Vanguard Switch to Brokerage Accounts

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cowdogman
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Vanguard Switch to Brokerage Accounts

Post by cowdogman » Thu Aug 09, 2018 8:43 pm

Hi:

I know this is an often discussed topic, but I am so irritated that I needed to post.

My wife and I have been with Vanguard well over 20 years and have been Flagship customers for a long time.

Several months ago our Flagship rep called my wife out of the blue and gave her a sales pitch for switching our joint account to the new brokerage account. I thought that was strange because I was the one that normally (solely actually) dealt with our rep, but I didn't think twice about it.

I ended up talking to the rep and he gave me the pitch. He made it sound like it was just an admin change and nothing else would change (he did say we would have to reestablish checkwriting and get new checks). So I agreed.

Now I'm learning bit by bit that quite a bit has changed.

1. First I noticed that my dividends were no longer re-invested in my designated fund. I used to have my stock fund dividends reinvested in a short term bond account, but after the change the dividends went to the settlement account, Prime Money Market--and I had to go online to re-transfer them to the bond fund.

2. Then I learned we can have checkwriting on only one fund, Prime Money Market.

3. Today I went online to transfer some funds from our joint account to a Vanguard individual 401(k) account--something I have done in the past. Today the transfer option was not available, and when I called Vanguard I was told that transfers were not allowed from the new brokerage accounts. I was told that I was not the first person to be surprised by this change.

In short, I think Vanguard lied to us in a sales call. When I talked to Vanguard today, I was told there were ups and downs with the new system and the ups went mainly to traders. So Vanguard is changing the system to benefit traders to the detriment of invest-and-forget investors like me? That sounds very un-Vanguard-like. And a misleading sales call from Vanguard to sell me something that is to our detriment? That also sounds very un-Vanguard-like.

Can anybody tell me whether there are any improvements in the brokerage account for traditional Vanguard customers like me?

And is there any difference between Vanguard and Fidelity now?

TBillT
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Re: Vanguard Switch to Brokerage Accounts

Post by TBillT » Thu Aug 09, 2018 8:50 pm

Like you I've heard about this probably 2 years now here on BH, but I do not think they have bothered us about it yet.
We make very few transactions, but a few.

mhalley
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Re: Vanguard Switch to Brokerage Accounts

Post by mhalley » Fri Aug 10, 2018 1:38 am

Here is a review with some pros and cons
http://www.mymoneyblog.com/vanguard-mer ... -cons.html

acegolfer
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Re: Vanguard Switch to Brokerage Accounts

Post by acegolfer » Fri Aug 10, 2018 6:25 am

Thanks so much with sharing your experience. Your post made me re-think switching to brokerage account. I'll stay with my current 2 accounts.

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heartwood
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Re: Vanguard Switch to Brokerage Accounts

Post by heartwood » Fri Aug 10, 2018 7:14 am

cowdogman,

re "2. Then I learned we can have checkwriting on only one fund, Prime Money Market."

You should check that. As far as I know, in a brokerage account, checkwriting uses the settlement fund only, which is Federal MM fund. You can have a Prime MM fund but not as the settlement fund. If you write a check there should be enough in Federal MM to cover it, not in Prime.

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pfrank
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Re: Vanguard Switch to Brokerage Accounts

Post by pfrank » Fri Aug 10, 2018 7:44 am

heartwood wrote:
Fri Aug 10, 2018 7:14 am
cowdogman,

re "2. Then I learned we can have checkwriting on only one fund, Prime Money Market."

You should check that. As far as I know, in a brokerage account, checkwriting uses the settlement fund only, which is Federal MM fund. You can have a Prime MM fund but not as the settlement fund. If you write a check there should be enough in Federal MM to cover it, not in Prime.
With the brokerage account you can set up an alternative redemption fund using the check writing form or under account maintenance. I have Prime as my alternative fund. No issues.

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Re: Vanguard Switch to Brokerage Accounts

Post by Call_Me_Op » Fri Aug 10, 2018 7:52 am

cowdogman wrote:
Thu Aug 09, 2018 8:43 pm
And is there any difference between Vanguard and Fidelity now?
Yes. Fidelity has much better customer service and a vastly superior website.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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GoldStar
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Re: Vanguard Switch to Brokerage Accounts

Post by GoldStar » Fri Aug 10, 2018 7:57 am

After reading several threads here on the topic I have not changed yet. I suppose at some point they will force all to change but until then I will hold back.
My main concern is I have several funds set up to all reinvest in TSM (versus in themselves) - sounds like the brokerage accounts do not allow this.

rkhusky
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Re: Vanguard Switch to Brokerage Accounts

Post by rkhusky » Fri Aug 10, 2018 8:35 am

cowdogman wrote:
Thu Aug 09, 2018 8:43 pm
3. Today I went online to transfer some funds from our joint account to a Vanguard individual 401(k) account--something I have done in the past. Today the transfer option was not available, and when I called Vanguard I was told that transfers were not allowed from the new brokerage accounts. I was told that I was not the first person to be surprised by this change.
Does this hold true for Roth IRA accounts too (i.e. transfer from taxable joint brokerage account to Roth IRA brokerage account)? Even if you can't do it with one transaction, there must be a way to do it (e.g. transfer to settlement account and then transfer to 401k or transfer to checking account and then transfer back to 401k).

Gig em
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Re: Vanguard Switch to Brokerage Accounts

Post by Gig em » Fri Aug 10, 2018 9:11 am

I am just starting taxable investing (retirement maxed) and wanting to save for our next home purchase in ~7 years.

Something I really want is the abilities to have direct deposit directly into a Vanguard mutual fund. My pay is not constant, so my plan is divert 10% into the house fund. My employer will allow this.

Vanguard told me I could do this with a brokerage account. Not true. You can only direct deposit into a federal money mart. However you can do this with the old mutual fund accounts.

BUT you can open one of the old accounts if you CALL them and specifically ask for it. (I outlined my situation and goal and they mailed me a paper form.) I'll let you know how it works, but I could be an effective option to "switch back."

Nate79
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Re: Vanguard Switch to Brokerage Accounts

Post by Nate79 » Fri Aug 10, 2018 9:20 am

Believe it or not but as was posted in the last rant thread on Vanguard brokerage vs mutual fund accounts that Vanguard will be transitioning all accounts to brokerage accounts in the near future. I would not be making long tern plans based on the mutual fund structure. However, we also know Vanguard has been slowly adding functionality to the brokerage accounts.

Bacchus01
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Re: Vanguard Switch to Brokerage Accounts

Post by Bacchus01 » Fri Aug 10, 2018 9:26 am

Nate79 wrote:
Fri Aug 10, 2018 9:20 am
Believe it or not but as was posted in the last rant thread on Vanguard brokerage vs mutual fund accounts that Vanguard will be transitioning all accounts to brokerage accounts in the near future. I would not be making long tern plans based on the mutual fund structure. However, we also know Vanguard has been slowly adding functionality to the brokerage accounts.
And if they force that, I will likely move to Fidelity.

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Oicuryy
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Re: Vanguard Switch to Brokerage Accounts

Post by Oicuryy » Fri Aug 10, 2018 9:27 am

Gig em wrote:
Fri Aug 10, 2018 9:11 am
BUT you can open one of the old accounts if you CALL them and specifically ask for it.
Thank you for confirming this. The prospectus for Vanguard mutual funds says you can hold funds directly with Vanguard Group Inc. (mutual fund account) as well as though Vanguard Brokerage Services (brokerage account). But you are the first person I've seen who has done it for a new account.

Ron
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Rupert
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Re: Vanguard Switch to Brokerage Accounts

Post by Rupert » Fri Aug 10, 2018 9:33 am

Can anyone tell me how this switch would affect someone attempting a backdoor Roth IRA for the first time this year? If the person already has a Roth account at Vanguard, which is an old mutual fund account, but opens a new tIRA at Vanguard, which is a new brokerage account, will there be any hiccups in converting the new tIRA funds to the old Roth account?

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Re: Vanguard Switch to Brokerage Accounts

Post by jhfenton » Fri Aug 10, 2018 9:55 am

rkhusky wrote:
Fri Aug 10, 2018 8:35 am
cowdogman wrote:
Thu Aug 09, 2018 8:43 pm
3. Today I went online to transfer some funds from our joint account to a Vanguard individual 401(k) account--something I have done in the past. Today the transfer option was not available, and when I called Vanguard I was told that transfers were not allowed from the new brokerage accounts. I was told that I was not the first person to be surprised by this change.
Does this hold true for Roth IRA accounts too (i.e. transfer from taxable joint brokerage account to Roth IRA brokerage account)? Even if you can't do it with one transaction, there must be a way to do it (e.g. transfer to settlement account and then transfer to 401k or transfer to checking account and then transfer back to 401k).
You can transfer from a taxable joint brokerage account to a Roth IRA brokerage account. I do it regularly, usually a transfer from a bond fund in our taxable account to a fund in either my or my wife's Roth IRAs. You up with a sale, a purchase, and a cash transfer all from one exchange transaction.

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cowdogman
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Re: Vanguard Switch to Brokerage Accounts

Post by cowdogman » Fri Aug 10, 2018 10:08 am

Thanks to all for the replies.

Regarding the suggested pro/con article above, it seems to be on the mark, but I had to laugh when I read the sentence "If any of these “cons” affect your current settings, Vanguard should alert you during the upgrade process." My experience was the opposite. We got an out-of-the-blue sales call from my (soon to be former) Flagship rep with a "it's just an admin change" story. Why are Flagship reps making these calls? Is part of their performance/comp review based on converting customers? Reminds me of Wells Fargo.**

In a blistering message to Vanguard yesterday, I demanded Vanguard switch our accounts back to the old structure.

In any case, our 401(k) contributions this year will be going to Fidelity. Based on how that goes, I'll move some or all of our Vanguard accounts over.

I used to be a Vanguard true-believer (both in the company and the investment philosophy), but something has changed at Vanguard for the worse.

Regarding a couple specific questions above:

1. Yes, the inability to move joint (non-retirement) funds to individual 401(k)s applies to Roth and non-Roth accounts. There is no online workaround, including thru a settlement account. The Vanguard rep yesterday actually suggested that I ask for a check from our joint account, deposit it in my checking account and then write a check to Vanguard for the 401(k). The simpler solution is write a check from our joint Vanguard account, but I still have to mail it.

2. Yes, you're right, the settlement account is Fed MMkt. I was operating from (faulty) memory when I posted yesterday. My main point tho was that only one account is allowed, whereas before I could write checks on a number of funds.

** I used to bank at Wells Fargo and absolutely every time I went in the teller would try to sell me a savings account. It was really annoying. Finally I said OK if there were no fees. The teller set up the account. The next month there was a $5 fee. I closed my accounts and switched to to another bank. A couple years later the Wells Fargo fake account scandal blew up. And even after I closed my accounts, for the next approx two years I would get a monthly statement in the US mail from Wells Fargo showing a balance of $0.01 in one account. After several months I called Wells Fargo and explained the situation. The person on the phone said I would have to visit a branch if I wanted to close the account (which I had already done). So I let it go on. After a couple years Wells Fargo sent me a check for $0.01, which I cashed.
Last edited by cowdogman on Fri Aug 10, 2018 10:15 am, edited 1 time in total.

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wander
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Re: Vanguard Switch to Brokerage Accounts

Post by wander » Fri Aug 10, 2018 10:09 am

Normally, I do not talk to any rep who calls me. If I need them to do something that I cannot handle on their website, I will call them.

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cowdogman
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Re: Vanguard Switch to Brokerage Accounts

Post by cowdogman » Fri Aug 10, 2018 10:14 am

Normally, I do not talk to any rep who calls me.
Yes, agreed. Usually I don't even answer my phone when it rings unless it's family/friends. But it's hard to ignore a call from someone assigned to look out for our money.

The lesson I have drawn from this is to not trust Vanguard. I used to.

MnD
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Re: Vanguard Switch to Brokerage Accounts

Post by MnD » Fri Aug 10, 2018 10:16 am

Times change. Vanguard is now much more than a mutual fund company and needs a platform to support that.
As a low-cost provider they can't afford to forever support a legacy mutual fund platform and a full service brokerage model platform. Employee training would be particularly troublesome and expensive.

In an switch from a legacy system to a new one, things will be missed about the way things worked "the old way", especially at first when familiarity is low with new system and all features. At some point when the number of customers on the old platform reaches a certain percentage they are going to pull the plug on the remainder so might as well get it over with.

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cowdogman
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Re: Vanguard Switch to Brokerage Accounts

Post by cowdogman » Fri Aug 10, 2018 10:29 am

Times change. Vanguard is now much more than a mutual fund company and needs a platform to support that.
As a low-cost provider they can't afford to forever support a legacy mutual fund platform and a brokerage platform. Employee training would be particularly troublesome and expensive.

In an switch from a legacy system to a new one, things will be missed about the way things worked "the old way", especially at first when familiarity is low with new system and all features. At some point when the number of customers on the old platform reaches a certain percentage they are going to pull the plug on the remainder so might as well get it over with.
All agreed. My issue is with Vanguard's deceptive practices.

If Vanguard wants to impose a change to all accounts, ok. Then it's up to the customer to stay or to leave. But it's not ok to offer two types of accounts and then try to switch people over to the new account with deceptive sales calls from a rep who is supposed to be looking out for our interest.

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Re: Vanguard Switch to Brokerage Accounts

Post by appleshampooid » Fri Aug 10, 2018 2:49 pm

cowdogman wrote:
Thu Aug 09, 2018 8:43 pm
1. First I noticed that my dividends were no longer re-invested in my designated fund. I used to have my stock fund dividends reinvested in a short term bond account, but after the change the dividends went to the settlement account, Prime Money Market--and I had to go online to re-transfer them to the bond fund.
This is my #1 frustration with the brokerage accounts. Not that there aren't others.

I was forced to upgrade to execute an incoming in-kind IRA rollover. Which didn't even need to be an in-kind since the funds are in cash already at the source. *shrug*
"If you aren't unhappy with part of your portfolio, you aren't diversified enough." -rudeboy

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heartwood
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Re: Vanguard Switch to Brokerage Accounts

Post by heartwood » Fri Aug 10, 2018 4:39 pm

pfrank wrote:
Fri Aug 10, 2018 7:44 am
heartwood wrote:
Fri Aug 10, 2018 7:14 am
cowdogman,

re "2. Then I learned we can have checkwriting on only one fund, Prime Money Market."

You should check that. As far as I know, in a brokerage account, checkwriting uses the settlement fund only, which is Federal MM fund. You can have a Prime MM fund but not as the settlement fund. If you write a check there should be enough in Federal MM to cover it, not in Prime.
With the brokerage account you can set up an alternative redemption fund using the check writing form or under account maintenance. I have Prime as my alternative fund. No issues.
pfrank Thanks. I didn't read the OPs item carefully enough. I assumed that "checkwriting" followed the same procedures as "bill pay." I use billpay within my Vanguard Advantage account. Federal MM is the settlement account in my bill pay, at least I've been unable to find a way to use an alternative redemption fund. I'll check with Vanguard next week.

Your suggestion to see the check writing form makes it clear that it works for check writing.

passiveTiger
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Re: Vanguard Switch to Brokerage Accounts

Post by passiveTiger » Fri Aug 10, 2018 9:46 pm

cowdogman wrote:
Fri Aug 10, 2018 10:08 am
We got an out-of-the-blue sales call from my (soon to be former) Flagship rep with a "it's just an admin change" story. Why are Flagship reps making these calls?

I used to be a Vanguard true-believer (both in the company and the investment philosophy), but something has changed at Vanguard for the worse.
They have been aggressive, but my cynical view is that Vanguard's point of view is that we cannot make brokerage transactions, if we do not have brokerage accounts. Therefore, we must have these "upgraded" accounts.

Gig em
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Re: Vanguard Switch to Brokerage Accounts

Post by Gig em » Wed Aug 15, 2018 7:03 pm

Oicuryy wrote:
Fri Aug 10, 2018 9:27 am
Gig em wrote:
Fri Aug 10, 2018 9:11 am
BUT you can open one of the old accounts if you CALL them and specifically ask for it.
Thank you for confirming this. The prospectus for Vanguard mutual funds says you can hold funds directly with Vanguard Group Inc. (mutual fund account) as well as though Vanguard Brokerage Services (brokerage account). But you are the first person I've seen who has done it for a new account.

Ron

Update: this worked as expected. I now have a brand new taxable mutual fund account with 3 funds.

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jhfenton
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Re: Vanguard Switch to Brokerage Accounts

Post by jhfenton » Wed Aug 15, 2018 8:20 pm

cowdogman wrote:
Fri Aug 10, 2018 10:08 am
1. Yes, the inability to move joint (non-retirement) funds to individual 401(k)s applies to Roth and non-Roth accounts. There is no online workaround, including thru a settlement account. The Vanguard rep yesterday actually suggested that I ask for a check from our joint account, deposit it in my checking account and then write a check to Vanguard for the 401(k). The simpler solution is write a check from our joint Vanguard account, but I still have to mail it.
It may apply to Roth and non-Roth 401(k) accounts, but it does not apply to Roth IRAs, which was the earlier question someone asked. I did it today in fact with both of our Roth IRA accounts, exchanging directly from VOHIX (Vanguard Ohio Long-Term Tax Exempt) in a joint taxable account to my Roth and my wife's Roth. I've done it a few dozen times in the last 3 years.

And the exchange can go into a specific fund or into the Roth settlement fund. Today, for example, I exchanged $850.00 from VOHIX into my wife's Roth, $84x.xx into the settlement fund to cover 21 shares of VWO (Vanguard Emerging Markets ETF) that I had purchased earlier, with the $x.xx balance of the $850.00 into an existing position in VEMAX (Vanguard Emerging Markets Admiral). That finished off my wife's $5,500 Roth contribution for the year.

I don't know why they don't allow it to 401(k) accounts, but the prohibition doesn't extend to IRAs.

baseball2horse
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Re: Vanguard Switch to Brokerage Accounts

Post by baseball2horse » Thu Aug 16, 2018 3:54 pm

Gig em wrote:
Fri Aug 10, 2018 9:11 am
Something I really want is the abilities to have direct deposit directly into a Vanguard mutual fund. My pay is not constant, so my plan is divert 10% into the house fund. My employer will allow this.

Vanguard told me I could do this with a brokerage account. Not true. You can only direct deposit into a federal money mart. However you can do this with the old mutual fund accounts.
I mean sure maybe the money briefly stops in the MM account but then it automatically goes into the account you specify so it really makes no difference with free trading. I have direct deposit set up from my bank every month into two funds in a brokerage account and its works just fine

Mr.BB
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Re: Vanguard Switch to Brokerage Accounts

Post by Mr.BB » Thu Aug 16, 2018 4:17 pm

When I sign in I sometimes get messages about making the switch to their brokerage account. In fact one of the messages says "we can't do this without you (approval). I don't want it, don't need it and this post just serves to remind me that it is not in my best interest to switch platforms.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

Finridge
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Re: Vanguard Switch to Brokerage Accounts

Post by Finridge » Thu Aug 16, 2018 11:11 pm

I also recommend NOT switching, if you have a choice.

It's been all hassle and no benefits. That is, I cannot think of a single good thing that changing to a brokerage account has brought us. But I can think of a lot of glitches and new restrictions.

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