Vanguard screws up rollover from TSP

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Vanguard screws up rollover from TSP

Post by 02nz » Mon Oct 15, 2018 10:47 pm

Short version: I recently rolled over a portion of my Thrift Savings Plan to a Vanguard traditional IRA. Vanguard credited the funds to my taxable brokerage instead of to the tIRA. They're fixing the mistake now, but it's seriously dented my confidence in Vanguard.

Long version: I left federal service several months ago and decided to roll over a relatively small portion (about 60K) of my TSP to Vanguard so that I could do Roth conversions. I already had a taxable account and Roth IRA at Vanguard, but no traditional IRA, so I opened a rollover IRA for the sole purpose of accepting this rollover. Because TSP withdrawals are still pro-rata, the bulk of the 60K was traditional, while about 2K was Roth.

I double-checked with Vanguard regarding the paperwork requirements, and then printed the form required by TSP. I completed my portion, notarized it, and sent the package to Vanguard about a month ago with a cover letter asking Vanguard to complete its portion of the form (including entering my account numbers, which I provided in my letter) and send to TSP. Everything seemed to be moving along - Vanguard received the paperwork, sent it to TSP, and the amount was withdrawn from TSP earlier this month.

And then today I looked on Vanguard.com and noticed that my total portfolio had grown a lot. Great, the rollovers must have come in. But while the Roth portion appeared to be properly credited in my Roth IRA, the 58K was sitting in my taxable brokerage account, not in the traditional IRA. I double-checked the cover letter I sent to Vanguard, and confirmed I'd provided the correct account numbers. I called Vanguard, they did some research and called me back to say there was indeed an error on their part and it would be corrected as soon as possible. Apparently Vanguard filled out TSP's form with the correct account number on the first pass but processed the form incorrectly when it came back from TSP with the actual funds, posting the traditional portion to the taxable brokerage account instead of to the rollover IRA.

I appreciate that Vanguard is now taking action to fix the mistake. But in my mind this is a really egregious error because 1) the two account numbers are not at all alike, and I didn't even mention the taxable brokerage account in my instructions; 2) TSP only has traditional (tax-deferred) and Roth balances, it shouldn't even possible to transfer anything from TSP to a regular brokerage account; 3) had I not discovered the error I could have been subject to a 10% withdrawal penalty and income taxes on this chunk of money.

I have to say that this has really shaken my confidence in Vanguard. I've invested with them since 2007 or so. I can recall only twice doing anything even remotely complicated with Vanguard: once removing excess Roth contributions around 2012, and this transfer from TSP. Vanguard managed to screw up both.

OK, so I wrote this partially to vent. I plan to write a letter admonishing them on this. But would be curious if others have had similar experiences, and obviously I recommend double-checking anything and everything Vanguard does with your assets!

finite_difference
Posts: 1048
Joined: Thu Jul 09, 2015 7:00 pm

Re: Vanguard screws up rollover from TSP

Post by finite_difference » Mon Oct 15, 2018 10:52 pm

I agree that it sounds like Vanguard needs to work to improve their protocols to prevent mistakes.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

MnD
Posts: 3793
Joined: Mon Jan 14, 2008 12:41 pm

Re: Vanguard screws up rollover from TSP

Post by MnD » Tue Oct 16, 2018 9:17 am

That's especially bad considering the TSP is not some little "brand X" 401-K plan.

User avatar
jeffyscott
Posts: 7330
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Vanguard screws up rollover from TSP

Post by jeffyscott » Tue Oct 16, 2018 8:58 pm

02nz wrote:
Mon Oct 15, 2018 10:47 pm
TSP only has traditional (tax-deferred) and Roth balances, it shouldn't even possible to transfer anything from TSP to a regular brokerage account
Sure it is possible, it would just be a withdrawal. As you noted: had I not discovered the error I could have been subject to a 10% withdrawal penalty and income taxes on this chunk of money.

And actually the rollover is, I assume, a withdrawal as far as the plan it is coming from is concerned. Learned that in doing rollover of a 457 plan, which coincidentally was also a poor experience at Vanguard (not as bad as yours) and led me to take my money elsewhere.
press on, regardless - John C. Bogle

mhalley
Posts: 6165
Joined: Tue Nov 20, 2007 6:02 am

Re: Vanguard screws up rollover from TSP

Post by mhalley » Tue Oct 16, 2018 9:09 pm

All companies make mistakes. What makes a company good is how they handle them. Double checking that a rollover went to the correct place is a prudent course of action for any account transfer.

WanderingDoc
Posts: 1153
Joined: Sat Aug 05, 2017 8:21 pm

Re: Vanguard screws up rollover from TSP

Post by WanderingDoc » Tue Oct 16, 2018 9:24 pm

Why is it that posts like this about Vanguard are so common, yet I've yet to see one about iShares, Schwab, or Fidelity?
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

blevine
Posts: 2057
Joined: Sat Feb 27, 2010 3:57 pm
Location: New York

Re: Vanguard screws up rollover from TSP

Post by blevine » Tue Oct 16, 2018 10:59 pm

WanderingDoc wrote:
Tue Oct 16, 2018 9:24 pm
Why is it that posts like this about Vanguard are so common, yet I've yet to see one about iShares, Schwab, or Fidelity?
Ishares has no direct accounts, they do not deal directly with consumers. So they have 100% failure and success rates. Bad example.

And there are threads with Fidelity complaints.

Rollovers are a manually labor intensive process across the industry. Vanguard is just doing more of them.

WanderingDoc
Posts: 1153
Joined: Sat Aug 05, 2017 8:21 pm

Re: Vanguard screws up rollover from TSP

Post by WanderingDoc » Tue Oct 16, 2018 11:04 pm

blevine wrote:
Tue Oct 16, 2018 10:59 pm
WanderingDoc wrote:
Tue Oct 16, 2018 9:24 pm
Why is it that posts like this about Vanguard are so common, yet I've yet to see one about iShares, Schwab, or Fidelity?
Ishares has no direct accounts, they do not deal directly with consumers. So they have 100% failure and success rates. Bad example.

And there are threads with Fidelity complaints.

Rollovers are a manually labor intensive process across the industry. Vanguard is just doing more of them.
So people with iShares invest through Vanguard, Schwab, and Fidelity?

There may be complaints with the other firms, however I diligently read these boards daily or at least 5 times a week and I've only seen Vanguard. Mind you, I have absolutely no problems with Vanguard - my transactions have all been smooth. This is just an observation.

A Vanguard bad customer service thread on here I have observed at least weekly.
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

smectym
Posts: 243
Joined: Thu May 26, 2011 5:07 pm

Re: Vanguard screws up rollover from TSP

Post by smectym » Tue Oct 16, 2018 11:20 pm

I’ve been with Vanguard forever. I recently suggested to my spouse that she roll over 10% of her Schwab IRA (there because while she worked it had been a Schwab 401(k)), to give Vanguard a try, due to certain sub-optimal aspects of the Schwab relationship that aren’t relevant here.

Spouse agreed. But though instructions on the 10% rollover were unambiguous and in writing (Vanguard does not dispute), spouse’s entire IRA rolled over to Vanguard. Vanguard “regrets the error.”

Spouse isn’t happy and has soured on any long-term relationship with Vanguard. I’m not doing anything precipitate, but I can see that point of view.

Smectym

User avatar
celia
Posts: 8491
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Vanguard screws up rollover from TSP

Post by celia » Wed Oct 17, 2018 12:56 am

WanderingDoc wrote:
Tue Oct 16, 2018 9:24 pm
Why is it that posts like this about Vanguard are so common, yet I've yet to see one about iShares, Schwab, or Fidelity?
Vanguard is the largest investment custodian, so of course, they will probably make some mistakes and have clients complain about the errors. But they also have clients who give them compliments online.

The other custodians just don't have an independent forum like Vanguard does, so where should complaints about custodian X be left online? Some end up in this forum like:
viewtopic.php?f=1&t=246045&p=3862372 (TD Ameritrade)
viewtopic.php?f=1&t=254677&p=4033856 (Edward Jones)
viewtopic.php?f=1&t=232095&p=3614695 (eTrade)
viewtopic.php?f=1&t=259280&p=4125450 (Fidelity)
viewtopic.php?f=10&t=254435&p=4029377 (Schwab)

User avatar
JamesSFO
Posts: 3111
Joined: Thu Apr 26, 2012 10:16 pm

Re: Vanguard screws up rollover from TSP

Post by JamesSFO » Wed Oct 17, 2018 1:11 am

WanderingDoc wrote:
Tue Oct 16, 2018 11:04 pm
There may be complaints with the other firms, however I diligently read these boards daily or at least 5 times a week and I've only seen Vanguard. Mind you, I have absolutely no problems with Vanguard - my transactions have all been smooth. This is just an observation.
This is a more-or-less heavily tilted Vanguard forum, so you have a population of say 10K users of whom 9K use Vanguard and 1K use all of the other services. You are likely to see more Vanguard complaints.

I've posted complaints about Schwab here. But more generally, there is not a focal point like this for "Chuck-heads" to post their litany of Schwab complaints, for example.

brokendirtdart
Posts: 133
Joined: Mon Jan 02, 2017 8:27 pm
Location: Circus watching and avoiding horses in Atropia

Re: Vanguard screws up rollover from TSP

Post by brokendirtdart » Wed Oct 17, 2018 7:21 am

smectym wrote:
Tue Oct 16, 2018 11:20 pm


Spouse agreed. But though instructions on the 10% rollover were unambiguous and in writing (Vanguard does not dispute), spouse’s entire IRA rolled over to Vanguard.
Odd.

The exact same thing happened to me over 10 years ago with a transfer from Fidelity Roth to Vanguard Roth. I only wanted to transfer 1 fund in kind, and ended up with everything in Vanguard. If I remember correctly, the options were clearly spelled out and easy for either brokerage to understand.
While I was annoyed with the fact the brokerage didn't do as I asked, I left it as is in Vanguard.

I am also in the TSP and will transfer to an IRA after retiring from the military in a couple years. Given the "complexity" of the forms, and the fact I have three pots of money with the TSP(traditional, traditional tax exempt, and Roth), I will likely choose a brokerage that has a local office versus playing telephone games via the USPS with Vanguard. The state I plan on retiring to has a Fidelity office, so I'll likely take my TSP stuff there and complete everything face to face.

rkhusky
Posts: 5736
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard screws up rollover from TSP

Post by rkhusky » Wed Oct 17, 2018 7:44 am

My rollover from TSP to Vanguard went smoothly, but it was all Traditional. I only sent Vanguard the one page from the TSP package that they had to fill out and had them send it back to me (they FedEx'd it back). Instead of my Rollover account number, they entered an identity code specific to my rollover transaction. Once I got that back, I filled out the other pages and took them to my bank for notarization. I then faxed the entire package directly to the TSP (I have an old computer for which I managed to get the fax modem working).

It took about 10 days for the form from Vanguard to get back to me (I sent it regular mail). It took another 12 days for the TSP to send the money to Vanguard and have it show up in my settlement account. Since I was checking my Vanguard account every day, waiting for the money to show up, I was able to transfer from the settlement account to my chosen mutual funds the same day.

MichCPA
Posts: 301
Joined: Fri Jul 06, 2018 9:06 pm

Re: Vanguard screws up rollover from TSP

Post by MichCPA » Wed Oct 17, 2018 8:08 am

WanderingDoc wrote:
Tue Oct 16, 2018 11:04 pm

A Vanguard bad customer service thread on here I have observed at least weekly.
Well, its Bogleheads so pretty much everyone here has some type of Vanguard account.

I have one along with Schwab and Fidelity for my 401k. Each of these firms has strengths and weaknesses. My impression is that Vanguard's growth has led to a higher demand on their resources and their emphasis on low cost has made them hesitant to charge enough to fix their issues. They also maintain 2 or 3 trading platforms. This will be unpopular, but I think they need to drop to one and just focus on making it good (easy to use and reliable). Most of what I have had to deal with is a glitchy and slow web platform. Admittedly not as big of an issue as the OP.

My biggest issue with the Fido 401k is that I need to call them to do some things arising from the fact that I have roth and traditional portions. They don't let you manage them separately very well.

Schwab is my favorite web platform, but they have more limited indexing options than VG.

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Wed Oct 17, 2018 9:58 am

Update - Vanguard's resolution team says this will take 3-5 business days to fix. The money is still in the wrong account. Since I intended (and still intend) to immediately invest the entire amount in VFIAX, I plan to write a letter and seek either adjustment of price back to the date that the money was received but incorrectly processed.

User avatar
jeffyscott
Posts: 7330
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Vanguard screws up rollover from TSP

Post by jeffyscott » Wed Oct 17, 2018 10:04 am

02nz wrote:
Wed Oct 17, 2018 9:58 am
I plan to write a letter and seek either adjustment of price back to the date that the money was received but incorrectly processed.
Depending on if it is higher or lower, of course :)
press on, regardless - John C. Bogle

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Wed Oct 17, 2018 10:39 am

jeffyscott wrote:
Wed Oct 17, 2018 10:04 am
02nz wrote:
Wed Oct 17, 2018 9:58 am
I plan to write a letter and seek either adjustment of price back to the date that the money was received but incorrectly processed.
Depending on if it is higher or lower, of course :)
Well, yes! :-) The rep who called from Vanguard actually suggested I make the request, with the caveat there was no guarantee.

User avatar
Garco
Posts: 704
Joined: Wed Jan 23, 2013 2:04 am

Re: Vanguard screws up rollover from TSP

Post by Garco » Wed Oct 17, 2018 10:53 am

I'll just log myself here as a Boglehead who does not have a VG account. That's mainly because my employer did not offer VG as a plan sponsor. It offered TIAA and Fidelity. I have investments in both the TIAA and Fido plans. And I own some VG funds in both of them.

A year ago when my daughter took a new job at an academic institution she had a choice between TIAA and Vanguard as plan sponsor. I recommended VG not on the basis of service quality (I had read the complaints here) but rather the large variety of choices/options that the VG plan offered compared with TIAA. I think any long-term investor will at some point have issues with their plan implementation.

User avatar
HueyLD
Posts: 6238
Joined: Mon Jan 14, 2008 10:30 am

Re: Vanguard screws up rollover from TSP

Post by HueyLD » Wed Oct 17, 2018 11:26 am

02nz wrote:
Wed Oct 17, 2018 10:39 am
jeffyscott wrote:
Wed Oct 17, 2018 10:04 am
02nz wrote:
Wed Oct 17, 2018 9:58 am
I plan to write a letter and seek either adjustment of price back to the date that the money was received but incorrectly processed.
Depending on if it is higher or lower, of course :)
Well, yes! :-) The rep who called from Vanguard actually suggested I make the request, with the caveat there was no guarantee.
However, it is worth trying. Hopefully Vanguard will compensate you for their serious mistake.

I once encountered a minor error made by a brokerage (not Vanguard). The brokerage credited my account for their mistake without my asking and I still have accounts with that brokerage.

Yes, mistakes are made and how a company addresses mistakes differentiates the good from the bad or ugly.

azanon
Posts: 1960
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR

Re: Vanguard screws up rollover from TSP

Post by azanon » Wed Oct 17, 2018 11:50 am

I'm just glad I won't have to do this (Fed with TSP and Vanguard accounts). TSP is eliminating the only remaining complaints I had (I fund expanded to emerging markets in 19', many new withdrawal options), while still retaining their main advantaged over Vanguard (and, well, pretty much everyone else) - the G fund. Of course they're extremely low cost too.

Even the L funds are being improved, as I can personally live with a 30% equity L income fund, though I know that still wouldn't be aggressive enough for many boglehead retirees.

I admit once those improvements are finalized, I'd have a hard time understanding why someone would still find TSP inadequate for their needs.

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Wed Oct 17, 2018 12:20 pm

azanon wrote:
Wed Oct 17, 2018 11:50 am
I'm just glad I won't have to do this (Fed with TSP and Vanguard accounts). TSP is eliminating the only remaining complaints I had (I fund expanded to emerging markets in 19', many new withdrawal options), while still retaining their main advantaged over Vanguard (and, well, pretty much everyone else) - the G fund. Of course they're extremely low cost too.

Even the L funds are being improved, as I can personally live with a 30% equity L income fund, though I know that still wouldn't be aggressive enough for many boglehead retirees.

I admit once those improvements are finalized, I'd have a hard time understanding why someone would still find TSP inadequate for their needs.
I totally agree. The only reason I did this transfer was to be able to do Roth conversions. Even before the VG screwup I was planning to keep most of the balance in the TSP, in part to take advantage of the G and I funds. The latter has a way lower expense ratio than Admiral shares of VG's international index funds. There's no EM exposure but that will be fixed soon.

TSP clearly runs a good operation. In my nearly 15 years with TSP they've never made a single error with my account, as far as I can recall. That includes two loans I took out and repaid. Doing this transfer was the very first time I needed to call them. And they were substantially quicker with their part of the transfer than Vanguard, even though TSP's part was probably more work/processing than what VG had to do.

azanon
Posts: 1960
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR

Re: Vanguard screws up rollover from TSP

Post by azanon » Wed Oct 17, 2018 2:08 pm

02nz wrote:
Wed Oct 17, 2018 12:20 pm
azanon wrote:
Wed Oct 17, 2018 11:50 am
I'm just glad I won't have to do this (Fed with TSP and Vanguard accounts). TSP is eliminating the only remaining complaints I had (I fund expanded to emerging markets in 19', many new withdrawal options), while still retaining their main advantaged over Vanguard (and, well, pretty much everyone else) - the G fund. Of course they're extremely low cost too.

Even the L funds are being improved, as I can personally live with a 30% equity L income fund, though I know that still wouldn't be aggressive enough for many boglehead retirees.

I admit once those improvements are finalized, I'd have a hard time understanding why someone would still find TSP inadequate for their needs.
I totally agree. The only reason I did this transfer was to be able to do Roth conversions. Even before the VG screwup I was planning to keep most of the balance in the TSP, in part to take advantage of the G and I funds. The latter has a way lower expense ratio than Admiral shares of VG's international index funds. There's no EM exposure but that will be fixed soon.

TSP clearly runs a good operation. In my nearly 15 years with TSP they've never made a single error with my account, as far as I can recall. That includes two loans I took out and repaid. Doing this transfer was the very first time I needed to call them. And they were substantially quicker with their part of the transfer than Vanguard, even though TSP's part was probably more work/processing than what VG had to do.
I probably won't end up bothering with Roth conversions myself, since a reasonable TSP annual withdrawal + SS + Federal pension would already easily have me in the 24% federal bracket, and that's not even counting whether or not my wife keeps working, meaning I see almost no chance I'd ever have to pay in a higher bracket. Even if i deferred social security, I'd still be hitting the 22% bracket with pension + TSP withdrawals, so I'd pay 22% federal + 7% state for any conversion at the least. So why bother...... I'm not a CPA so I might be missing something, I admit.

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Wed Oct 17, 2018 2:15 pm

azanon wrote:
Wed Oct 17, 2018 2:08 pm
02nz wrote:
Wed Oct 17, 2018 12:20 pm
azanon wrote:
Wed Oct 17, 2018 11:50 am
I'm just glad I won't have to do this (Fed with TSP and Vanguard accounts). TSP is eliminating the only remaining complaints I had (I fund expanded to emerging markets in 19', many new withdrawal options), while still retaining their main advantaged over Vanguard (and, well, pretty much everyone else) - the G fund. Of course they're extremely low cost too.

Even the L funds are being improved, as I can personally live with a 30% equity L income fund, though I know that still wouldn't be aggressive enough for many boglehead retirees.

I admit once those improvements are finalized, I'd have a hard time understanding why someone would still find TSP inadequate for their needs.
I totally agree. The only reason I did this transfer was to be able to do Roth conversions. Even before the VG screwup I was planning to keep most of the balance in the TSP, in part to take advantage of the G and I funds. The latter has a way lower expense ratio than Admiral shares of VG's international index funds. There's no EM exposure but that will be fixed soon.

TSP clearly runs a good operation. In my nearly 15 years with TSP they've never made a single error with my account, as far as I can recall. That includes two loans I took out and repaid. Doing this transfer was the very first time I needed to call them. And they were substantially quicker with their part of the transfer than Vanguard, even though TSP's part was probably more work/processing than what VG had to do.
I probably won't end up bothering with Roth conversions myself, since a reasonable TSP annual withdrawal + SS + Federal pension would already easily have me in the 24% federal bracket, and that's not even counting whether or not my wife keeps working, meaning I see almost no chance I'd ever have to pay in a higher bracket. Even if i deferred social security, I'd still be hitting the 22% bracket with pension + TSP withdrawals, so I'd pay 22% federal + 7% state for any conversion at the least. So why bother...... I'm not a CPA so I might be missing something, I admit.
No in your situation I wouldn't bother. I'm going back to school so the opportunity to do Roth conversions during a year of low income (and also ensure enough tax liability to get the - nonrefundable - lifetime learning credit) were attractive.

mhalley
Posts: 6165
Joined: Tue Nov 20, 2007 6:02 am

Re: Vanguard screws up rollover from TSP

Post by mhalley » Wed Oct 17, 2018 4:18 pm

More vanguard complaints here as this is a vanguard centric forum. Google fidelity sucks, schwavb problems, etc and you will find plenty of problems with other brokerages.
https://www.consumeraffairs.com/finance/fidelity.html

https://www.consumeraffairs.com/finance/schwab.html

User avatar
celia
Posts: 8491
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Vanguard screws up rollover from TSP

Post by celia » Wed Oct 17, 2018 4:35 pm

02nz wrote:
Wed Oct 17, 2018 9:58 am
Update - Vanguard's resolution team says this will take 3-5 business days to fix. The money is still in the wrong account. Since I intended (and still intend) to immediately invest the entire amount in VFIAX, I plan to write a letter and seek either adjustment of price back to the date that the money was received but incorrectly processed.
Everyone makes mistakes once in a while, but the outstanding custodians would know how to make you "whole", as if the problem never happened. In your case, I think the odds are good that you will get the share prices from the date the rollover was received. You shouldn't even have to ask. They have always fixed my issues involving date-of-receipt this way.

User avatar
celia
Posts: 8491
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Vanguard screws up rollover from TSP

Post by celia » Wed Oct 17, 2018 4:43 pm

azanon wrote:
Wed Oct 17, 2018 2:08 pm
I probably won't end up bothering with Roth conversions myself, since a reasonable TSP annual withdrawal + SS + Federal pension would already easily have me in the 24% federal bracket, and that's not even counting whether or not my wife keeps working, meaning I see almost no chance I'd ever have to pay in a higher bracket. Even if i deferred social security, I'd still be hitting the 22% bracket with pension + TSP withdrawals, so I'd pay 22% federal + 7% state for any conversion at the least. So why bother...... I'm not a CPA so I might be missing something, I admit.
The "big thing you might be missing" involves taking RMDs after you start SS. If either you or your spouse have a large traditional IRA, you should estimate your income for each year from now until you are both over age 71 (after SS and RMDs have been in effect for a whole year). Many Bogleheads with large tax-deferred accounts find that their AGI, and thus their tax bracket, will increase after they are on SS and RMDs. So they start Roth conversions to smooth out their income (AGI) so it would be somewhat level across all their remaining years.

User avatar
indexfundfan
Posts: 2278
Joined: Tue Feb 20, 2007 11:21 am
Contact:

Re: Vanguard screws up rollover from TSP

Post by indexfundfan » Wed Oct 17, 2018 5:26 pm

OP, since you asked about Vanguard issues, here's one. Vanguard just made a mistake in one of my transactions I submitted last week.

I submitted an online request to exchange shares from Bond Fund A to the following:

97% of proceeds into Bond Fund B
3% of proceeds into a MMF

Instead, everything went into the MMF.

I sent them a secure message last week, asking them to fix it (I had a screenshot of the order confirmation; I knew from prior experience that it is good to capture a screenshot for the more important transactions).

It took them two days to acknowledge the problem before they start to fix it. And boy, they are fixing it very slowly, doing it one step at a time:

Day 2: The money from the MMF was reversed back into Bond Fund A
Day 3: Nothing happened
Day 4: 97% of Bond Fund A was exchanged into Bond Fund B
Day 5: Remaining 3% of Bond Fund A was exchanged into the MMF

In total, it took about a week to completely fix the problem. They did use the price from last week to re-do the transactions.

This also made me wonder how could such an error occur in their IT system. Shouldn't it already be well tested before?
My signature has been deleted.

azanon
Posts: 1960
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR

Re: Vanguard screws up rollover from TSP

Post by azanon » Wed Oct 17, 2018 6:31 pm

celia wrote:
Wed Oct 17, 2018 4:43 pm
azanon wrote:
Wed Oct 17, 2018 2:08 pm
I probably won't end up bothering with Roth conversions myself, since a reasonable TSP annual withdrawal + SS + Federal pension would already easily have me in the 24% federal bracket, and that's not even counting whether or not my wife keeps working, meaning I see almost no chance I'd ever have to pay in a higher bracket. Even if i deferred social security, I'd still be hitting the 22% bracket with pension + TSP withdrawals, so I'd pay 22% federal + 7% state for any conversion at the least. So why bother...... I'm not a CPA so I might be missing something, I admit.
The "big thing you might be missing" involves taking RMDs after you start SS. If either you or your spouse have a large traditional IRA, you should estimate your income for each year from now until you are both over age 71 (after SS and RMDs have been in effect for a whole year). Many Bogleheads with large tax-deferred accounts find that their AGI, and thus their tax bracket, will increase after they are on SS and RMDs. So they start Roth conversions to smooth out their income (AGI) so it would be somewhat level across all their remaining years.
Well, I'm a ways off TBH, but if i were estimating based on what I know today, and the current brackets, my traditional IRA (basically my TSP)+ 2 SS + Pension won't be so large that they'd push my wife and I into the 32% bracket. (I stayed WAY too long if those combined are $165K+! That'd be a fortune in Little Rock with no debt and a paid-off house). And the difference between the 22% and 24% is so small, I don't think it'd be worth the hassle to try to get under the 24% if i could.

We max Roth IRAs every year, but I'll probably save those for last and draw down the Traditional IRAs first so I'm gradually heading towards no taxable savings.

blevine
Posts: 2057
Joined: Sat Feb 27, 2010 3:57 pm
Location: New York

Re: Vanguard screws up rollover from TSP

Post by blevine » Thu Oct 18, 2018 6:06 pm

WanderingDoc wrote:
Tue Oct 16, 2018 11:04 pm
blevine wrote:
Tue Oct 16, 2018 10:59 pm
WanderingDoc wrote:
Tue Oct 16, 2018 9:24 pm
Why is it that posts like this about Vanguard are so common, yet I've yet to see one about iShares, Schwab, or Fidelity?
Ishares has no direct accounts, they do not deal directly with consumers. So they have 100% failure and success rates. Bad example.

And there are threads with Fidelity complaints.

Rollovers are a manually labor intensive process across the industry. Vanguard is just doing more of them.
So people with iShares invest through Vanguard, Schwab, and Fidelity?

There may be complaints with the other firms, however I diligently read these boards daily or at least 5 times a week and I've only seen Vanguard. Mind you, I have absolutely no problems with Vanguard - my transactions have all been smooth. This is just an observation.

A Vanguard bad customer service thread on here I have observed at least weekly.

Yes Ishares purchases/sales are made via any broker, they trade like stocks, any broker would allow you to trade them.
There will be differences in level of commissions they charge, from free to nominal, but all can trade them

Yes there are threads, but if you read them the complaints are almost always about the process of moving an IRA, 401k or similar
to Vanguard. I myself had them make a mistake and not follow my instructions many years ago when they were smaller and didn't
have such a crushing volume of requests, seems to be getting worse. But this is a one time issue for you personally, and then no problems once the account is setup. I think moving a retirement account to any firm is much worse than moving other types of accounts, and maybe yes, Vanguard does make more mistakes in this particular process. But I did this once in the last 20 years of being a Vanguard customer. One annoying month and 19 years, 11 months of happiness.

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Fri Nov 02, 2018 12:55 pm

OP here. After the money was credited to the correct account and I made my purchase of VFIAX, I asked Vanguard to adjust the trade date to two days earlier to reflect the date/price of when I should have been able to buy the fund. It was a difference of several hundred dollars. The response really galled me: the first response to my written request said since I didn't request the adjustment when I asked for the error to be fixed (I had no idea this was even possible, thought it had to be a separate request), it couldn't be done. I went through a phone rep on the resolution team, who went up his chain, and was told that they could adjust the trade date to one day earlier (when the price was actually higher than what I purchased at) but not two days. Hah.

Bottom line, really dismayed with Vanguard. They screwed up and refuse to make me whole. It's not that much money in the big scheme of things, but this kind of shoddy service is unacceptable to me. This is not how any customer should be treated, much less by a client-owned company. So, I'm in the process of moving everything - taxable, rollover IRA, Roth, about 250K in all - out of Vanguard.

rkhusky
Posts: 5736
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard screws up rollover from TSP

Post by rkhusky » Fri Nov 02, 2018 1:22 pm

02nz wrote:
Fri Nov 02, 2018 12:55 pm
Bottom line, really dismayed with Vanguard. They screwed up and refuse to make me whole. It's not that much money in the big scheme of things, but this kind of shoddy service is unacceptable to me. This is not how any customer should be treated, much less by a client-owned company. So, I'm in the process of moving everything - taxable, rollover IRA, Roth, about 250K in all - out of Vanguard.
Hope your new company doesn't make similar mistakes.

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Fri Nov 02, 2018 1:26 pm

rkhusky wrote:
Fri Nov 02, 2018 1:22 pm
02nz wrote:
Fri Nov 02, 2018 12:55 pm
Bottom line, really dismayed with Vanguard. They screwed up and refuse to make me whole. It's not that much money in the big scheme of things, but this kind of shoddy service is unacceptable to me. This is not how any customer should be treated, much less by a client-owned company. So, I'm in the process of moving everything - taxable, rollover IRA, Roth, about 250K in all - out of Vanguard.
Hope your new company doesn't make similar mistakes.
Nobody is perfect. But there should be processes in place to catch human mistakes. And when those fail the customer should be made whole. Vanguard failed on both counts. I've only had limited experience with one other brokerage (Schwab), but I think the chances are better than 50/50 that they would not have screwed this up or would've compensated me accordingly.

Nate79
Posts: 3593
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Vanguard screws up rollover from TSP

Post by Nate79 » Fri Nov 02, 2018 4:20 pm

Vanguards mutual structure - putting their customer first since they are owners. Not.

rkhusky
Posts: 5736
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard screws up rollover from TSP

Post by rkhusky » Fri Nov 02, 2018 5:19 pm

02nz wrote:
Fri Nov 02, 2018 1:26 pm
Nobody is perfect. But there should be processes in place to catch human mistakes. And when those fail the customer should be made whole. Vanguard failed on both counts. I've only had limited experience with one other brokerage (Schwab), but I think the chances are better than 50/50 that they would not have screwed this up or would've compensated me accordingly.
You will get a few more data points as you transfer your accounts over to the new company. Perhaps you can let us know how it goes.

rkhusky
Posts: 5736
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard screws up rollover from TSP

Post by rkhusky » Fri Nov 02, 2018 5:22 pm

Nate79 wrote:
Fri Nov 02, 2018 4:20 pm
Vanguards mutual structure - putting their customer first since they are owners. Not.
That's what can happen when you cut costs to the bone (and grow too fast). See what happened to the airline that tried to charge passengers for using the bathroom.

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Mon Nov 05, 2018 10:35 am

Ugh, and it gets worse. Vanguard seems intent to prove to me that moving all my assets away is the correct decision. I decided to transfer the taxable account to Merrill Edge, which has a bonus offer. I held nothing but the 500 Fund (VFIAX) in this account, and since Admiral shares can't be transacted at Merrill Edge I decided to convert to ETF first at Vanguard. This was completed October 30, and following the conversion my account only showed shares of VOO. Three days later the transfer went through, but Vanguard somehow transferred out my original number of VFIAX shares, not VOO. They even sold the fractional share of VOO, which would make sense if they were going to transfer it out, but they didn't. So now my holdings show the VOO shares, and about negative 500 shares of VFIAX, for an overall (small) negative balance. WTF?! On the Merrill Edge side it shows up as VFIAX not VOO. I know the error wasn't on their end because I didn't provide Merrill Edge any information about what funds I held, only the account number and approximate dollar balance. Calling the resolution team when they open, but Vanguard just shredded whatever trust I had left in them.

rkhusky
Posts: 5736
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard screws up rollover from TSP

Post by rkhusky » Mon Nov 05, 2018 12:26 pm

02nz wrote:
Mon Nov 05, 2018 10:35 am
I decided to convert to ETF first at Vanguard. This was completed October 30, and following the conversion my account only showed shares of VOO. Three days later the transfer went through, but Vanguard somehow transferred out my original number of VFIAX shares, not VOO.
On what day did you submit the transaction to move the shares from Vanguard to Merrill?

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Mon Nov 05, 2018 3:37 pm

rkhusky wrote:
Mon Nov 05, 2018 12:26 pm
02nz wrote:
Mon Nov 05, 2018 10:35 am
I decided to convert to ETF first at Vanguard. This was completed October 30, and following the conversion my account only showed shares of VOO. Three days later the transfer went through, but Vanguard somehow transferred out my original number of VFIAX shares, not VOO.
On what day did you submit the transaction to move the shares from Vanguard to Merrill?
I submitted it on the Merrill Edge website on Nov 1 - after confirming that the conversion was completed at Vanguard (conversion out of VFIAX shows a trade/settlement date of Oct 29, conversion into VOO Oct 30). I did so only after seeing on Vanguard.com that my holdings were 100% in VOO. Unclear how VG managed to transfer out almost 500 shares of VFIAX on Nov 2 - four business days after those shares were already zeroed out for the ETF conversion.

rkhusky
Posts: 5736
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard screws up rollover from TSP

Post by rkhusky » Mon Nov 05, 2018 6:47 pm

02nz wrote:
Mon Nov 05, 2018 3:37 pm
I submitted it on the Merrill Edge website on Nov 1 - after confirming that the conversion was completed at Vanguard (conversion out of VFIAX shows a trade/settlement date of Oct 29, conversion into VOO Oct 30). I did so only after seeing on Vanguard.com that my holdings were 100% in VOO. Unclear how VG managed to transfer out almost 500 shares of VFIAX on Nov 2 - four business days after those shares were already zeroed out for the ETF conversion.
That is strange.

And I didn't realize that you could move shares between providers so quickly - submit on Nov 1 and they are in your new account on Nov 2. It takes longer to ACH funds to and from my bank. Good to know in case I have to do something similar.

rkhusky
Posts: 5736
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard screws up rollover from TSP

Post by rkhusky » Thu Nov 08, 2018 6:50 pm

rkhusky wrote:
Mon Nov 05, 2018 6:47 pm
02nz wrote:
Mon Nov 05, 2018 3:37 pm
I submitted it on the Merrill Edge website on Nov 1 - after confirming that the conversion was completed at Vanguard (conversion out of VFIAX shows a trade/settlement date of Oct 29, conversion into VOO Oct 30). I did so only after seeing on Vanguard.com that my holdings were 100% in VOO. Unclear how VG managed to transfer out almost 500 shares of VFIAX on Nov 2 - four business days after those shares were already zeroed out for the ETF conversion.
That is strange.

And I didn't realize that you could move shares between providers so quickly - submit on Nov 1 and they are in your new account on Nov 2. It takes longer to ACH funds to and from my bank. Good to know in case I have to do something similar.
Did this ever get fixed?

02nz
Posts: 529
Joined: Wed Feb 21, 2018 3:17 pm

Re: Vanguard screws up rollover from TSP

Post by 02nz » Sat Nov 10, 2018 10:42 pm

rkhusky wrote:
Thu Nov 08, 2018 6:50 pm
rkhusky wrote:
Mon Nov 05, 2018 6:47 pm
02nz wrote:
Mon Nov 05, 2018 3:37 pm
I submitted it on the Merrill Edge website on Nov 1 - after confirming that the conversion was completed at Vanguard (conversion out of VFIAX shows a trade/settlement date of Oct 29, conversion into VOO Oct 30). I did so only after seeing on Vanguard.com that my holdings were 100% in VOO. Unclear how VG managed to transfer out almost 500 shares of VFIAX on Nov 2 - four business days after those shares were already zeroed out for the ETF conversion.
That is strange.

And I didn't realize that you could move shares between providers so quickly - submit on Nov 1 and they are in your new account on Nov 2. It takes longer to ACH funds to and from my bank. Good to know in case I have to do something similar.
Did this ever get fixed?
Yes, after I called the "resolution team" again, Vanguard undid the erroneous transfer of VFIAX, and the transfer of VOO to Merrill Edge completed yesterday. (BTW I was also surprised also that these transfers happen so quickly, but apparently this happens electronically, at least between Vanguard and Merrill Edge. TSP to Vanguard was by check and thus took several days.)

However, in the meantime I discovered yet another Vanguard mistake. I requested by phone Nov 2 that Vanguard convert the mutual fund shares in my rollover IRA to the equivalent ETF. Everything was confirmed back to me, Vanguard even sent me the ETF prospectus. I'd done something similar with the brokerage account and Roth IRA, and with those the conversion was completed within 1-2 business days. But this time around nothing had been done as of Nov 8, and the rep I spoke with saw no record of any such request. I told him to listen to the recording of my phone request, and so a day later the conversion was completed as requested.

So to wrap up, on three different occasions over the past month, Vanguard has made significant errors with routine requests. I've probably spent an extra 2-3 hours getting this stuff fixed. They've managed to completely destroy the trust of someone who, until a few months ago, has only invested with Vanguard. I'll continue to invest in Vanguard ETFs but will be staying far, far away from the brokerage side of the house.

User avatar
LadyGeek
Site Admin
Posts: 48650
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Vanguard screws up rollover from TSP

Post by LadyGeek » Sun Nov 11, 2018 5:08 pm

celia wrote:
Wed Oct 17, 2018 12:56 am
WanderingDoc wrote:
Tue Oct 16, 2018 9:24 pm
Why is it that posts like this about Vanguard are so common, yet I've yet to see one about iShares, Schwab, or Fidelity?
Vanguard is the largest investment custodian, so of course, they will probably make some mistakes and have clients complain about the errors. But they also have clients who give them compliments online.

The other custodians just don't have an independent forum like Vanguard does, so where should complaints about custodian X be left online? Some end up in this forum like:
viewtopic.php?f=1&t=246045&p=3862372 (TD Ameritrade)
viewtopic.php?f=1&t=254677&p=4033856 (Edward Jones)
viewtopic.php?f=1&t=232095&p=3614695 (eTrade)
viewtopic.php?f=1&t=259280&p=4125450 (Fidelity)
viewtopic.php?f=10&t=254435&p=4029377 (Schwab)
To be clear, we follow the man, not the company. We are not part of Vanguard - but we post a lot about the company. We also post a lot about investment companies not named Vanguard. Complain away, but please keep the discussion civil.

The process of undoing a transaction like it never happened is called "rewinding" the transaction.

A few years ago, I transferred money intended for a Roth IRA into a traditional IRA. Never mind that the website was unclear on how to do the actual transfer. Long story short, my initial interaction with customer service was not willing to fix it. It took 6 months to get a sympathetic rep who was willing to take care of it. They rewound the transactions, inserted the correct ones (including reinvested dividends), then resubmitted a new 1099-R.

This was my fault, but I was not impressed with how they handled it.

Tip: If you are rolling over funds from 401(k) non-taxable contributions to a Roth IRA (After-tax 401(k)), create a new settlement fund. Don't use a previous settlement fund which may have been intended for a different purpose. That's what caused my problem in the first place - co-mingling funds for different purposes.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Post Reply