Vanguard Mutual Fund to ETF conversion for transfer out; Can I leave fractional shares behind?

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NewtoInvesting403
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Vanguard Mutual Fund to ETF conversion for transfer out; Can I leave fractional shares behind?

Post by NewtoInvesting403 » Mon Nov 13, 2017 10:50 pm

Situation:
Will be signing up for HDHP with employer contributions to HSA at Fidelity. To get Fidelity to waive the $12/quarter fee, I need to have $250K assets held there.

Background:
Have 403b/457 @ Fidelity (Does anyone know if this counts towards the 250k?).
Have the required minimum at Vanguard in taxable account, but in mutual fund form.

Plan:
Convert Vanguard funds to ETF's and then transfer to Fidelity to meet the $250 minimum.

Question:
I know converting the mutual funds to ETF's will leave fractional shares behind. Is it possible to specify transfer of ONLY the full shares to Fidelity and leave the fractional shares at Vanguard? Or are the fractional shares attached to each of the tax lots? (ie. each spec ID tax lot would generate it's own ETFs and fractional shares?)
Last edited by NewtoInvesting403 on Mon Nov 13, 2017 11:50 pm, edited 1 time in total.

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triceratop
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Re: Vanguard Mutual Fund to ETF conversion for transfer out; Can I leave fractional shares behind?

Post by triceratop » Mon Nov 13, 2017 11:44 pm

This combination recently bit me: SpecID + fractional shares + mutual fund to ETF conversion + transfer out of Vanguard. Vanguard made an error last December in the post conversion cost basis, which took nearly a month to resolve. Post transfer things looked alright until they sent some mysterious form to my new brokerage and screwed things up, just this week, 10 months later.

Bottom line: this combination can be fraught with difficulties.

However 403b/457 accounts are tax advantaged so I don't see the issue.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

NewtoInvesting403
Posts: 16
Joined: Mon May 16, 2016 7:36 pm

Re: Vanguard Mutual Fund to ETF conversion for transfer out; Can I leave fractional shares behind?

Post by NewtoInvesting403 » Mon Nov 13, 2017 11:49 pm

Sorry, vanguard funds are in taxable! Forgot about that. Ugh... maybe it's not worth the headache

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triceratop
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Re: Vanguard Mutual Fund to ETF conversion for transfer out; Can I leave fractional shares behind?

Post by triceratop » Mon Nov 13, 2017 11:51 pm

I see. I am not sure what the answer actually is. It's complicated from the fact that Vanguard makes mistakes so often. I meant to link to this thread with more detail: viewtopic.php?f=1&t=230425&p=3617611#p3617611
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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