Vanguard: "Your Account Needs to be Transitioned"

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MD8056
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Vanguard: "Your Account Needs to be Transitioned"

Post by MD8056 »

First time poster, long time lurker. My background: male, age 63, recently retired, Vanguard customer for 27 years, IRAs of 1.3M+

I just received this email from Vanguard Flagship Services titled "YOUR ACCOUNT NEEDS TO BE TRANSITIONED". I've never had such a message from them before. They are telling me I need to switch my current all-mutual-fund IRAs into ETFs held in their brokerage platform, as a cost saving measure for the company. I am completely satisfied with MFs and have no desire to convert to ETFs.

I realize that SPIC would cover me for up to $500K in a brokerage account, but it is my understanding that this protection is only for brokerage fraud or failure. As I see it, Vanguard is wanting me to transfer my account into an environment where, in effect, I will assume 1.3M of fraud/failure risk with only 500K coverage. With my current account arrangement I have no such brokerage risk (although I understand other risks are involved, as with all investments). Their request, if I must comply with it, will compel me to transfer 800K away from Vanguard to another company or companies. Am I missing something?

Has anyone else received such an email? What's their next step if I just ignore it?
Mike Scott
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Mike Scott »

Vanguard has been asking people to transition to their new system for some time. You can probably still wait for a while longer but the new system is OK too. You might recheck your email about the mutual fund to etf conversion... this seems unlikely.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by nisiprius »

There are reasons not to like this, but it's not as bad as you think.

Mutual funds have no backstop in the form of any government guarantee, from SIPC or anybody else. If you do not currently have any brokerage accounts at Vanguard, if you have nothing but Vanguard mutual funds, you will find that your statement does not say anything on it anywhere about SIPC protection. You have none. The protection you do have in the mutual funds is the protection provided by the fairly strict regulations of the Investment Company Act of 1940. It says, for example, that Vanguard itself can't touch the actual assets within the fund, they are held by an independent custodian.

When you hold a mutual fund or a stock, you have no actual insurance. If you buy Enron stock and it goes to zero due to fraud, you lose your money.

Vanguard is forcing you to hold a mutual fund within their brokerage.

When you hold any asset in a brokerage, it adds a second layer of risk. The risk has to do with bad custodianship by the broker. For example, you might send the broker money to buy a stock, and they might pocket the money, not buy the stock, and send you a fraudulent confirmation and statement that says they've bought it for you. (Something like this really happened to some of Madoff's clients). They might also sincerely mean to buy the asset, but bungle their recordkeeping. This really happened in the 1970s and is one of the reasons why the SIPC was formed.

So, holding an asset in a brokerage adds some risk. The SIPC insurance offsets that risk and only that risk. If your account statement says you own some Enron stock and the brokerage didn't buy that stock and earmark it for you, the SIPC covers that. If Enron stock becomes valueless due to fraud, that's not the SIPC's problem.

Now, over $500,000, at Vanguard and every other brokerage I've used, the same risk SIPC covers are covered by private insurance that goes up to some much higher amount. The details for Vanguard are here:
Securities in your brokerage account are held in custody by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation. Vanguard Marketing Corporation is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at sipc.org.

To offer greater protection and security, Vanguard Marketing Corporation has secured additional coverage from certain insurers at Lloyd's of London and London Company Insurers for eligible customers with an aggregate limit of $250 million, incorporating a customer limit of $49.5 million for securities and $1.75 million for cash. Coverage provided by SIPC and certain Lloyd's of London and London Company Insurers does not protect against loss of market value of securities. The policy provided by certain Lloyd's of London and London Company Insurers is subject to its own terms and conditions.
To tell the truth I don't understand that "aggregate limit of $250 million," though.

Anyway, it is reasonable to be irritated by all this, but, no, you are not transitioning from $1.3 million of coverage to $500,000 of coverage. You are transitioning from

a) no coverage for fraud within the mutual fund itself to
no coverage for fraud within the mutual fund itself. No change.

You are transitioning from
a) No risk of bad custodianship by a brokerage because no brokerage is involved, to
b) Risk of bad custodianship, which is countered by $500,000 of SIPC protection, and the rest of it covered by Lloyds of London protection.

I have to say that in Ye Old Days, when Vanguard mutual funds could not be held within the brokerage account, people complained about that. The issue was that within the brokerage, you could do a same-day "sell-to-buy" between any non-Vanguard funds--sell a Fidelity fund to buy an Invesco fund or whatever. But if you wanted to buy a Vanguard fund, you had to wait several days for the sale to settle before you could use the proceeds to buy the Vanguard fund. People complained, justifiably, that (in this specific situation) treated you worse if you were buying a Vanguard fund than if you were buying a non-Vanguard fund. This didn't exist at Fidelity, nor, I think, at Schwab. So people kept asking why Vanguard wasn't doing the same things its competitors are doing.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by KingRiggs »

MD8056 wrote: Sun Mar 17, 2019 6:40 pm First time poster, long time lurker. My background: male, age 63, recently retired, Vanguard customer for 27 years, IRAs of 1.3M+

I just received this email from Vanguard Flagship Services titled "YOUR ACCOUNT NEEDS TO BE TRANSITIONED". I've never had such a message from them before. They are telling me I need to switch my current all-mutual-fund IRAs into ETFs held in their brokerage platform, as a cost saving measure for the company. I am completely satisfied with MFs and have no desire to convert to ETFs.

They will NOT require you to change to ETFs. Your current holdings will not be affected in the least, other than that they will be held in a brokerage account.

Many, many posts regarding this transition. Most have been trouble-free.
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telemark
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by telemark »

This is a new and peculiar use of the word need, meaning roughly that Vanguard really really wants all its customers to use brokerage accounts. I have been ignoring this for several years now, with no consequences other than having to click through yet another plea when I sign in.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by joe8d »

telemark wrote: Sun Mar 17, 2019 8:52 pm This is a new and peculiar use of the word need, meaning roughly that Vanguard really really wants all its customers to use brokerage accounts. I have been ignoring this for several years now, with no consequences other than having to click through yet another plea when I sign in.
Same here.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by MP123 »

nisiprius wrote: Sun Mar 17, 2019 7:57 pm
Now, over $500,000, at Vanguard and every other brokerage I've used, the same risk SIPC covers are covered by private insurance that goes up to some much higher amount. The details for Vanguard are here:
Securities in your brokerage account are held in custody by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation. Vanguard Marketing Corporation is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at sipc.org.

To offer greater protection and security, Vanguard Marketing Corporation has secured additional coverage from certain insurers at Lloyd's of London and London Company Insurers for eligible customers with an aggregate limit of $250 million, incorporating a customer limit of $49.5 million for securities and $1.75 million for cash. Coverage provided by SIPC and certain Lloyd's of London and London Company Insurers does not protect against loss of market value of securities. The policy provided by certain Lloyd's of London and London Company Insurers is subject to its own terms and conditions.
To tell the truth I don't understand that "aggregate limit of $250 million," though.
I don't either. That would seem to be far too low of an aggregate limit for Vanguard which has how many trillions in accounts? But maybe there's something we're not understanding.

In my case the transfer to the new brokerage format was completely uneventful and very fast.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by SpringMan »

If you have authorization to trade for a spouse, you may have to submit new paperwork. They lost my authorization during transition. Requires a notarized signature.
Best Wishes, SpringMan
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by TravelGeek »

SpringMan wrote: Mon Mar 18, 2019 2:41 am If you have authorization to trade for a spouse, you may have to submit new paperwork. They lost my authorization during transition. Requires a notarized signature.
I think for the MF account it simply required an online action to grant permissions. No paperwork, no signature, definitely no notarized anything.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by talzara »

nisiprius wrote: Sun Mar 17, 2019 7:57 pm To tell the truth I don't understand that "aggregate limit of $250 million," though.
If Vanguard Brokerage Services loses $1 trillion of customer securities above the SIPC limit, then Lloyd's of London will only pay $250 million.
MP123 wrote: Sun Mar 17, 2019 10:05 pm I don't either. That would seem to be far too low of an aggregate limit for Vanguard which has how many trillions in accounts? But maybe there's something we're not understanding.
That is exactly what it means. No insurance company can possibly provide $1 trillion in coverage. Nothing short of a government bailout can insure against that kind of risk.

Fidelity's excess policy has a $1 billion aggregate limit:
In addition to SIPC protection, Fidelity provides its brokerage customers with additional "excess of SIPC" coverage. The excess coverage would only be used when SIPC coverage is exhausted. Like SIPC, excess protection does not cover investment losses in customer accounts due to market fluctuation. It also does not cover other claims for losses incurred while broker-dealers remain in business. For example, fraud claims would not be covered if the brokerage firm was still in operation. Total aggregate excess of SIPC coverage available through Fidelity's excess of SIPC policy is $1 billion.

https://www.fidelity.com/why-fidelity/s ... r-accounts
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by GrowthSeeker »

When they started, AFAIK, the only type of account was a MF account. Later, they added brokerage accounts. Now they want to decrease the overhead of managing two types of accounts.

Switching from MF account-type to brokerage account-type does NOT mean you have to sell Funds and buy ETFs. Just keep holding the same Funds if you wish.

I'm not sure there is even a single downside to switching to a brokerage account (maybe there is and I just don't know about it)
Just because you're paranoid doesn't mean they're NOT out to get you.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by hirlaw »

Does Vanguard continue to provide you with your pre-transition cost basis?
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Thesaints »

GrowthSeeker wrote: Mon Mar 18, 2019 8:36 pm When they started, AFAIK, the only type of account was a MF account. Later, they added brokerage accounts. Now they want to decrease the overhead of managing two types of accounts.

Switching from MF account-type to brokerage account-type does NOT mean you have to sell Funds and buy ETFs. Just keep holding the same Funds if you wish.

I'm not sure there is even a single downside to switching to a brokerage account (maybe there is and I just don't know about it)
In my MF account I can instruct Vanguard to withdraw money from my bank account and buy shares of VTSAX fund.
In the brokerage account, my wife has to instruct Vanguard to withdraw money from her bank account to be deposited in the settlement MM fund AND to exchange shares of the settlement MM fund with shares of VTSAX.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by MP123 »

hirlaw wrote: Mon Mar 18, 2019 9:01 pm Does Vanguard continue to provide you with your pre-transition cost basis?
Yes. But if you use Quicken you'll need to fix it manually.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by HomeStretch »

Thesaints wrote: Mon Mar 18, 2019 9:06 pm In my MF account I can instruct Vanguard to withdraw money from my bank account and buy shares of VTSAX fund.
In the brokerage account, my wife has to instruct Vanguard to withdraw money from her bank account to be deposited in the settlement MM fund AND to exchange shares of the settlement MM fund with shares of VTSAX.
In my brokerage account, I buy shares of VTSAX in the same way you do in your MF account.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by CalculatedRisk »

HomeStretch wrote: Mon Mar 18, 2019 9:20 pm
Thesaints wrote: Mon Mar 18, 2019 9:06 pm In my MF account I can instruct Vanguard to withdraw money from my bank account and buy shares of VTSAX fund.
In the brokerage account, my wife has to instruct Vanguard to withdraw money from her bank account to be deposited in the settlement MM fund AND to exchange shares of the settlement MM fund with shares of VTSAX.
In my brokerage account, I buy shares of VTSAX in the same way you do in your MF account.
Same for my brokerage account. I can directly buy vanguard mutual funds using external bank accounts.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by clown »

We transitioned a few months back with absolutely no problems, and were able to own MFs in the brokerage account. I have also bought some new MFs from within the brokerage account. My reading of the tea leaves -- having one system to maintain is cheaper than maintaining two platforms. Vanguard saves money, which is passed on two its owners (the investors themselves, there is no corporate ownership as with FIDO for example) in the form of lower ERs and lower transaction costs. If you want to keep what you have, ignore their request.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by grandmacassie »

I just called Vanguard 5 minutes ago b/c I had received the same message. I was prepared to transition, but had a few questions. My Flagship rep told me transition was totally optional. I elected not to transition because I don't have any individual stocks/ETFs and my set-up now works perfectly for me. So the term "need" is not the same as "require".
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Thesaints »

CalculatedRisk wrote: Mon Mar 18, 2019 9:37 pm
HomeStretch wrote: Mon Mar 18, 2019 9:20 pm
Thesaints wrote: Mon Mar 18, 2019 9:06 pm In my MF account I can instruct Vanguard to withdraw money from my bank account and buy shares of VTSAX fund.
In the brokerage account, my wife has to instruct Vanguard to withdraw money from her bank account to be deposited in the settlement MM fund AND to exchange shares of the settlement MM fund with shares of VTSAX.
In my brokerage account, I buy shares of VTSAX in the same way you do in your MF account.
Same for my brokerage account. I can directly buy vanguard mutual funds using external bank accounts.
How do you do that ?
When she wants to buy the only choice in the pulldown menu is the mm fund.
To be accurate, this refers to a backdoor roth, so the operation is exchanging shares from a traditional ira (mm fund) into her roth ira (vtsax). Can’t do directly into vtsax; the choice is not available.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by GrowthSeeker »

Thesaints wrote: Tue Mar 19, 2019 10:48 am
CalculatedRisk wrote: Mon Mar 18, 2019 9:37 pm
HomeStretch wrote: Mon Mar 18, 2019 9:20 pm
Thesaints wrote: Mon Mar 18, 2019 9:06 pm In my MF account I can instruct Vanguard to withdraw money from my bank account and buy shares of VTSAX fund.
In the brokerage account, my wife has to instruct Vanguard to withdraw money from her bank account to be deposited in the settlement MM fund AND to exchange shares of the settlement MM fund with shares of VTSAX.
In my brokerage account, I buy shares of VTSAX in the same way you do in your MF account.
Same for my brokerage account. I can directly buy vanguard mutual funds using external bank accounts.
How do you do that ?
When she wants to buy the only choice in the pulldown menu is the mm fund.
To be accurate, this refers to a backdoor roth, so the operation is exchanging shares from a traditional ira (mm fund) into her roth ira (vtsax). Can’t do directly into vtsax; the choice is not available.
It has been a while since I saw that page, but I think one requirement is that you have a linked external bank account.
Then you say you want to buy so many shares or dollars worth of, say, VTSAX. Then when it says: Where is the money coming from? the external bank account should be one of the options.
Just because you're paranoid doesn't mean they're NOT out to get you.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by rkhusky »

Thesaints wrote: Tue Mar 19, 2019 10:48 am How do you do that ?
When she wants to buy the only choice in the pulldown menu is the mm fund.
To be accurate, this refers to a backdoor roth, so the operation is exchanging shares from a traditional ira (mm fund) into her roth ira (vtsax). Can’t do directly into vtsax; the choice is not available.
Under my login, which doesn't have a linked bank account, but has both mutual fund and brokerage accounts, I go to the Balances and Holdings page from the My Accounts drop down menu. On the RHS, for each mutual fund, there are links for Buy Sell Exchange. Next to my Prime Money Market, there is also a link for Bank transfer. When I click the latter, it asks me to set up a linked bank account. If I instead click Buy and put in an amount, it asks where is the money coming from - Add a new bank, Send Vanguard a check, or Exchange from another fund (if you have a linked bank account, your only option is a purchase from the linked bank). Choosing Bank transfer for the money market account gives a different screen, than for Buy, but it does basically the same thing. There is no difference between mutual fund and brokerage accounts for these actions. If I had a linked bank account, I could select that account and Vanguard would debit my bank account and buy the number of shares or amount that was entered. This is possible for any of the mutual funds.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by nisiprius »

talzara wrote: Mon Mar 18, 2019 8:21 pm
nisiprius wrote: Sun Mar 17, 2019 7:57 pm To tell the truth I don't understand that "aggregate limit of $250 million," though.
If Vanguard Brokerage Services loses $1 trillion of customer securities above the SIPC limit, then Lloyd's of London will only pay $250 million.
MP123 wrote: Sun Mar 17, 2019 10:05 pm I don't either. That would seem to be far too low of an aggregate limit for Vanguard which has how many trillions in accounts? But maybe there's something we're not understanding.
That is exactly what it means. No insurance company can possibly provide $1 trillion in coverage. Nothing short of a government bailout can insure against that kind of risk.

Fidelity's excess policy has a $1 billion aggregate limit:
In addition to SIPC protection, Fidelity provides its brokerage customers with additional "excess of SIPC" coverage. The excess coverage would only be used when SIPC coverage is exhausted. Like SIPC, excess protection does not cover investment losses in customer accounts due to market fluctuation. It also does not cover other claims for losses incurred while broker-dealers remain in business. For example, fraud claims would not be covered if the brokerage firm was still in operation. Total aggregate excess of SIPC coverage available through Fidelity's excess of SIPC policy is $1 billion.

https://www.fidelity.com/why-fidelity/s ... r-accounts
Hmmm. What's the hypothetical scenario in which $250 million aggregate coverage would be worthwhile? Rogue employee raids a small number of accounts?
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by tibbitts »

GrowthSeeker wrote: Tue Mar 19, 2019 6:25 pm
Thesaints wrote: Tue Mar 19, 2019 10:48 am
CalculatedRisk wrote: Mon Mar 18, 2019 9:37 pm
HomeStretch wrote: Mon Mar 18, 2019 9:20 pm
Thesaints wrote: Mon Mar 18, 2019 9:06 pm In my MF account I can instruct Vanguard to withdraw money from my bank account and buy shares of VTSAX fund.
In the brokerage account, my wife has to instruct Vanguard to withdraw money from her bank account to be deposited in the settlement MM fund AND to exchange shares of the settlement MM fund with shares of VTSAX.
In my brokerage account, I buy shares of VTSAX in the same way you do in your MF account.
Same for my brokerage account. I can directly buy vanguard mutual funds using external bank accounts.
How do you do that ?
When she wants to buy the only choice in the pulldown menu is the mm fund.
To be accurate, this refers to a backdoor roth, so the operation is exchanging shares from a traditional ira (mm fund) into her roth ira (vtsax). Can’t do directly into vtsax; the choice is not available.
It has been a while since I saw that page, but I think one requirement is that you have a linked external bank account.
Then you say you want to buy so many shares or dollars worth of, say, VTSAX. Then when it says: Where is the money coming from? the external bank account should be one of the options.
I asked at Fidelity and they told me I couldn't do that in their brokerage account - everything from/to an external bank account had to go through the settlement fund. But I didn't try that much since I don't really care.

I do want to be able to redirect distributions from one fund to another directly, though.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Wiggums »

tibbitts wrote: Tue Mar 19, 2019 8:46 pm
GrowthSeeker wrote: Tue Mar 19, 2019 6:25 pm
Thesaints wrote: Tue Mar 19, 2019 10:48 am
CalculatedRisk wrote: Mon Mar 18, 2019 9:37 pm
HomeStretch wrote: Mon Mar 18, 2019 9:20 pm

In my brokerage account, I buy shares of VTSAX in the same way you do in your MF account.
Same for my brokerage account. I can directly buy vanguard mutual funds using external bank accounts.
How do you do that ?
When she wants to buy the only choice in the pulldown menu is the mm fund.
To be accurate, this refers to a backdoor roth, so the operation is exchanging shares from a traditional ira (mm fund) into her roth ira (vtsax). Can’t do directly into vtsax; the choice is not available.
It has been a while since I saw that page, but I think one requirement is that you have a linked external bank account.
Then you say you want to buy so many shares or dollars worth of, say, VTSAX. Then when it says: Where is the money coming from? the external bank account should be one of the options.
I asked at Fidelity and they told me I couldn't do that in their brokerage account - everything from/to an external bank account had to go through the settlement fund. But I didn't try that much since I don't really care.

I do want to be able to redirect distributions from one fund to another directly, though.
That has been my experience as well. I scheduled my bank transfer and then another task for the fund purchase. The good news is that it has been running Without fail for 15 years. The bad news is it takes two steps but it can be automated.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Wiggums »

tibbitts wrote: Tue Mar 19, 2019 8:46 pm
GrowthSeeker wrote: Tue Mar 19, 2019 6:25 pm
Thesaints wrote: Tue Mar 19, 2019 10:48 am
CalculatedRisk wrote: Mon Mar 18, 2019 9:37 pm
HomeStretch wrote: Mon Mar 18, 2019 9:20 pm

In my brokerage account, I buy shares of VTSAX in the same way you do in your MF account.
Same for my brokerage account. I can directly buy vanguard mutual funds using external bank accounts.
How do you do that ?
When she wants to buy the only choice in the pulldown menu is the mm fund.
To be accurate, this refers to a backdoor roth, so the operation is exchanging shares from a traditional ira (mm fund) into her roth ira (vtsax). Can’t do directly into vtsax; the choice is not available.
It has been a while since I saw that page, but I think one requirement is that you have a linked external bank account.
Then you say you want to buy so many shares or dollars worth of, say, VTSAX. Then when it says: Where is the money coming from? the external bank account should be one of the options.
I asked at Fidelity and they told me I couldn't do that in their brokerage account - everything from/to an external bank account had to go through the settlement fund. But I didn't try that much since I don't really care.

I do want to be able to redirect distributions from one fund to another directly, though.
That has been my experience as well. I scheduled my bank transfer and then another task for the fund purchase. The good news is that it has been running Without fail for 15 years. The bad news is it takes two steps but it can be automated.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Thesaints »

GrowthSeeker wrote: Tue Mar 19, 2019 6:25 pm It has been a while since I saw that page, but I think one requirement is that you have a linked external bank account.
Then you say you want to buy so many shares or dollars worth of, say, VTSAX. Then when it says: Where is the money coming from? the external bank account should be one of the options.
Yes, she has the linked account. The problem is that after selecting "where is the money coming from ?" the only option is the settlement money market, even if her brokerage account already contains other funds (or she may want to buy a new one).
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Longdog »

GrowthSeeker wrote: Mon Mar 18, 2019 8:36 pm When they started, AFAIK, the only type of account was a MF account. Later, they added brokerage accounts. Now they want to decrease the overhead of managing two types of accounts.

Switching from MF account-type to brokerage account-type does NOT mean you have to sell Funds and buy ETFs. Just keep holding the same Funds if you wish.

I'm not sure there is even a single downside to switching to a brokerage account (maybe there is and I just don't know about it)
There is. The brokerage platform doesn’t support all of the features of the mutual fund platform. If you don’t use or know about them, then no downside.
Steve
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by rkhusky »

Thesaints wrote: Tue Mar 19, 2019 10:48 am To be accurate, this refers to a backdoor roth, so the operation is exchanging shares from a traditional ira (mm fund) into her roth ira (vtsax). Can’t do directly into vtsax; the choice is not available.
If you are moving from fund to fund, you want to choose Exchange. When I moved money from a tIRA to a Roth, I got some extra screens about the taxes that I would owe, but I was able to move directly from fund to fund, without using a settlement account. In fact, I have never used the brokerage settlement account. I use the Prime Money Market in my taxable account to transfer money between bank and taxable and tiRA and Roth IRA.
Verifyb4Trust
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Verifyb4Trust »

I have the "unease" feeling that Vanguard is changing after the passing of its founder John Bogle. I think it is in all Vanguard investors best interest to let Vanguard new management know that we can take our money and leave if Vanguard stop following the path of John Bogle and put investors best interest first. Here are my findings after research:
1. There is a big difference transition from "mutual fund investment platform" to "brokerage investment platform".
- Your investment assets in the "mutual fund platform" is held and watched over by several independent "custodians". Since a mutual fund is essentially a large pool of funds from many different investors, it requires an additional entity to hold and safeguard the securities that are mutually owned by all the fund's investors. The Securities and Exchange Commission (SEC) has specific rules and requirements governing the custody of mutual funds which leads most investment companies to work with a third-party custodian for compliance. Regulations for custody of mutual fund assets were revised in 2009 to ensure even greater transparency and safety of investments for investors. These regulations are primarily outlined in rule 206(4)-2 of the Investment Advisors Act of 1940. The 1940 Act regulations are in place to help mitigate the risks of fraudulent or dishonest activity by investment companies and fund managers.
- If you "need" to transition to the new "brokerage investment platform" you lost that SEC protection and Vanguard can access your investments like any other brokerage firms. SPIC is "seriously" under-funded to say the least and in times of crisis when every brokerage firm needs that SPIC insurance, you may find yourself swimming "naked" without any protection.

2. I just called Vanguard and confirmed that you are "NOT REQUIRED" to transition to their new brokerage investment platform. They can not make you do that because i assume there is binding contract when we initially put money in Vanguard mutual fund and they can not go back and reverse that. (my assumption> or they fear that we will leave Vangurad with our money)

3. After telling me over and over that I can only roll over my "traditional IRA in the mutual fund platform" to a "Roth IRA in the brokerage investment platform", they admit that YESI can "roll over my traditional IRA to Roth IRA in the same mutual fund investment platform".

I think it is wise not to put all your eggs in a brokerage account that will not have the strict SEC protection rule 206(4)-2 of the Investment Advisors Act of 1940, which you currently enjoy in Vanguard mutual fund platform. You should also let Vanguard know that they need to stop harassing you each time you log in to your account. The only power we investors have is to take your money and leave. good luck. As always, verify before you trust.
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Cheez-It Guy
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Cheez-It Guy »

This request really isn't something to leave Vanguard about. The impacts are very minor in most cases. Don't just refuse to make the change. Rather, communicate what you would like to see added to or enhanced on the brokerage platform to eliminate your concerns with transitioning.
njuser
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by njuser »

I've been seeing 'your account needs to be transitioned now' for months. Sign in today expecting to do it and nothing. Did a search for 'transition' and got zero results. Are people still staying with the old platform?
TravelGeek
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by TravelGeek »

I have been getting it for a while. It was still there a few days ago. I just logged in and it didn’t pop up.

One of these days I will do the transition, but I will first read through the various threads to understand the issues people have encountered to know what to look out for. It really isn’t a priority for me (if it ain’t broken...).
Finridge
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Finridge »

At least in our experience, transitioning to the brokerage platform did NOT require our having to convert our mutual funds to ETF's. Rather we could continue holding the mutual funds within the brokerage account.

There are few differences in how the brokerage accounts work--more or less it's minor differences in how some transactions are performed and when account statements are issued. Personally, I don't see any benefits from the move, and the difference are generally annoying--but's is only minor annoyances.
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Cheez-It Guy
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Cheez-It Guy »

Transitioning to the brokerage account platform is in NO WAY synonymous with surrendering your mutual fund shares in favor of ETFs. If that rumor is floating around out there, it is misinformation. You can hold nothing but Vanguard mutual fund shares in a new platform account if you choose, and MANY do.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by z3r0c00l »

"They are telling me I need to switch my current all-mutual-fund IRAs into ETFs held in their brokerage platform, as a cost saving measure for the company. I am completely satisfied with MFs and have no desire to convert to ETFs."

Can you share the language they used to tell you this? Are we sure it wasn't just a suggestion?
Triple digit golfer
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Triple digit golfer »

Cheez-It Guy wrote: Sat Jan 04, 2020 8:49 am Transitioning to the brokerage account platform is in NO WAY synonymous with surrendering your mutual fund shares in favor of ETFs. If that rumor is floating around out there, it is misinformation. You can hold nothing but Vanguard mutual fund shares in a new platform account if you choose, and MANY do.
Yep. I only own mutual funds. No ETFs, despite being in brokerage accounts.
chestnut
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by chestnut »

https://www.vanguard.com/pdf/vbafqm.pdf gives details of Moving your Vanguard funds to a Vanguard Brokerage Account.

Certain issues and limitations after transitioning are mentioned in other threads...

For me one main issue and I don't plan to transition unless it is addressed... I reinvest dividends and CG from one fund to a different fund currently and that's done automatically. If I transition, they don't allow it. Either I can reinvest in the same fund or, it can be directed to a MM settlement fund and I have to manually invest in my other fund.

If others have found a way around this, please let me know!

This is mentioned in the pdf above -- Pages 7 & 8

What about dividends and capital gains
For all your brokerage holdings, you’ll have two options:
• Reinvest them in additional shares of the distributing holding.
• Distribute them in cash to your money market settlement fund.
Once your Vanguard mutual funds are in your brokerage account, you’ll have two additional options for distributions paid on the funds:
• Have them sent by electronic transfer to your bank.
• Have them sent by check to your address of record.
If dividends or capital gains are paid on the date your funds transfer into your brokerage account, they’ll be distributed by the method you’ve chosen, unless you originally elected to have them paid to another Vanguard mutual fund. In that case, they’ll be reinvested in the funds that paid them.
In the future, these dividends and capital gains on your Vanguard mutual funds will be paid to your settlement fund, unless you
elect to have them reinvested, electronically transferred to your bank, or paid by check.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by yakers »

Similar to the trasnition issue, Our VG accounts are now MF, our joint and both Roth IRAs. I called VG to transfer $ from a 401K to a new tIRA at VG and the advisor insisted I could not open it as a MF account, it must be a brokerage account even though I requested a MF account specifically . So it looks like I will have both, at least until I decide if I want to transition to only brokerage accounts
Derby
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Derby »

I just rolled over a 401K to Vanguard. When I did it on line, they gave me no option to roll it over into my current MF account SEP-IRA, instead, it automatically created a brokerage account for the rollover. When I called VG to ask about whether I could roll my 401K to the existing SEP-IRA, the guy on the phone basically hemmed and hawed and could not give me a simple yes or no answer.

So I got a check from my custodian (made out to VG, not me), and mailed it to VG with instructions and the account number to deposit to my IRA.

And it worked just fine. Now I have an empty IRA Rollover Brokerage Account, which will sit there vacant for eternity.
Carpe Diem.
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Cheez-It Guy
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Cheez-It Guy »

Derby wrote: Mon Jan 06, 2020 12:15 am I just rolled over a 401K to Vanguard. When I did it on line, they gave me no option to roll it over into my current MF account SEP-IRA, instead, it automatically created a brokerage account for the rollover. When I called VG to ask about whether I could roll my 401K to the existing SEP-IRA, the guy on the phone basically hemmed and hawed and could not give me a simple yes or no answer.

So I got a check from my custodian (made out to VG, not me), and mailed it to VG with instructions and the account number to deposit to my IRA.

And it worked just fine. Now I have an empty IRA Rollover Brokerage Account, which will sit there vacant for eternity.
It's very simple to close a vacant account, after which it disappears from your view (although if you had actually ever had activity in the account, you'd still be able to access historical transactions and statements). Log in to Vanguard. Select Account Maintenance. Select Close Account and pick the applicable empty account.
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Church Lady »

If Vanguard forces me to convert to brokerage, there's nothing to stop me converting my funds to ETFs and moving the money elsewhere. It's to Vanguard's advantage to keep my fund only account.

And based on all the complaints I see on this forum about VG brokerage, I probably would jump on a sign-up bonus and move the money!
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
TravelGeek
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by TravelGeek »

Church Lady wrote: Mon Jan 06, 2020 11:33 am If Vanguard forces me to convert to brokerage, there's nothing to stop me converting my funds to ETFs and moving the money elsewhere. It's to Vanguard's advantage to keep my fund only account.
Does Vanguard care (benefit) from me having Vanguard ETFs in a Vanguard brokerage account vs having the same ETFs in a (insert fav brokerage) account?
Church Lady
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Church Lady »

TravelGeek wrote: Mon Jan 06, 2020 11:50 am
Church Lady wrote: Mon Jan 06, 2020 11:33 am If Vanguard forces me to convert to brokerage, there's nothing to stop me converting my funds to ETFs and moving the money elsewhere. It's to Vanguard's advantage to keep my fund only account.
Does Vanguard care (benefit) from me having Vanguard ETFs in a Vanguard brokerage account vs having the same ETFs in a (insert fav brokerage) account?
I'd say they want to market additional services to you, which they can't do if your account is at <favorite brokerage>. Also, <favorite brokerage> gets more industry clout and negotiating clout because they have more clients and assets.

I vaguely recall mutual funds can lend the underlying shares out without your explicit knowledge and consent. That's income to them. In fact, I recall warnings not to hold securities in your brokerage account in street name because then your broker can lend them without your consent. (I myself do not lose much sleep wondering if Fidelity or Schwab or TD would make good on securities they lent from my account. That's what SIPC is for.)
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
beehivehave
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by beehivehave »

Why should we do this?
Vanguard doesn't say or even clearly divulge what changes are effected.
Just the (undisclosed) elimination of optional reinvestment of dividends in funds into another fund is enough for me.
I can only assume there is no upside for investors and nothing I have read here changes that.
I will not do this unless it becomes mandatory.
Northern Flicker
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Northern Flicker »

I don’t think they are asking you to convert mutual funds to ETFs. They are asking you to convert your account to a brokerage account that can also hold Vanguard mutual funds. The main benefits are: 1) you would be able to hold both mutual funds and ETFs in the same account; 2) there will no longer be a minimum balance for VMFXX (Vanguard Federal Money Market Fund), the settlement account; and 3) you would have the option of doing conversions of index mutual fund shares to ETF shares of that were your choice.

The main downside is that distributions from mutual funds can only be reinvested in the find that my generated them or land in the settlement account. You also will now read “This trade was unsolicited.” on transaction notifications for mutual fund exchanges.
Risk is not a guarantor of return.
Northern Flicker
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by Northern Flicker »

beehivehave wrote: Mon Jan 06, 2020 3:39 pm Why should we do this?
Vanguard doesn't say or even clearly divulge what changes are effected.
Just the (undisclosed) elimination of optional reinvestment of dividends in funds into another fund is enough for me.
I can only assume there is no upside for investors and nothing I have read here changes that.
I will not do this unless it becomes mandatory.
The upside is that if all accounts of all investors are converted, it will lower administration costs which will help drive lower fund ERs, to the advantage of investors.
Risk is not a guarantor of return.
UpperNwGuy
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by UpperNwGuy »

beehivehave wrote: Mon Jan 06, 2020 3:39 pm Why should we do this?
Vanguard doesn't say or even clearly divulge what changes are effected.
Just the (undisclosed) elimination of optional reinvestment of dividends in funds into another fund is enough for me.
I can only assume there is no upside for investors and nothing I have read here changes that.
I will not do this unless it becomes mandatory.
Transitioning to a brokerage account does not change your ability to reinvest dividends from one fund into another, but you won't be able to automate that activity.
yaboi
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Re: Vanguard: "Your Account Needs to be Transitioned"

Post by yaboi »

I just transitioned....or in the process....how long does this take???!? Now I can't buy the dip for stocks/ETFs smh. smh. :oops:
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