their bank so why should they want to write checks on their investment accounts? :?
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Re: Vanguard has switched to brokerage only accounts

Post by CABob » Fri Apr 28, 2017 12:25 pm

Doc wrote:Bogleheads don't make mutual fund investments through their bank so why should they want to write checks on their investment accounts? :?
Because it is a convenient way to move money from my VG money market fund to my checking (or other) account. Also a convient way to pay a bill that is a bit too large for my checking account current balance such as income tax, property tax, medical bill etc.
Bob

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 1:42 pm

CABob wrote:
Doc wrote:Bogleheads don't make mutual fund investments through their bank so why should they want to write checks on their investment accounts? :?
Because it is a convenient way to move money from my VG money market fund to my checking (or other) account. Also a convient way to pay a bill that is a bit too large for my checking account current balance such as income tax, property tax, medical bill etc.
For convenience:

On the Balances tab:

<Transfer Money>
Transfer to or from bank
I'll send vanguard a check
Send me a check
Move money between accounts.

Choose Transfer to or from bank

The money will be in your checking account by opening on the next business day. You can mail your check today for your property tax. The money will be in your checking account long before the tax man gets your check.

If you transfer money from your bank to VG you can invest it couple of minutes later and your bank won't get debited until a few days later.

Perhaps you are not thinking of the new upgraded brokerage system that everyone is "itching" about. :D

If you want to pay your bills electronically you can probably use the bank's own system or Quicken. If you are using Vanguard the check isn't even distributed directly from Vanguard but has to go through its corespondent bank. I use Quicken because at the same time the payment is entered it gets recorded in my check register and also gets recorded in my budget categories.

(You can do the same thing directly from a Vangaurd fund but it may take another day. If I need money from a fund I sometimes use a margin account and sell the fund or ETF on the same day and eat the one (three for the ETF) days interest. It's usually less than the postage.)
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Re: Vanguard has switched to brokerage only accounts

Post by Kevin M » Fri Apr 28, 2017 1:44 pm

CABob wrote:
Doc wrote:Bogleheads don't make mutual fund investments through their bank so why should they want to write checks on their investment accounts? :?
Because it is a convenient way to move money from my VG money market fund to my checking (or other) account. Also a convient way to pay a bill that is a bit too large for my checking account current balance such as income tax, property tax, medical bill etc.
I have some checks for my Vanguard advantage account, but they sit in a safe unused. I might even have shredded them by now.

Some years ago Vanguard introduced the ability to do same-day mutual fund purchases using a linked bank account. I stopped using a Vanguard money market fund in my taxable accounts when that happened, because at the time the MM rates were pathetic compared to bank savings rates (like 0% compared to 1%). Everything else can be done directly between the funds and the bank account. The only exception on the old platform is ETF or stock dividends paid into the MM "sweep account", which I manually transfer from the MM account to a bank account as soon as I notice them.

For this limited case, an ACH transfer is a much more convenient way to move money from a MM fund to a bank account--at least for me. I hate writing checks, and almost never do (I can almost always use bill pay or people pay from a checking account instead).

Since I'm not going to leave money in a MM fund with a sub-par rate compared to a decent savings account, bills are paid from a checking account which is fed by a savings account, mostly through scheduled transfers. Things like income tax and property tax (and credit card payments) are known in advance, so I just schedule two or three transfers from savings to checking to handle these bills for the coming month. Easy.

Like Doc says, banks are better at banking tasks than Vanguard is (and they've been paying better rates for years).

I do notice that the Prime MM rate is up to 0.96% now, so now in the ballpark of a savings account. Maybe we're close to getting back to the old days, when MM rates were higher than savings account rates. On April 6, I predicted that Prime MM rate would be at least 1% by mid-May, and that it would hit 1.1% by then if past trends continued, so we're on track for that. Article--Money Funds Yielding Over 1.​0 Percent Makes News; More Coming Soon - Bogleheads.org.

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 1:59 pm

Kevin M wrote:I do notice that the Prime MM rate is up to 0.96% now, so now in the ballpark of a savings account.
I think the Prime MM is not a settlement fund any longer so you might just as well use a short Treasury fund instead as long as you don't need money more than once every thirty days (wash sale concerns).

(I use two short term funds to avoid the wash sale bookkeeping.)
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Re: Vanguard has switched to brokerage only accounts

Post by fire5soon » Fri Apr 28, 2017 2:09 pm

The conversion is a great concern of mine. My employer will not allows me to hold brokerage accounts with outside firms. If Vanguard tried to do this I would have to close all accounts and transfer the assets away. If Vanguard forces this on me it would be a major negative event in my life.
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Re: Vanguard has switched to brokerage only accounts

Post by CABob » Fri Apr 28, 2017 2:23 pm

Perhaps you are not thinking of the new upgraded brokerage system that everyone is "itching" about. :D
Perhaps you are right since my mutual fund accounts have not been upgraded to the "new and improved" accounts. In reading this conversation and others I'm not real anxious to make the conversion, but will accept it when Vanguard forces the issue. :annoyed
Bob

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 2:25 pm

fire5soon wrote:The conversion is a great concern of mine. My employer will not allows me to hold brokerage accounts with outside firms. If Vanguard tried to do this I would have to close all accounts and transfer the assets away. If Vanguard forces this on me it would be a major negative event in my life.
As I understand it if you work in the financial industry having an outside brokerage account can be a problem. One would hope there would be some work around but I haven't heard of one. I can see why Vangaurd would not want to maintain two different platforms just to accommodate the (few?) people in your situation but ????
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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 2:40 pm

CABob wrote:
Perhaps you are not thinking of the new upgraded brokerage system that everyone is "itching" about. :D
Perhaps you are right since my mutual fund accounts have not been upgraded to the "new and improved" accounts. In reading this conversation and others I'm not real anxious to make the conversion, but will accept it when Vanguard forces the issue. :annoyed
In March 2016 Intuit sold it's Quicken line because it no longer fit their business model. The new owner, H.I.G. Capital, has faced some challenges in the transition. Probably because Intuit stopped or reduced the support it was giving to the Quicken team once Intuit decided to get out of that market. It wouldn't surprise me that support for the VG mutual fund only platform doesn't suffer from the same syndrome.
http://www.computerworld.com/article/30 ... uyout.html

(Recently Quicken is starting to overcome Intuit's previous lack of support.)
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Re: Vanguard has switched to brokerage only accounts

Post by Kevin M » Fri Apr 28, 2017 2:57 pm

Doc wrote:
Kevin M wrote:I do notice that the Prime MM rate is up to 0.96% now, so now in the ballpark of a savings account.
I think the Prime MM is not a settlement fund any longer so you might just as well use a short Treasury fund instead as long as you don't need money more than once every thirty days (wash sale concerns).

(I use two short term funds to avoid the wash sale bookkeeping.)
A short-term Treasury fund is not really a substitute for cash. For example, max drawdown for VFISX often has exceeded -0.6%, with the most recent such drawdown of -0.84% from July-November of 2016, from which the fund had not yet recovered as of the end of March (and I believe it still has not recovered).

With SEC yield at 1.00%, what's the point in taking the unnecessary risk?

Or, let's just compare to the 1-month Treasury at 0.70%. You have to go out to 1-year at 1.06% to be competitive with a savings account with no term risk. As usual, deposit accounts continue to be the best deal for retail investors, although the margin is narrowing at the shortest end of the curve.

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 3:23 pm

Kevin M wrote:A short-term Treasury fund is not really a substitute for cash. For example, max drawdown for VFISX often has exceeded -0.6%, with the most recent such drawdown of -0.84% from July-November of 2016, from which the fund had not yet recovered as of the end of March (and I believe it still has not recovered).
OK it's not cash but neither is Prime MM since the rules changed. I also don't know what you mean by "draw down". I see only about 15 bps in price over the last five years.

Imagewindows screenshotcertificity.com

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
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Re: Vanguard has switched to brokerage only accounts

Post by *3!4!/5! » Fri Apr 28, 2017 3:43 pm

Doc wrote:
Kevin M wrote:A short-term Treasury fund is not really a substitute for cash. For example, max drawdown for VFISX often has exceeded -0.6%, with the most recent such drawdown of -0.84% from July-November of 2016, from which the fund had not yet recovered as of the end of March (and I believe it still has not recovered).
OK it's not cash but neither is Prime MM since the rules changed. I also don't know what you mean by "draw down". I see only about 15 bps in price over the last five years.

Imagewindows screenshotcertificity.com

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
Oops, factor of ten.

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 3:55 pm

*3!4!/5! wrote:Oops, factor of ten
Been there, done that. :beer
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Re: Vanguard has switched to brokerage only accounts

Post by clip651 » Fri Apr 28, 2017 4:00 pm

fire5soon wrote:The conversion is a great concern of mine. My employer will not allows me to hold brokerage accounts with outside firms. If Vanguard tried to do this I would have to close all accounts and transfer the assets away. If Vanguard forces this on me it would be a major negative event in my life.
I am far from an expert on this. But it seems that generally folks that already have mutual fund only accounts (non brokerage) have been allowed to keep them.

Also, when I recently opened a new account with VG, they asked various questions during the opening - things like do you work in certain financial areas, are you a control person, etc. I don't recall the exact wording as none applied to me. After answering no to all of those questions, I ended up with a brokerage account for my new tIRA. (I already have other VG accts, including one that is mutual fund only, with an upgrade button that I haven't used.) But if such things do apply to someone, I think they might offer the old account structure to them. Just a guess.

You could call Vanguard and ask, or just let sleeping dogs lie for now.

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Re: Vanguard has switched to brokerage only accounts

Post by Doc » Fri Apr 28, 2017 4:11 pm

"Moving your Vanguard funds to a Vanguard Brokerage Account" Disclosure statement

http://www.vanguard.com/pdf/vbafqm.pdf

a 12 page PDF with a before and after chart at the bottom.
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Re: Vanguard has switched to brokerage only accounts

Post by rattlenap » Fri Apr 28, 2017 4:55 pm

What is the difference between brokerage and non-brokerage account? Did I miss something here?

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Re: Vanguard has switched to brokerage only accounts

Post by clip651 » Fri Apr 28, 2017 5:04 pm

rattlenap wrote:What is the difference between brokerage and non-brokerage account? Did I miss something here?
If you are buying and holding Vanguard mutual funds, there is little effective difference. There are some differences in some account features that have been discussed above, these may or may not be important to you.

The brokerage accounts allow you to hold Vanguard mutual funds, but they also allow you to hold other things in the same account. Things like ETFs, individual stocks, brokered CDs, and mutual funds from other fund companies, etc. The "old style" non brokerage accounts can only hold Vanguard mutual funds. Here is a link to Vanguard's explanation:

https://investor.vanguard.com/info/account-upgrade

I currently have both account types (for different accounts). They behave slightly differently - for instance the brokerage account has to have a settlement account associated with it, and transactions settle slightly differently, and account statements are organized a bit differently, and account numbers are handled differently. But when buying and holding VG mutual funds, there is not a lot practical of difference. You can buy and sell VTSAX in either one.

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Re: Vanguard has switched to brokerage only accounts

Post by Kevin M » Fri Apr 28, 2017 6:55 pm

Doc wrote:
Kevin M wrote:A short-term Treasury fund is not really a substitute for cash. For example, max drawdown for VFISX often has exceeded -0.6%, with the most recent such drawdown of -0.84% from July-November of 2016, from which the fund had not yet recovered as of the end of March (and I believe it still has not recovered).
OK it's not cash but neither is Prime MM since the rules changed. I also don't know what you mean by "draw down". I see only about 15 bps in price over the last five years.
I should have provided a link; here it is: Backtest Portfolio Asset Allocation.

Drawdown is a period of negative total return. PV uses monthly returns, so the the drawdowns are for monthly returns--could be worse for daily returns, and you could use M* to check that.

Price on July 7 was 10.80, and on March 8 it was 10.61, so price decline alone was -1.8%. For the drawdown period corresponding to the monthly PV data, price on June 30 was 10.80 and on November 30 was 10.67, so price decline for that period was -1.2%, and the interest brought total return back up to -0.84%.

Maximum drawdown was -2.23%, beginning in Feb 1994, lasting three months, with a recovery time of one year. Again, this is for monthly returns.

A cent is not a basis point, so calling 15 cents 15 bps makes no sense. The math for the price decline would be -0.15/10.80 = -1.4%. Since there is no difference of percentages involved anywhere in this calculation, basis points or percentage points are not relevant units.

And remember, I don't use Prime MM or any MM--at least not in a taxable account. I use a savings account, currently paying 1.05%. I was just commenting that Prime MM is approaching parity with a decent savings account; when it offers a decent yield premium over a savings account, I might start using it again.

If we want to compare a Treasury fund to Prime MM, we should compare Treasury MM fund, with an SEC yield of 0.63%. This is consistent with the 1-month Treasury yield of 0.68%.

The short-term Treasury fund only holds only about 20% of its portfolio in Treasuries with maturities of less than one year. It must hold Treasuries with maturities longer than that to get its yield into the 1% ballpark. Its average duration is 2.2 years, which is why we see the types of drawdowns that we do. I'll take 1% at 0 years duration over 1% at 2.2 years duration, thank you very much.

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Re: Vanguard has switched to brokerage only accounts

Post by rob » Fri Apr 28, 2017 7:08 pm

fire5soon wrote:The conversion is a great concern of mine. My employer will not allows me to hold brokerage accounts with outside firms. If Vanguard tried to do this I would have to close all accounts and transfer the assets away. If Vanguard forces this on me it would be a major negative event in my life.
This is my major gripe here... That is a non-trivial cost. Vanguard has lost all of it if they push that change thru to me.

I moved a single kids account because they told me it would "fix" their other errors on the "new" platform :-
- As custodian I cannot transfer $ from a fund to an IRA. Error is on brokerage also.
- I have a penny in several places now - Vanguard cannot figure out how to move either.
- My minor is a penny short of IRA contributions.
- The agent auth all changed.
- Auto investments failed.

Just more of the same from an incompetent IT department (before you call it random griping, I have been in this professional world for a few decades but clearly not at Vanguard).
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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