Switching from Vanguard to Schwab

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ZachFinch76
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Switching from Vanguard to Schwab

Post by ZachFinch76 » Thu May 23, 2019 2:29 pm

Hi,

I have most of my taxable assets at Vanguard, VTSAX/VTIAX/VBTLX. I really do not like their website or web services. I also recently started to use Schwab banking for most things. As such I am seriously considering transferring my account to Schwab. I have some questions in case anyone has some info/wisdom for me:

1. Can I continue to invest in my Vanguard funds once they are with Schwab, without a fee? I already own them so I am not buying them from scratch
2. If I want to move those Vanguard funds to the comparable total market funds with Schwab, does anyone have any strong opinions for or against that? The only thing I know is that VTSAX is said to be more tax efficient than SWTSX? Any other data points on moving the 3 funds to Schwab equivalents?
3. Are there other things I am missing about why having my actual holdings with a Vanguard brokerage account vs a Schwab one could be advantageous?

Thanks!

mhalley
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Re: Switching from Vanguard to Schwab

Post by mhalley » Thu May 23, 2019 2:59 pm

1. You will be charged a fee to buy new shares, but not to reinvest dividends. So if you don’t want to pay taxes, you could invest new money in the schwab fund while keeping the vanguard one.
2. The equivalent schwab funds are fine. You will have to pay any cap gains taxes to switch.
3. If you want vanguard products, stay at vanguard. You could use the vanguard ETFs elsewhere, but there will still be a fee.
I think that schwab, vanguard and fidelity are all fine, if you prefer one over the other, you will still have cheap passive funds that will have very similar performance.

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FrugalInvestor
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Re: Switching from Vanguard to Schwab

Post by FrugalInvestor » Thu May 23, 2019 3:36 pm

Vanguard has a patent on the structure of VTSAX which results in deferral of taxes on capital gains for the fund's investors (this may apply to other Vanguard funds, I'm not sure). See article here....

https://www.bloomberg.com/graphics/2019 ... tax-dodge/

For that reason and the fact that it's one of the best (lowest cost) funds available I'd be very hesitant to substitute another company's fund for it. Other companies may choose to copy this strategy after another 4 years pass but no one knows at this point.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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jeffyscott
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Re: Switching from Vanguard to Schwab

Post by jeffyscott » Thu May 23, 2019 3:56 pm

FrugalInvestor wrote:
Thu May 23, 2019 3:36 pm
Vanguard has a patent on the structure of VTSAX which results in deferral of taxes on capital gains for the fund's investors (this may apply to other Vanguard funds, I'm not sure).
Yes, it applies to all their index funds that also have an ETF share class.

This would be a reason for the OP to stay at Vanguard with a taxable account. While the existing holdings can be moved, if money is being added it will either have to be added to different funds that will be less tax efficient (or be ETFs), require a fee to buy more of current funds (or even ETFs if converted prior to moving), or have to be bought at Vanguard and then transferred over.

Schwab will waive mutual fund transaction fees at times, but I doubt that they will do it on an ongoing basis for someone who wants to add to Vanguard mutual funds over time.
Time is your friend; impulse is your enemy. - John C. Bogle

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Nate79
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Re: Switching from Vanguard to Schwab

Post by Nate79 » Thu May 23, 2019 8:17 pm

You can convert the mutual funds at Vanguard to the ETF equivalent funds then transfer to Schwab. If you ask or if they have a bonus going on Schwab will easily give you free trades towards the buying/selling of ETFs.

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calmaniac
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Re: Switching from Vanguard to Schwab

Post by calmaniac » Thu May 23, 2019 8:56 pm

I'm at Schwab and many of my ETFs are from Vanguard. When I buy new shares I have not seen any fees (bought 2 this week). I would check with Schwab, as at least for my account, they have not charged anything for buying Vanguard ETFs.

Wricha
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Re: Switching from Vanguard to Schwab

Post by Wricha » Thu May 23, 2019 9:07 pm

Switch from Vanguard to Schwab five years ago. Could not be more pleased. Bonus of $5000 plus 100 free trades with costumer service that is much better than Vanguard. Vanguard just grew to big to fast without training staff properly but still a good company just not in Schwab’s league. Just one person’s opinion.

ccieemeritus
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Re: Switching from Vanguard to Schwab

Post by ccieemeritus » Thu May 23, 2019 9:09 pm

I have accounts at both Vanguard and Schwab. I'm happy with both. But I use Vanguard for a "plain taxable account". Schwab supports a bunch of different (more complex) account types. In addition to a taxable account at Schwab I have:

Roth
Coverdell (old, from before 529's got "good")
Custodial accounts for kids
inherited IRA

It's also nice to have a Schwab office close by for certain types of questions and transactions.

I do not think I would be happy with _only_ Vanguard. I could be happy with only Schwab (although I prefer not to have all money in one place, hence the Vanguard taxable account).

I personally prefer mutual funds to ETFs (old fashioned I guess--I understand ETFs have a slight advantage but I like the ability to buy fractional shares---especially in tax-advantaged accounts where I enable automatic dividend reinvestment). SWPPX is my main goto fund at Schwab. Very low ER. Low annual distributions.

mhalley
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Re: Switching from Vanguard to Schwab

Post by mhalley » Thu May 23, 2019 9:18 pm

The free etf trades could be for several reasons, (account size, free trades from moving accounts, etc) but I don’t see vanguard on the schwab one source list.
https://www.schwab.wallst.com/Prospect/ ... ceETFs.asp#
You can compare the total return after taxes between the two ETFs here
https://personal.vanguard.com/us/faces/ ... sp?lang=en

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Allocationist
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Re: Switching from Vanguard to Schwab

Post by Allocationist » Thu May 23, 2019 9:51 pm

After encountering many problems with Vanguard over the years I finally gave up and transferred most of my assets to Schwab. Before the transfer I asked Schwab to allow me to buy Vanguard funds with no Schwab transaction fee. They agreed. Not sure if such an agreement is available to everyone.

I've been with Schwab for several years and am very satisfied. Some things I like:

Consistently excellent service including minimal wait times and staff want to help.

So far, not one problem with my accounts.

Great web site functionality

Unlike Vanguard, Schwab's trading platform doesn't freeze up during high volume trading situations.

Better bid/ask spreads for thinly traded securities than Vanguard.

Like Vanguard I've never experienced any effort to persuade me to modify my asset allocation or buy a product.

IMO the absolute best ATM card to use internationally.

Hope this helps.

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ZachFinch76
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Re: Switching from Vanguard to Schwab

Post by ZachFinch76 » Fri May 24, 2019 1:41 am

Wricha wrote:
Thu May 23, 2019 9:07 pm
Switch from Vanguard to Schwab five years ago. Could not be more pleased. Bonus of $5000 plus 100 free trades with costumer service that is much better than Vanguard. Vanguard just grew to big to fast without training staff properly but still a good company just not in Schwab’s league. Just one person’s opinion.
How did you get $5000? Can you elaborate? Thanks

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jeffyscott
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Re: Switching from Vanguard to Schwab

Post by jeffyscott » Fri May 24, 2019 7:21 am

Allocationist wrote:
Thu May 23, 2019 9:51 pm
After encountering many problems with Vanguard over the years I finally gave up and transferred most of my assets to Schwab. Before the transfer I asked Schwab to allow me to buy Vanguard funds with no Schwab transaction fee. They agreed. Not sure if such an agreement is available to everyone.
Is this for Vanguard mutual funds or ETFs?

If it is mutual funds, how frequently are you buying Vanguard funds at Schwab and are you able to buy online, without the transaction fee?
Time is your friend; impulse is your enemy. - John C. Bogle

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ZachFinch76
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Re: Switching from Vanguard to Schwab

Post by ZachFinch76 » Fri May 24, 2019 11:28 am

Nate79 wrote:
Thu May 23, 2019 8:17 pm
You can convert the mutual funds at Vanguard to the ETF equivalent funds then transfer to Schwab. If you ask or if they have a bonus going on Schwab will easily give you free trades towards the buying/selling of ETFs.
Hi Nate, separate question. I know you have the strong opinion that SIP does not have a cash drag. Primary premise being the overall fixed income yield is good enough that the portfolio performs well and perhaps better than one with no cash and say all BND as its core holding. But my question is: Is that not because it is holding more risky bonds? If I am taking more risk to offset cash returns being low, why would I not just put that risk in stocks rather than try and fix the low cash return rate? I am really liking a bunch of stuff about SIP so I am trying to rationalize it all and convince myself if it makes sense or not :)

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Re: Switching from Vanguard to Schwab

Post by Jack FFR1846 » Fri May 24, 2019 11:38 am

I've got a Schwab taxable account and when I finally decided that I was leaving Vanguard, I looked at them and at TDAmeritrade. I converted my Vanguard fund to an ETF, so knew it could fly anywhere. Schwab did not offer a bonus as I already had an account and TDA would give me a bonus even with the existing account, so that's where it went. Once in the new holder, I had zero plans to add anything Vanguard and use the dividend money to buy one of TDA's free ETFs. (state street something or other). I tend to put any new taxable investment money into Schwab, however and buy only SCHB.
Bogle: Smart Beta is stupid

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Nate79
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Re: Switching from Vanguard to Schwab

Post by Nate79 » Fri May 24, 2019 1:26 pm

ZachFinch76 wrote:
Fri May 24, 2019 11:28 am
Nate79 wrote:
Thu May 23, 2019 8:17 pm
You can convert the mutual funds at Vanguard to the ETF equivalent funds then transfer to Schwab. If you ask or if they have a bonus going on Schwab will easily give you free trades towards the buying/selling of ETFs.
Hi Nate, separate question. I know you have the strong opinion that SIP does not have a cash drag. Primary premise being the overall fixed income yield is good enough that the portfolio performs well and perhaps better than one with no cash and say all BND as its core holding. But my question is: Is that not because it is holding more risky bonds? If I am taking more risk to offset cash returns being low, why would I not just put that risk in stocks rather than try and fix the low cash return rate? I am really liking a bunch of stuff about SIP so I am trying to rationalize it all and convince myself if it makes sense or not :)
Risk is relative. If you want to hold a little bit more stock and offset with very low duration bonds (short term or high yield cash) then ok. Schwab holds a mix of high yield, long term, intermediate term, emerging market and international bonds, short term and cash. Overall the risk is of the entire fixed income mix not any one holding. The ignorance around the cash drag is focusing on one single holding without taking the time nor the capability to look at the portfolio in entirety.

azanon
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Re: Switching from Vanguard to Schwab

Post by azanon » Fri May 24, 2019 2:09 pm

Wricha wrote:
Thu May 23, 2019 9:07 pm
Switch from Vanguard to Schwab five years ago. Could not be more pleased. Bonus of $5000 plus 100 free trades with costumer service that is much better than Vanguard. Vanguard just grew to big to fast without training staff properly but still a good company just not in Schwab’s league. Just one person’s opinion.
I've been with Vanguard longer than I can shake a stick, but I really can't comment much on their customer service. I haven't run across anything that I can't do online yet, is my problem :). Maybe they act surprised when people actually call them in 2019?

I kid.... But for the most part, not really, right?

Wricha
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Re: Switching from Vanguard to Schwab

Post by Wricha » Fri May 24, 2019 4:26 pm

ZachFinch76 wrote:
Fri May 24, 2019 1:41 am
Wricha wrote:
Thu May 23, 2019 9:07 pm
Switch from Vanguard to Schwab five years ago. Could not be more pleased. Bonus of $5000 plus 100 free trades with costumer service that is much better than Vanguard. Vanguard just grew to big to fast without training staff properly but still a good company just not in Schwab’s league. Just one person’s opinion.
How did you get $5000? Can you elaborate? Thanks
I had a taxable account that I moved over for $2500 and couple months later I moved a 401K over for another $2500. Schwab will match anyone’s promotion.

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Stinky
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Re: Switching from Vanguard to Schwab

Post by Stinky » Fri May 24, 2019 9:22 pm

FrugalInvestor wrote:
Thu May 23, 2019 3:36 pm
Vanguard has a patent on the structure of VTSAX which results in deferral of taxes on capital gains for the fund's investors (this may apply to other Vanguard funds, I'm not sure). See article here....

https://www.bloomberg.com/graphics/2019 ... tax-dodge/

For that reason and the fact that it's one of the best (lowest cost) funds available I'd be very hesitant to substitute another company's fund for it. Other companies may choose to copy this strategy after another 4 years pass but no one knows at this point.
Very interesting!

I’ve invested in VTSAX for several years, and was totally unaware of this tax nuance. It sounds quite innovative.

I feel like I learn something new from this Forum every day...,,
It's a GREAT day to be alive - Travis Tritt

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Re: Switching from Vanguard to Schwab

Post by grabiner » Sat May 25, 2019 8:28 am

If you want to move your Vanguard funds to Schwab, convert them to ETFs first. Schwab may charge a commission on trading Vanguard ETFs, but it will be lower than the fee on Vanguard mutual funds. (In a taxable account, the ETF conversion is not a taxable event, but selling them would be.)

In the future, you can buy Schwab's ETFs, which are comparable to Vanguard's; as ETfs, they should be very tax-efficient.
Wiki David Grabiner

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rustymutt
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Re: Switching from Vanguard to Schwab

Post by rustymutt » Sat May 25, 2019 8:53 am

I'm amazed at comments that mention how great their brokers are. They all just provide a service, and some seem better than others, but in the end it's not the broker that makes or breaks you, but bad deceptions that that people don't understand that bring em down. I'm with Vanguard, and happy with them. Just sit it and forget it. :D
I'm amazed at the wealth of Knowledge others gather, and share over a lifetime of learning. The mind is truly unique. It's nice when we use it!

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