A Vanguard account question

Aunt Bea

Aunt Bea

SF VIP
Location
Near Mount Pilot
I have two accounts with Vanguard and they have been pushing me to convert one of those accounts to a brokerage/trading account by early December.

I have been reluctant to respond because I've never yet had a company encourage me to do something that didn't benefit them more than it does me.

I'm also confused about why they only seem interested in my IRA account and not my taxable account.

Have any of you run into a similar situation recently?

Thanks, B
 

Probably an internal end of the year commission contest. However, I'm a little confused because Vanguard IS a brokerage. Only a brokerage or similar financial institution (such as a bank) can hold investment accounts, whether taxable or non-taxable.

It could be that they are merely trying to get you to change which funds you are invested in. Tell them to send you all the fund information, including fund fees. Then peruse it at your leisure.

The bigger question is, are they requesting you open a "DISCRETIONARY" trading account?

Because you very, very definitely do not want to do that.

Any account held at a brokerage should ALWAYS be "non-discretionary". This means the client, and ONLY the client, can approve any account activity.

If they try to pressure you into something you don't think you want, tell them:

1) Put it in writing. You are requesting they include any relevant brochures, AND a letter with the broker's signature, stating precisely what service(s) they are trying to sell to you.

2) If they will not agree immediately to send you a letter with brochures, ask to speak to the manager of their department. Insist on it. They will at that point probably back off and cross you off their Call List.

3) If you are transferred to a manager, get his/her full name, his/her exact title, and ask that the phone call be recorded (it is supposed to be, legally). Say that you are feeling pressured by the salesperson and you wish to make it clear you DO NOT appreciate a hard sell.

4) The manager should apologize immediately. Don't get into a long conversation, be firm but polite - cut them off, say thank you, and "I hope we don't have to have this conversation again in the future" and say good-bye, then hang up.
 
noooooooo that is not true at all about them trying to change your funds .

the big mutual fund companies have always had two types of accounts . a brokerage account where you can buy cd's , funds ,stocks ,etc . then they had mutual fund only accounts and you have no access to anything but their funds .

there is no difference in fees , nor the mutual funds you can hold . but there is a difference in structure .

with the mutual fund accounts you own the funds directly in your name and there is no middle person involved . on the other hand with a brokerage account everything is usually held in street name not your name . that enables you to trade with out delivering stock certificates to the broker .

mutual fund accounts have no sipc insurance because they do not need it . brokerage accounts carry sipc insurance since things are held in street name .
originally with vanguard you could not buy vanguard funds through a vanguard brokerage account , only stocks ,bonds , etc as well as other company mutual funds .

most brokerage accounts now let you buy both . i have a brokerage account at fidelity and hold all my fidelity funds in it .

at the end of the day which account you have is transparent to you . there is no difference other than a brokerage account gives you much more flexibility than just a mutual fund account.vanguard has been converting clients to brokerage accounts and trying to phase out the mutual fund only , accounts .

i closed my vanguard account because they removed beneficiaries from joint accounts , didn't tell us and no longer allow it . i personally encountered some of the worst customer service from vanguard as well .
 

here is a nice explanation of some of the finer details between the two accounts . interesting that it says no direct deposits in to a brokerage account . that is really a silly policy . i have been having my pay check direct deposited to my fidelity brokerage account for decades .

Pros

  • Simplification at no additional cost. Your online account view is simplified. Your statements are simplified. There is no cost to switch. There is no change in your commission structure.
  • Less tax paperwork. For the tax year of your upgrade, you’ll receive separate tax forms for your mutual fund accounts and brokerage accounts. Starting the first full tax year after you upgrade, you’ll receive a single tax form for each brokerage account. One less 1099-B and 1099-DIV sounds good to me.
  • Possibly quicker funds availability. After the merge, you will be able to sell a brokerage asset (i.e. ETF) and then use the proceeds to buy a Vanguard mutual fund on the same day. Previously, you had to wait 4 days for the brokerage funds to settle first to be available for use in the mutual fund account.
  • SIPC coverage of Vanguard mutual funds. Vanguard mutual funds were previously not held in a brokerage account, so no SIPC coverage. (It technically wasn’t necessary for mutual funds.) Now everything is inside a brokerage account, so everything is covered by SIPC. Vanguard also has separate insurance that exceeds the SIPC maximums.
Cons / Concerns

  • Less flexible checkwriting. With the mutual fund accounts, you could get a separate checkbook for each of your eligible mutual fund accounts. I could get checks that withdrew directly from my Vanguard Limited-Term Muni Bond fund, or Vanguard Total US Bond fund, or any money market fund. But now, you will only get a single checkbook for each brokerage account, and it will only pull from your settlement account (plus another fund as backup).

    Vanguard will “do our best to honor any outstanding checks written on a Vanguard mutual fund that are presented for payment within 45 days after you’ve transferred your Vanguard funds into a brokerage account.”
  • Less flexible dividend and capital gains distributions. With a merged account, your only options for fund distributions are either automatic reinvestment into the same fund, or cash into your settlement fund. You’ll no longer be able to receive Vanguard fund distributions directly by check, by automatic transfer to your bank account, or by automatic reinvestment into another Vanguard fund.
  • Direct deposit not available. You can no longer have your paycheck direct deposited into your Vanguard brokerage account. You can still set up a manual or recurring transfer from your linked bank account to Vanguard. It just can’t come directly from your employer, so that can be a loss of convenience.
 
mathjak107,

Thanks for the detailed explanation, it makes sense, and it is in agreement with the snippets of information in the emails from Vanguard.

I still can't understand why they are interested in only converting my IRA account and not my taxable account.
 
mathjak107 said:
i gave up on vanguards reasoning for the things they do . that is one of the reasons i stopped doing business with them . it may make sense to them but not to some of us .
Click to expand...

I left Fidelity and went to Vanguard for the same reason, LOL!!!

I do have to say that Vanguard is drifting way from Bogle's simple philosophy and becoming more like other brokerage firms, I suppose that's evolution.

Thanks again!!!
 
funny how vanguard did away with beneficiaries being listed on joint accounts and is now promoting their trust department heavily .

i have had nothing but excellent service from fidelity . been with them 30 years .

i have never had to make more than 1 phone call to fidelity when i have things that need to be done . our rep takes the info and runs with the ball to whoever is involved .

vanguard passed us around like a hot potato , with no one taking ownership of what needed to be done , ultimately having us call a number they gave us that has a recording to please hold for the next available rep.

we held for 1:15 minutes , called on other lines and was put in the same cue ,eventually when our work we were doing while on hold was done and we did not want to hold anymore we just hung up .

no longer doing any business with them . i use fidelity 90% and chase 10% .
 
mathjak107 said:
there is no difference in fees [between mutual fund accts vs brokerage accts] , nor the mutual funds you can hold .
Click to expand...

I'm not so sure that's true. For example, check out the fee schedule on Ameriprise's comparison between the two accounts:
https://www.ameriprise.com/content/files/AMP_763103.PDF

It clearly states: "You may pay commissions, sales charges and/or other fees on products purchased and soldin your brokerage account" on a brokerage acct, vs a mutual fund acct.

Depending on the size of your account, you may or may not be purchasing at NAV. If you are being charged points on trades, that is profit to the brokerage.
 
no , don't get confused at what you are looking at . that is only if you do not buy vanguard funds from vanguard !

you cannot buy anyone else's funds through the mutual fund account at vanguard . you would need a brokerage account just like from any other broker if they were to buy someone else's funds .


the fees apply only to stocks ,bonds , and non vanguard funds if they apply .

a brokerage account from vanguard or fidelity does not charge to buy their own funds .

also what you are looking at with ameritrade if you read what you posted , is a managed account where they charge you a fee to manage your money vs a brokerage account where you manage your own money . , not a mutual fund account .

ameritrade has no mutual fund account since they do not offer their own mutual funds .

you have to buy all mutual funds through your brokerage account with them and their could be fees for doing so . most brokerages who do not offer their own funds have no load deals and commission fee deals for certain mutual funds from other families .. of course for a fee they will manage your money for you through a managed account .
 
I don't know why they are asking you to do that because you didn't say what kind of accounts you already have. Vanguard's system is cumbersome and can be confusing unlike any other brokerage I deal with. For each brokerage account, you have to have a money market settlement account. If you want to redeem shares you must sell then transfer them into the MM account before the funds can be deposited into your bank. If you have three brokerage accounts, you have to have three money market funds. Each brokerage account has a corresponding MM fund. The only changes I've gotten notice of was that they were changing their money market funds somehow (can't remember the details right now). I've been seriously thinking about transferring out of Vanguard because their system is overly complicated.
 
vanguard has been phasing out the mutual fund accounts and converting you to brokerage accounts .as far as money market accounts nothing changes if you want to place to hold cash when you buy or sell . i have one money market at fidelity for our brokerage account that is a core
 

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