Vanguard Brokerage versus Mutual Fund Account Decision thread

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
JackoC
Posts: 4714
Joined: Sun Aug 12, 2018 11:14 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by JackoC »

Cheez-It Guy wrote: Sat Oct 31, 2020 12:34 pm
SmileyFace wrote: Sat Oct 31, 2020 12:11 pm - It has been reported by folks that hold both account types that they receive their Mutual Fund tax statement well-before their Brokerage tax statement
And this is wrong, unless you can reasonably consider 1-2 weeks as "well before". I don't.
OP agreed with the comment it seems, but this is actually the only difference that has impacted me in any noticeable way. I do a lot of (people and entities in the family) tax returns, including LLC's where the return is due March 15. Depending when all the types of Turbotax I need come out, waiting for brokerage tax forms can be the critical path to getting going, and it cuts things a little closer than the MF statements used to. But as implied by 'has impacted', all the relevant accounts at Vanguard are already brokerage type, no MF types left. And as other posts pointed out, this whole question is getting to be moot, you'll have to do it before very long.
Last edited by JackoC on Sat Oct 31, 2020 10:20 pm, edited 2 times in total.
User avatar
Oicuryy
Posts: 1959
Joined: Thu Feb 22, 2007 9:29 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Oicuryy »

Are Vanguard mutual funds in a Vanguard brokerage account held in street name?

Ron
Money is fungible | Abbreviations and Acronyms
User avatar
beyou
Posts: 6915
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by beyou »

UpperNwGuy wrote: Sat Oct 31, 2020 9:36 pm
beyou wrote: Sat Oct 31, 2020 9:21 pm
arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
They can’t require you to change your existing accounts nor can they deny what you inherit, legally
Maybe we’ll go back to the 1980-90s and use paper deposits, withdrawals and statements by mail ? I doubt Vanguard would want to go back to mail/paper, but they can’t simply force you to create a new brokerage account and they can’t take away your assets.
But they can start removing features from the old mutual fund platform in the name of cost savings. When that happens, why would you want to stay on that platform?
Legally they can’t get rid of clients holding funds, you OWN the funds. And assuming so, why would they remove any features online that would result in more cost to call and use CSR’s time or use paper and backoffice to process paper. The site is barebones now, they wont save much by reducing it further.

In the end, I simply can’t move to the brokerage period, while still employed where I am now. So it’s academic for me, other than if Vanguard makes life difficult I will transfer the account where I AM able to hold (select list of employer approved brokers, a couple of which are solid choices).
k1982
Posts: 325
Joined: Tue Feb 11, 2020 11:36 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by k1982 »

I'm so confused about this whole thread...
what is difference between Vanguard Brokerage and Mutual Fund Account ??

I have both Vanguard ROTH IRA and Vanguard Brokerage Account

I hold 100% VFIAX in both
mortfree
Posts: 2968
Joined: Mon Sep 12, 2016 7:06 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by mortfree »

UpperNwGuy wrote: Sat Oct 31, 2020 7:53 pm
tfb wrote: Sat Oct 31, 2020 2:58 pm
Cheez-It Guy wrote: Sat Oct 31, 2020 2:28 pm 2019 tax year's E-Mail notification of consolidated 1099 availability was date-stamped 01/26/2020. That's 10-11 days from mid-January.
Measuring from January 1, when everything finalized, the lag time is almost double on the brokerage platform. I consider it "well before."
Give me a break. Before I retired I often didn't get my W-2 from my employer until the last week of January. I consider any tax-related statement that arrives before the end of January to be timely.
I believe:
Employers are required to have the W2 to everyone by end of January.

Investment firms have a deadline of mid-February with some exceptions of course.
Mid-40’s
sycamore
Posts: 6360
Joined: Tue May 08, 2018 12:06 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by sycamore »

k1982 wrote: Sun Nov 01, 2020 1:00 am I'm so confused about this whole thread...
what is difference between Vanguard Brokerage and Mutual Fund Account ??
...
A mutual fund account can hold only mutual funds. By contrast, a brokerage account can hold various kinds of assets, like individual stocks, bonds, CDs, ETFs, and mutual funds.

One other big difference is that with a brokerage account you use a settlement process to buy & sell stuff. If your account has a settlement fund then you have a brokerage account.

There are other minor differences like the Vanguard brokerage account doesn’t let you reinvest dividends of one mutual fund into another fund, whereas the mutual fund account does. Some of these differences are very important to some people, and that’s one reason for this whole thread (and dozens of previous threads).

Whether your account is taxable or an IRA is a different aspect of your account (brokerage or mutual fund-only), i.e., how it is treated for tax and other purposes.

A simplified history: For many years, the only way to own a Vanguard mutual fund was by opening a mutual fund account with them. Same was true of other providers like Fidelity, T. Rowe Price, Dodge & Cox, etc. But if you wanted to hold an individual stock or bond, you had to open a separate brokerage account.

At some point the investment industry figured out it might be better to have a single brokerage account that could hold all kinds of assets instead of having multiple accounts. So now we have Vanguard trying to transition their old mutual fund-only accounts to brokerage accounts. This will eventually save them (and customers) money because they won’t have to support two different kinds of accounts.
User avatar
Nate79
Posts: 9372
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Nate79 »

beyou wrote: Sun Nov 01, 2020 1:01 am
UpperNwGuy wrote: Sat Oct 31, 2020 9:36 pm
beyou wrote: Sat Oct 31, 2020 9:21 pm
arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
They can’t require you to change your existing accounts nor can they deny what you inherit, legally
Maybe we’ll go back to the 1980-90s and use paper deposits, withdrawals and statements by mail ? I doubt Vanguard would want to go back to mail/paper, but they can’t simply force you to create a new brokerage account and they can’t take away your assets.
But they can start removing features from the old mutual fund platform in the name of cost savings. When that happens, why would you want to stay on that platform?
Legally they can’t get rid of clients holding funds, you OWN the funds. And assuming so, why would they remove any features online that would result in more cost to call and use CSR’s time or use paper and backoffice to process paper. The site is barebones now, they wont save much by reducing it further.

In the end, I simply can’t move to the brokerage period, while still employed where I am now. So it’s academic for me, other than if Vanguard makes life difficult I will transfer the account where I AM able to hold (select list of employer approved brokers, a couple of which are solid choices).
Have you called Vanguard very recently to see what they are going to do for you? It would be good to report back what they say. They have already confirmed they are going start removing features next year.
User avatar
Cheez-It Guy
Posts: 4007
Joined: Sun Mar 03, 2019 3:20 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

Trev H wrote: Sat Oct 31, 2020 1:07 pm Has anyone tried to work with Vanguard to make this change after market close on the last day of the year and before market open first day of new year ?

PS... I use TuroTax... and import from Vanguard... and that all works nicely now.

Does anyone know if TurboTax can handle (what ever changes may take place) if I changed my account type mid year ?
It has been suggested that around the first of the year would be a good time to transition for cleanliness, but this may also depend on what funds you hold and when interest or dividends are issued / credited. A mid-year transition also works fine. I was in the middle of a year.

TurboTax can deal with the new 1099s from the brokerage account just fine. Be aware that there are two different Vanguard entries in TurboTax when you search for the firm from which to import. One for mutual fund only accounts and another for brokerage accounts.

Assuming a mid-year transition, you will receive both versions of 1099s for the tax year of transition only. One for the mutual fund account up to the transition date, and one for the brokerage account reflecting any activity after the transition date. They sum up to the proper total, and nothing is double-reported. This is effectively no different than holding assets at two different companies who each send you a 1099, and they should be handled similarly. Make sure you import BOTH in the year of transition, or you may be hearing from the IRS. That's it.
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

JackoC wrote: Sat Oct 31, 2020 10:18 pm OP agreed with the comment it seems, but this is actually the only difference that has impacted me in any noticeable way. I do a lot of (people and entities in the family) tax returns, including LLC's where the return is due March 15. Depending when all the types of Turbotax I need come out, waiting for brokerage tax forms can be the critical path to getting going, and it cuts things a little closer than the MF statements used to. But as implied by 'has impacted', all the relevant accounts at Vanguard are already brokerage type, no MF types left. And as other posts pointed out, this whole question is getting to be moot, you'll have to do it before very long.
I left the comment in strike-through because I thought additional discussion/detail/data may arise on this issue. I took out most of the strikethru based upon this and other comments/data posted.
Thanks for the feedback.
User avatar
midareff
Posts: 7711
Joined: Mon Nov 29, 2010 9:43 am
Location: Biscayne Bay, South Florida

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by midareff »

bling wrote: Sat Oct 31, 2020 12:18 pm the nagging finally annoyed me enough to do something, although probably not what vanguard expected. i opened a new roth account with fidelity and transferred everything over. the entire process took 3 days.

in this day and age of $0 commissions everywhere i'm not sure why vanguard is pushing into the brokerage space when pretty much everyone else is better at it.
Not to mention better friendlier web sites and brokerage accounts don't report activity next day like old accounts did because they make you go through a settlement account so withdrawals seem to be delayed an extra day.
User avatar
Monster99
Posts: 628
Joined: Tue Aug 29, 2017 10:28 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Monster99 »

sycamore wrote: Sat Oct 31, 2020 9:17 pm
mkc wrote: Sat Oct 31, 2020 8:08 pm Specifically for those who have gone through the conversion and had non-covered shares in the mutual fund account, did your cost basis transfer over to the brokerage platform? I seem to recall some prior posts where this did not occur. The majority of our holdings in our MF account are non-covered due to how long we have held those funds.
Yes, the cost basis transferred over just fine for me, including both covered and non-covered lots.

I double-checked to make to sure :)
I have the Vanguard S&P 500 fund that has both uncovered and covered shares. Where do you find the basis for the uncovered shares? My account only shows average cost for all uncovered shares. I have records of all the purchases but it would be nice to double check the actual basis Vanguard holds....
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

rkhusky wrote: Sat Oct 31, 2020 9:42 pm Negative for brokerage is that all transactions go through the sweep account, which shows as two transactions for each exchange. Mutual fund allows direct transactions between funds, which shows as a single transaction for each exchange.
Thanks for the input - added this point - had missed it.
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

Nate79 wrote: Sun Nov 01, 2020 5:49 am They have already confirmed they are going start removing features next year.
What features have they confirmed they are removing? When (and if) they are removed I will list them here.
If you have a confirmation on which features they are removing and what date they are being removed I can list them. Otherwise - it seems like conjecture.
User avatar
beyou
Posts: 6915
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by beyou »

Nate79 wrote: Sun Nov 01, 2020 5:49 am
beyou wrote: Sun Nov 01, 2020 1:01 am
UpperNwGuy wrote: Sat Oct 31, 2020 9:36 pm
beyou wrote: Sat Oct 31, 2020 9:21 pm
arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
They can’t require you to change your existing accounts nor can they deny what you inherit, legally
Maybe we’ll go back to the 1980-90s and use paper deposits, withdrawals and statements by mail ? I doubt Vanguard would want to go back to mail/paper, but they can’t simply force you to create a new brokerage account and they can’t take away your assets.
But they can start removing features from the old mutual fund platform in the name of cost savings. When that happens, why would you want to stay on that platform?
Legally they can’t get rid of clients holding funds, you OWN the funds. And assuming so, why would they remove any features online that would result in more cost to call and use CSR’s time or use paper and backoffice to process paper. The site is barebones now, they wont save much by reducing it further.

In the end, I simply can’t move to the brokerage period, while still employed where I am now. So it’s academic for me, other than if Vanguard makes life difficult I will transfer the account where I AM able to hold (select list of employer approved brokers, a couple of which are solid choices).
Have you called Vanguard very recently to see what they are going to do for you? It would be good to report back what they say. They have already confirmed they are going start removing features next year.
Sorry, not planning to call about their website system plans. The letters they sent out said they “might” start removing features by 2022. I may well be freed from my employer restriction then, facing layoff at some point but estimated in 2021. Note if one moved to a competitor in my industry, would end up with similar restrictions, and it seems rarely is Vanguard on the approved broker list (reasons I can only speculate). For me this is race to see if I retire first or if Vanguard cuts off their nose to spite their own face first. I happen to work in IT at a competitor (multiple over the years). I think they have more to lose by dropping the fund-only web front end than they have to gain. Not only will they lose my younger peers who are NOT retiring (funds and brokerage firms employ many and all have restrictions), but this move also makes it easier to switch brokers for anyone. If they could do a forced conversion, and did it, would be so much easier to transfer a brokerage acct to an approved broker than a fund account. So eventually I will convert. The only question is if I can leave the account or must immediately transfer it, and have to explain to my compliance officers why I briefly had a rogue account at Vanguard.

I did call/msg twice to setup NEW fund-only accounts, and they quickly agreed with no push back. So what they say and what they do is not the same.
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
When you switched to the brokerage account was there a legal agreement you had to make regarding gong to arbitration? How does this differ from the Mutual fund account? Sorry - I remember this mentioned but can't find the details on it - if you can point me to the other thread with details I will go and read there.

Regarding SIPC - I am not going to contradict what is stated right here in boglehead wiki. If that gets updated, or someone provides more substantial detail, I can update.
rkhusky
Posts: 17763
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by rkhusky »

What does " All fund dividends reported as a single line on 1099B versus Fund account which has each fund as a separate line item from a separate payer." mean? [Current last bullet for brokerage positives]

My MF account taxable dividends are reported on a 1099-DIV and shows the total for each fund, which is what I would want. If the brokerage account 1099-DIV just shows the total amount of dividends, I would view that as a negative.

My MF account 1099-B shows all the sales for each fund in my taxable account, along with fund totals.

Is the positive for the brokerage account forms that you also get a grand total, along with the individual fund totals?
User avatar
Cheez-It Guy
Posts: 4007
Joined: Sun Mar 03, 2019 3:20 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

SmileyFace wrote: Sun Nov 01, 2020 6:43 am I left the comment in strike-through because I thought additional discussion/detail/data may arise on this issue. I took out most of the strikethru based upon this and other comments/data posted.
Thanks for the feedback.
Why not just put the actual dates on there? 1/25/2020 for brokerage account holding mostly Vanguard mutual funds. I previously said 1/26/2020, which was the date of the E-Mail notification, but the form creation date is 1/25/2020. Perhaps someone can confirm last availability date for 1099-DIV for mutual fund only account.
User avatar
Cheez-It Guy
Posts: 4007
Joined: Sun Mar 03, 2019 3:20 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

rkhusky wrote: Sun Nov 01, 2020 7:10 am What does " All fund dividends reported as a single line on 1099B versus Fund account which has each fund as a separate line item from a separate payer." mean? [Current last bullet for brokerage positives]

My MF account taxable dividends are reported on a 1099-DIV and shows the total for each fund, which is what I would want. If the brokerage account 1099-DIV just shows the total amount of dividends, I would view that as a negative.

My MF account 1099-B shows all the sales for each fund in my taxable account, along with fund totals.

Is the positive for the brokerage account forms that you also get a grand total, along with the individual fund totals?
The consolidated 1099 for Vanguard brokerage accounts shows all necessary detail and then some. I think this bullet is just about how the dividends are / can be tabulated for tax reporting and importation by various software platforms. You get one 1099 with different boxes that covers both 1099-DIV and 1099-B.
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

rkhusky wrote: Sun Nov 01, 2020 7:10 am What does " All fund dividends reported as a single line on 1099B versus Fund account which has each fund as a separate line item from a separate payer." mean? [Current last bullet for brokerage positives]

My MF account taxable dividends are reported on a 1099-DIV and shows the total for each fund, which is what I would want. If the brokerage account 1099-DIV just shows the total amount of dividends, I would view that as a negative.

My MF account 1099-B shows all the sales for each fund in my taxable account, along with fund totals.

Is the positive for the brokerage account forms that you also get a grand total, along with the individual fund totals?
Yes - people have reported they get a single line item from a single Payer after they have converted to brokerage. I believe they view as a positive since there are less line items to include in tax return. If you explain why you view as a negative I can create a third category of "Differences that could be viewed as a Positive or Negative".
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

Cheez-It Guy wrote: Sun Nov 01, 2020 7:25 am
SmileyFace wrote: Sun Nov 01, 2020 6:43 am I left the comment in strike-through because I thought additional discussion/detail/data may arise on this issue. I took out most of the strikethru based upon this and other comments/data posted.
Thanks for the feedback.
Why not just put the actual dates on there? 1/25/2020 for brokerage account holding mostly Vanguard mutual funds. I previously said 1/26/2020, which was the date of the E-Mail notification, but the form creation date is 1/25/2020. Perhaps someone can confirm last availability date for 1099-DIV for mutual fund only account.
You also have 1099-B's in additional to 1099-DIV. According to this: https://personal.vanguard.com/pdf/1099COMB_012020.pdf
from 2019 (most recent) returns 1099B's were available by mid-Jan for Mutual Fund accounts but by Mid-Feb for Brokerage accounts. A "potential" 4 week difference. I don't want to go through the work of tabulating all the reported dates - based upon all Vanguard documents; and statements here - I believe what I have is accurate. Tax statements for Funds are released prior to tax statements for Brokerage. It is something to consider and folks have reported it as a major negative for them.
rkhusky
Posts: 17763
Joined: Thu Aug 18, 2011 8:09 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by rkhusky »

SmileyFace wrote: Sun Nov 01, 2020 7:35 am
rkhusky wrote: Sun Nov 01, 2020 7:10 am What does " All fund dividends reported as a single line on 1099B versus Fund account which has each fund as a separate line item from a separate payer." mean? [Current last bullet for brokerage positives]

My MF account taxable dividends are reported on a 1099-DIV and shows the total for each fund, which is what I would want. If the brokerage account 1099-DIV just shows the total amount of dividends, I would view that as a negative.

My MF account 1099-B shows all the sales for each fund in my taxable account, along with fund totals.

Is the positive for the brokerage account forms that you also get a grand total, along with the individual fund totals?
Yes - people have reported they get a single line item from a single Payer after they have converted to brokerage. I believe they view as a positive since there are less line items to include in tax return. If you explain why you view as a negative I can create a third category of "Differences that could be viewed as a Positive or Negative".
It would only be a negative for me if they did not provide the fund-level information and the post from Cheez-It Guy indicates that that is not the case. I haven't seen a consolidated statement that combines the various 1099 forms. Perhaps the bullet should be changed to indicate that the brokerage account gets a consolidated form with all the necessary information. Wonder if it also has 1099-R information or just 1099-B and 1099-Div?
User avatar
Cheez-It Guy
Posts: 4007
Joined: Sun Mar 03, 2019 3:20 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

SmileyFace wrote: Sun Nov 01, 2020 7:39 am
Cheez-It Guy wrote: Sun Nov 01, 2020 7:25 am
SmileyFace wrote: Sun Nov 01, 2020 6:43 am I left the comment in strike-through because I thought additional discussion/detail/data may arise on this issue. I took out most of the strikethru based upon this and other comments/data posted.
Thanks for the feedback.
Why not just put the actual dates on there? 1/25/2020 for brokerage account holding mostly Vanguard mutual funds. I previously said 1/26/2020, which was the date of the E-Mail notification, but the form creation date is 1/25/2020. Perhaps someone can confirm last availability date for 1099-DIV for mutual fund only account.
You also have 1099-B's in additional to 1099-DIV. According to this: https://personal.vanguard.com/pdf/1099COMB_012020.pdf
from 2019 (most recent) returns 1099B's were available by mid-Jan for Mutual Fund accounts but by Mid-Feb for Brokerage accounts. A "potential" 4 week difference. I don't want to go through the work of tabulating all the reported dates - based upon all Vanguard documents; and statements here - I believe what I have is accurate. Tax statements for Funds are released prior to tax statements for Brokerage. It is something to consider and folks have reported it as a major negative for them.
That is not a fair comparison. If you have a mutual fund only account with Vanguard, by definition you hold only Vanguard mutual funds in it. If you choose to continue to hold only Vanguard mutual funds in a new format brokerage account, you receive a consolidated 1099 that includes 1099-INT, 1099-DIV, and 1099-B. 1099-R is separate. The 1/25/2020 date I am quoting you involves sales of Vanguard mutual funds in tax year 2019 and a corresponding 1099-B within the consolidated form. It did not push the date to mid-February. That sometimes occurs if you hold or transact on certain non-Vanguard investment vehicles within the brokerage account, but if you do this, you have to have a brokerage account anyway.

The comparison should be between mutual fund only accounts and continuing to hold only Vanguard mutual funds in a new format brokerage account, as that's the decision point. That's the only fair comparison to be made. Anything else is muddying the water and confusing people. Do you see the challenge of posting about these issues from only one side of the transition? In many cases, people are making assumptions about what happens on the other side of the transition instead of listening to reported facts from people who are already there. That was actually the key point of my thread yesterday.
stan1
Posts: 14246
Joined: Mon Oct 08, 2007 4:35 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by stan1 »

SmileyFace wrote: Sun Nov 01, 2020 6:52 am
Nate79 wrote: Sun Nov 01, 2020 5:49 am They have already confirmed they are going start removing features next year.
What features have they confirmed they are removing? When (and if) they are removed I will list them here.
If you have a confirmation on which features they are removing and what date they are being removed I can list them. Otherwise - it seems like conjecture.
Let's pull a quote from the Vanguard email.
We'll continue to support clients on this old platform until it's retired from use in 2022 or earlier. But know that some of the features you've used in the past may not be available as we make updates and changes in the future.
They did not say which features may not be available, so it would be conjecture to guess which ones. Maybe someone who still has a legacy mutual fund account can call Vanguard and press them on which features may be lost? Also note there is a may not a will -- so they've left the door open to do whatever they want.
User avatar
Cheez-It Guy
Posts: 4007
Joined: Sun Mar 03, 2019 3:20 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

Here is a PDF leaflet from Vanguard dated October 2019 that summarizes the differences before and after transition in a table at the end:

https://www.vanguard.com/pdf/vbafqm.pdf
UpperNwGuy
Posts: 9479
Joined: Sun Oct 08, 2017 7:16 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by UpperNwGuy »

midareff wrote: Sun Nov 01, 2020 6:46 am Not to mention better friendlier web sites and brokerage accounts don't report activity next day like old accounts did because they make you go through a settlement account so withdrawals seem to be delayed an extra day.
My activity reports the next day. Why doesn't yours? Are you doing something with a two-step process?
mkc
Moderator
Posts: 3291
Joined: Wed Apr 17, 2013 2:59 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by mkc »

sycamore wrote: Sat Oct 31, 2020 9:17 pm Yes, the cost basis transferred over just fine for me, including both covered and non-covered lots.

I double-checked to make to sure :)
Thank you! I had recalled that was an issue a while back and held off conversion as a result.
User avatar
House Blend
Posts: 4878
Joined: Fri May 04, 2007 1:02 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by House Blend »

Trev H wrote: Sat Oct 31, 2020 1:07 pm Question... is there any advantage to "timing" the move between account types ?

For example could Vanguard Transition my accounts on the last day of the year, if I requested that ?

I heard that you get different reports, tax forms, etc... when you change.

If you change during the year, you would get reports & forms for mutual funds and brokerage accounts.... and have to deal with both at year end, taxes, etc...
I would not want to do this on Dec. 31.

Keep in mind that 1099s generally don't get issued for < $10 in dividends, so:

* If you don't have any bond/MM funds in taxable, you can do the switch anytime before the first quarter dividends in March and you will not get a 1099 from your old account.

* If you have bonds/MM in taxable that accrue daily but distribute monthly, the accrued dividends will be distributed when you do the conversion. If the amount is over $10 (perhaps on a fund-by-fund basis?), you will get a 1099 from your old account for those.

If multiple 1099s are a concern for you, this suggests converting in early January. That said, I have no first-hand confirmation that you won't get a 1099 for divs under $10. And you obliged to report them whether or not they appear on a 1099.

I converted in mid-January. My taxable account includes muni funds, and the amount distributed was well north of $10. So I will be getting a 1099 for those amounts. Note that although muni fund dividends do get reported on the 1040, you do not report them on Schedule B.
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

Cheez-It Guy wrote: Sun Nov 01, 2020 8:14 am Here is a PDF leaflet from Vanguard dated October 2019 that summarizes the differences before and after transition in a table at the end:

https://www.vanguard.com/pdf/vbafqm.pdf
Unfortunately this document fails to tell people what they will lose (example: ability to reinvest between different accounts).
It is obviously put together to convince people to switch.
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

Cheez-It Guy wrote: Sun Nov 01, 2020 8:08 am
SmileyFace wrote: Sun Nov 01, 2020 7:39 am
Cheez-It Guy wrote: Sun Nov 01, 2020 7:25 am
SmileyFace wrote: Sun Nov 01, 2020 6:43 am I left the comment in strike-through because I thought additional discussion/detail/data may arise on this issue. I took out most of the strikethru based upon this and other comments/data posted.
Thanks for the feedback.
Why not just put the actual dates on there? 1/25/2020 for brokerage account holding mostly Vanguard mutual funds. I previously said 1/26/2020, which was the date of the E-Mail notification, but the form creation date is 1/25/2020. Perhaps someone can confirm last availability date for 1099-DIV for mutual fund only account.
You also have 1099-B's in additional to 1099-DIV. According to this: https://personal.vanguard.com/pdf/1099COMB_012020.pdf
from 2019 (most recent) returns 1099B's were available by mid-Jan for Mutual Fund accounts but by Mid-Feb for Brokerage accounts. A "potential" 4 week difference. I don't want to go through the work of tabulating all the reported dates - based upon all Vanguard documents; and statements here - I believe what I have is accurate. Tax statements for Funds are released prior to tax statements for Brokerage. It is something to consider and folks have reported it as a major negative for them.
That is not a fair comparison. If you have a mutual fund only account with Vanguard, by definition you hold only Vanguard mutual funds in it. If you choose to continue to hold only Vanguard mutual funds in a new format brokerage account, you receive a consolidated 1099 that includes 1099-INT, 1099-DIV, and 1099-B. 1099-R is separate. The 1/25/2020 date I am quoting you involves sales of Vanguard mutual funds in tax year 2019 and a corresponding 1099-B within the consolidated form. It did not push the date to mid-February. That sometimes occurs if you hold or transact on certain non-Vanguard investment vehicles within the brokerage account, but if you do this, you have to have a brokerage account anyway.

The comparison should be between mutual fund only accounts and continuing to hold only Vanguard mutual funds in a new format brokerage account, as that's the decision point. That's the only fair comparison to be made. Anything else is muddying the water and confusing people. Do you see the challenge of posting about these issues from only one side of the transition? In many cases, people are making assumptions about what happens on the other side of the transition instead of listening to reported facts from people who are already there. That was actually the key point of my thread yesterday.
The document clearly states the dates by Account Type - not by assets.
k1982
Posts: 325
Joined: Tue Feb 11, 2020 11:36 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by k1982 »

sycamore wrote: Sun Nov 01, 2020 3:43 am
k1982 wrote: Sun Nov 01, 2020 1:00 am I'm so confused about this whole thread...
what is difference between Vanguard Brokerage and Mutual Fund Account ??
...
A mutual fund account can hold only mutual funds. By contrast, a brokerage account can hold various kinds of assets, like individual stocks, bonds, CDs, ETFs, and mutual funds.

One other big difference is that with a brokerage account you use a settlement process to buy & sell stuff. If your account has a settlement fund then you have a brokerage account.

There are other minor differences like the Vanguard brokerage account doesn’t let you reinvest dividends of one mutual fund into another fund, whereas the mutual fund account does. Some of these differences are very important to some people, and that’s one reason for this whole thread (and dozens of previous threads).

Whether your account is taxable or an IRA is a different aspect of your account (brokerage or mutual fund-only), i.e., how it is treated for tax and other purposes.

A simplified history: For many years, the only way to own a Vanguard mutual fund was by opening a mutual fund account with them. Same was true of other providers like Fidelity, T. Rowe Price, Dodge & Cox, etc. But if you wanted to hold an individual stock or bond, you had to open a separate brokerage account.

At some point the investment industry figured out it might be better to have a single brokerage account that could hold all kinds of assets instead of having multiple accounts. So now we have Vanguard trying to transition their old mutual fund-only accounts to brokerage accounts. This will eventually save them (and customers) money because they won’t have to support two different kinds of accounts.
thank you for the clarification !
So it seems the Mutual Fund Account @ Vanguard was the "old" process of holding these mutual funds.
I just started investing this year at Vanguard so I only heard of a brokerage account.
Ferdinand2014
Posts: 2390
Joined: Mon Dec 17, 2018 5:49 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Ferdinand2014 »

Cheez-It Guy wrote: Sat Oct 31, 2020 12:34 pm
SmileyFace wrote: Sat Oct 31, 2020 12:11 pm - It's what you used for years. If it is working for you, why change
Because Vanguard clearly wants you to, and because if you don't already have other valid reasons, wouldn't you prefer to be on the supported platform going forward? Not many other places will offer you a mutual fund only account in the first place, and of those that will, how many have the quality, quantity, and low cost of Vanguard funds?

SmileyFace wrote: Sat Oct 31, 2020 12:11 pm - You want the ability to auto-reinvest dividends/gains between Mutual Funds (you currently can't do this with Brokerage Accounts)
Just make sure everyone is clear on this. Between DIFFERENT mutual funds automatically. You CAN reinvest in the same fund, and you CAN redeem to an external bank account. Good luck finding another platform that is going to allow you to automatically redirect dividends from one holding to another. It was a nice feature, and I wish Vanguard would add it back, but perhaps there is something about brokerage platforms in general that prevents this?

Fidelity allows this. You can take cash, reinvest, or redirect to another fund in all accounts that I currently use: SEP, IRA rollover, brokerge, CMA. I personally only reinvest in same fund for now.
SmileyFace wrote: Sat Oct 31, 2020 12:11 pm - It has been reported by folks that hold both account types that they receive their Mutual Fund tax statement well-before their Brokerage tax statement
And this is wrong, unless you can reasonably consider 1-2 weeks as "well before". I don't.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
sycamore
Posts: 6360
Joined: Tue May 08, 2018 12:06 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by sycamore »

Monster99 wrote: Sun Nov 01, 2020 6:49 am
sycamore wrote: Sat Oct 31, 2020 9:17 pm
mkc wrote: Sat Oct 31, 2020 8:08 pm Specifically for those who have gone through the conversion and had non-covered shares in the mutual fund account, did your cost basis transfer over to the brokerage platform? I seem to recall some prior posts where this did not occur. The majority of our holdings in our MF account are non-covered due to how long we have held those funds.
Yes, the cost basis transferred over just fine for me, including both covered and non-covered lots.

I double-checked to make to sure :)
I have the Vanguard S&P 500 fund that has both uncovered and covered shares. Where do you find the basis for the uncovered shares? My account only shows average cost for all uncovered shares. I have records of all the purchases but it would be nice to double check the actual basis Vanguard holds....
Look under My Accounts > Cost Basis, under "Unrealized gains & losses" tab, then click on "Show Details" for the fund in question.

Actually, during the market swoon in March, I sold all of my last mutual fund with noncovered shares. So I see the noncovered share basis under the "Realized gains & losses" tab. However, I only had one noncovered lot. So it's possible they were showing the average costs basis -- it would be same value as the SpecID basis for a single lot.

In any case, I didn't trust Vanguard to preserve the basis correctly :) so I double checked I had all my trade confirmations before starting the account transition.

Side note: I still own an ETF with noncovered shares, and Vanguard does show the cost basis of various noncovered shares bought pre-2012. These were from the days when Vanguard used Pershing for brokerage services. This isn't directly relevant for people transitioning from mutual fund account to brokerage, except to say at least the transition worked going from one brokerage provider (Pershing) to another (VBS).
User avatar
arcticpineapplecorp.
Posts: 15080
Joined: Tue Mar 06, 2012 8:22 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by arcticpineapplecorp. »

actually, let me correct a mistatement I made earlier.

If/When I (and brother) inherit my mom's IRAs (and brokerage), those inherited IRAs will need to be in brokerage (as my mom has them now) in my/bro's name.

this would not affect my current mutual fund account, but would then require having two accounts at Vanguard:
1. my Roth IRA mutual fund acct
2. an inherited Roth IRA and inherited brokerage acct in a Vanguard brokerage acct.

Also regarding SIPC, yes I was going to point out it's $500k only, but I wasn't aware of any similar coverage under the mutual fund platform currently other than the assets are held in trust by a third party custodian I believe.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
User avatar
Doc
Posts: 10607
Joined: Sat Feb 24, 2007 12:10 pm
Location: Two left turns from Larry

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Doc »

rkhusky wrote: Sat Oct 31, 2020 9:42 pm Negative for brokerage is that all transactions go through the sweep account, which shows as two transactions for each exchange. Mutual fund allows direct transactions between funds, which shows as a single transaction for each exchange.
Exchanging one mutual fund for another on the brokerage platform does not go through the sweep account. You get two transactions: a "Buy (exchange)" and a "Sell (exchange)". You do not have to do a sell and a buy separately which would generate four transactions.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
User avatar
Doc
Posts: 10607
Joined: Sat Feb 24, 2007 12:10 pm
Location: Two left turns from Larry

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Doc »

We moved from the mutual fund platform to the brokerage platform at the end of 2014. After several years I even was able to stop asking Vanguard reps for their CRD numbers so that I could tell how experienced they were('nt) on https://brokercheck.finra.org/ :D

(BrokerCheck is a free tool to research the background and experience of financial brokers, advisers and firms.)
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by abuss368 »

arcticpineapplecorp. wrote: Sun Nov 01, 2020 10:53 am actually, let me correct a mistatement I made earlier.

If/When I (and brother) inherit my mom's IRAs (and brokerage), those inherited IRAs will need to be in brokerage (as my mom has them now) in my/bro's name.

this would not affect my current mutual fund account, but would then require having two accounts at Vanguard:
1. my Roth IRA mutual fund acct
2. an inherited Roth IRA and inherited brokerage acct in a Vanguard brokerage acct.

Also regarding SIPC, yes I was going to point out it's $500k only, but I wasn't aware of any similar coverage under the mutual fund platform currently other than the assets are held in trust by a third party custodian I believe.
Believe Vanguard mutual funds were held by JP Morgan.
John C. Bogle: “Simplicity is the master key to financial success."
palanzo
Posts: 2146
Joined: Thu Oct 10, 2019 4:28 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

SmileyFace wrote: Sun Nov 01, 2020 6:56 am
arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
When you switched to the brokerage account was there a legal agreement you had to make regarding gong to arbitration? How does this differ from the Mutual fund account? Sorry - I remember this mentioned but can't find the details on it - if you can point me to the other thread with details I will go and read there.

Regarding SIPC - I am not going to contradict what is stated right here in boglehead wiki. If that gets updated, or someone provides more substantial detail, I can update.
The wiki states:

"Question: If you have a fund that is not held in a brokerage account, is it prudent to move it into a brokerage account just to get SIPC protection? The answer is "no" and explained here."

So SIPC is NOT a Pro in any way.

https://www.bogleheads.org/wiki/SIPC_pr ... tual_funds
Last edited by palanzo on Sun Nov 01, 2020 12:08 pm, edited 3 times in total.
palanzo
Posts: 2146
Joined: Thu Oct 10, 2019 4:28 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

Cheez-It Guy wrote: Sun Nov 01, 2020 8:14 am Here is a PDF leaflet from Vanguard dated October 2019 that summarizes the differences before and after transition in a table at the end:

https://www.vanguard.com/pdf/vbafqm.pdf
That's a puff piece and leaves out a lot of the important issues.
palanzo
Posts: 2146
Joined: Thu Oct 10, 2019 4:28 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

SmileyFace wrote: Sun Nov 01, 2020 10:15 am
Cheez-It Guy wrote: Sun Nov 01, 2020 8:14 am Here is a PDF leaflet from Vanguard dated October 2019 that summarizes the differences before and after transition in a table at the end:

https://www.vanguard.com/pdf/vbafqm.pdf
Unfortunately this document fails to tell people what they will lose (example: ability to reinvest between different accounts).
It is obviously put together to convince people to switch.
It is very deceptive and unworthy of Vanguard.
User avatar
Topic Author
SmileyFace
Posts: 9184
Joined: Wed Feb 19, 2014 9:11 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

palanzo wrote: Sun Nov 01, 2020 12:03 pm
SmileyFace wrote: Sun Nov 01, 2020 6:56 am
arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
When you switched to the brokerage account was there a legal agreement you had to make regarding gong to arbitration? How does this differ from the Mutual fund account? Sorry - I remember this mentioned but can't find the details on it - if you can point me to the other thread with details I will go and read there.

Regarding SIPC - I am not going to contradict what is stated right here in boglehead wiki. If that gets updated, or someone provides more substantial detail, I can update.
The wiki states:

"Question: If you have a fund that is not held in a brokerage account, is it prudent to move it into a brokerage account just to get SIPC protection? The answer is "no" and explained here."

So SPIC is NOT a Pro in any way.

https://www.bogleheads.org/wiki/SIPC_pr ... tual_funds
Yes - that was my point when I said I wasn't going to contradict the wiki (and why I didn't add SIPC to the list). From the wiki on the page you reference there is a summarized statement that says it all:
As noted previously, funds not part of Vanguard Brokerage Services do not require SIPC protection.
palanzo
Posts: 2146
Joined: Thu Oct 10, 2019 4:28 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

abuss368 wrote: Sun Nov 01, 2020 11:22 am
arcticpineapplecorp. wrote: Sun Nov 01, 2020 10:53 am actually, let me correct a mistatement I made earlier.

If/When I (and brother) inherit my mom's IRAs (and brokerage), those inherited IRAs will need to be in brokerage (as my mom has them now) in my/bro's name.

this would not affect my current mutual fund account, but would then require having two accounts at Vanguard:
1. my Roth IRA mutual fund acct
2. an inherited Roth IRA and inherited brokerage acct in a Vanguard brokerage acct.

Also regarding SIPC, yes I was going to point out it's $500k only, but I wasn't aware of any similar coverage under the mutual fund platform currently other than the assets are held in trust by a third party custodian I believe.
Believe Vanguard mutual funds were held by JP Morgan.
They still are.
palanzo
Posts: 2146
Joined: Thu Oct 10, 2019 4:28 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

SmileyFace wrote: Sun Nov 01, 2020 12:06 pm
palanzo wrote: Sun Nov 01, 2020 12:03 pm
SmileyFace wrote: Sun Nov 01, 2020 6:56 am
arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
When you switched to the brokerage account was there a legal agreement you had to make regarding gong to arbitration? How does this differ from the Mutual fund account? Sorry - I remember this mentioned but can't find the details on it - if you can point me to the other thread with details I will go and read there.

Regarding SIPC - I am not going to contradict what is stated right here in boglehead wiki. If that gets updated, or someone provides more substantial detail, I can update.
The wiki states:

"Question: If you have a fund that is not held in a brokerage account, is it prudent to move it into a brokerage account just to get SIPC protection? The answer is "no" and explained here."

So SPIC is NOT a Pro in any way.

https://www.bogleheads.org/wiki/SIPC_pr ... tual_funds
Yes - that was my point when I said I wasn't going to contradict the wiki (and why I didn't add SIPC to the list). From the wiki on the page you reference there is a summarized statement that says it all:
As noted previously, funds not part of Vanguard Brokerage Services do not require SIPC protection.
Thanks. It's still in the quote.
talzara
Posts: 4745
Joined: Thu Feb 12, 2009 6:40 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by talzara »

Oicuryy wrote: Sat Oct 31, 2020 10:19 pm Are Vanguard mutual funds in a Vanguard brokerage account held in street name?
Yes, they are registered in the name of Vanguard Brokerage Services. This is why the 1099-DIV shows only one payer.

With a mutual fund account, each mutual fund paid you dividends directly. If you have 10 mutual funds, then you have 10 payers.

With a brokerage account, each mutual fund pays Vanguard Brokerage Services, which is the registered owner of the shares. Then Vanguard Brokerage Services pays you.
talzara
Posts: 4745
Joined: Thu Feb 12, 2009 6:40 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by talzara »

arcticpineapplecorp. wrote: Sun Nov 01, 2020 10:53 am Also regarding SIPC, yes I was going to point out it's $500k only, but I wasn't aware of any similar coverage under the mutual fund platform currently other than the assets are held in trust by a third party custodian I believe.
With a mutual fund account, you are exposed to the risk of the mutual fund failing. The custodian holds the underlying securities, which prevents Vanguard from being a Ponzi scheme. The mutual fund's statements and the custodian's records are periodically audited and reconciled with each other.

With a brokerage account, you are exposed to the same risks of the mutual fund plus the risk of the brokerage. SIPC protection insures the first $500k of that, leaving you exposed for amounts over $500k. The Lloyd's policy can be disregarded, since the aggregate limit is so low that it'll pay less than a penny on the dollar.

This is why SIPC protection is not a plus. It is better to have no brokerage risk at all, rather than brokerage risk that is only partially insured. You don't need insurance when you have no risk.
palanzo wrote: Sun Nov 01, 2020 12:06 pm
abuss368 wrote: Sun Nov 01, 2020 11:22 am Believe Vanguard mutual funds were held by JP Morgan.
They still are.
Vanguard mutual funds have used JP Morgan Chase, State Street, BNY Mellon, and Brown Brothers Harriman as custodian banks.

The custodian bank is identified in the mutual fund's Statement of Additional Information. Vanguard sometimes moves funds from one custodian bank to another.
User avatar
telemark
Posts: 3389
Joined: Sat Aug 11, 2012 6:35 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by telemark »

palanzo wrote: Sat Oct 31, 2020 9:34 pm
arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
SIPC coverage is not a pro. It's required in a brokerage account because of the potential for the brokerage to fail. It only covers up to $500,000. What are you going to do with amounts in excess of $500,000?

https://www.sipc.org/for-investors/introduction

The mutual fund arm of Vanguard cannot fail in the same way that a brokerage can fail. I think it is deceptive of Vanguard to market this as a feature.
I tend to agree. Vanguard never says outright that your money is safer in a brokerage account. That would be incorrect. But they do leave the door open rather invitingly for customers to reach that conclusion on their own.
palanzo
Posts: 2146
Joined: Thu Oct 10, 2019 4:28 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

talzara wrote: Sun Nov 01, 2020 1:10 pm
arcticpineapplecorp. wrote: Sun Nov 01, 2020 10:53 am Also regarding SIPC, yes I was going to point out it's $500k only, but I wasn't aware of any similar coverage under the mutual fund platform currently other than the assets are held in trust by a third party custodian I believe.
With a mutual fund account, you are exposed to the risk of the mutual fund failing. The custodian holds the underlying securities, which prevents Vanguard from being a Ponzi scheme. The mutual fund's statements and the custodian's records are periodically audited and reconciled with each other.

With a brokerage account, you are exposed to the same risks of the mutual fund plus the risk of the brokerage. SIPC protection insures the first $500k of that, leaving you exposed for amounts over $500k. The Lloyd's policy can be disregarded, since the aggregate limit is so low that it'll pay less than a penny on the dollar.

This is why SIPC protection is not a plus. It is better to have no brokerage risk at all, rather than brokerage risk that is only partially insured. You don't need insurance when you have no risk.
palanzo wrote: Sun Nov 01, 2020 12:06 pm
abuss368 wrote: Sun Nov 01, 2020 11:22 am Believe Vanguard mutual funds were held by JP Morgan.
They still are.
Vanguard mutual funds have used JP Morgan Chase, State Street, BNY Mellon, and Brown Brothers Harriman as custodian banks.

The custodian bank is identified in the mutual fund's Statement of Additional Information. Vanguard sometimes moves funds from one custodian bank to another.
Thank you for the additional information about the other custodians.

What is the risk of the mutual fund failing? What scenarios are likely?
User avatar
telemark
Posts: 3389
Joined: Sat Aug 11, 2012 6:35 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by telemark »

UpperNwGuy wrote: Sat Oct 31, 2020 9:57 pm
palanzo wrote: Sat Oct 31, 2020 9:48 pm
UpperNwGuy wrote: Sat Oct 31, 2020 9:39 pm
palanzo wrote: Sat Oct 31, 2020 9:34 pm The mutual fund arm of Vanguard cannot fail in the same way that a brokerage can fail.
Please explain why this is true.
It's all explained on the Boglehead's blog.

https://www.bogleheads.org/wiki/SIPC_pr ... tual_funds
It's not explained very well there. It needs to be rewritten. Is this your sole authority for making your statement that the mutual fund arm of Vanguard cannot fail?
It's not obvious, at least to me, that a better version of the wiki is just waiting to be written. Complex subjects can't always be explained as simply as we would like.

And no one has said that the mutual fund arm cannot fail, only that it can't fail in a specific way. Conceivably, Vanguard mutual funds could fail due to some combination of bad luck/bad judgement/misfeasance/malfeasance/fraud/incompetence/whatever. But in that case SIPC insurance would not protect you, even if you owned them in a brokerage account, because SIPC only covers problems at the brokerage and this would not have happened at the brokerage. Short form: SIPC protects you if securities go missing, but not if they go bad.
User avatar
telemark
Posts: 3389
Joined: Sat Aug 11, 2012 6:35 am

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by telemark »

palanzo wrote: Sat Oct 31, 2020 9:34 pm SIPC coverage is not a pro. It's required in a brokerage account because of the potential for the brokerage to fail. It only covers up to $500,000. What are you going to do with amounts in excess of $500,000?
SIPC only covers to $500,000, but according to this link from the Wiki, Vanguard has bought additional coverage, from Lloyds of London no less, above and beyond that amount. More reason to wonder, by the way, how operating a brokerage is saving Vanguard money.
palanzo
Posts: 2146
Joined: Thu Oct 10, 2019 4:28 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

telemark wrote: Sun Nov 01, 2020 1:50 pm
palanzo wrote: Sat Oct 31, 2020 9:34 pm SIPC coverage is not a pro. It's required in a brokerage account because of the potential for the brokerage to fail. It only covers up to $500,000. What are you going to do with amounts in excess of $500,000?
SIPC only covers to $500,000, but according to this link from the Wiki, Vanguard has bought additional coverage, from Lloyds of London no less, above and beyond that amount. More reason to wonder, by the way, how operating a brokerage is saving Vanguard money.
As talzara said above:
The Lloyd's policy can be disregarded, since the aggregate limit is so low that it'll pay less than a penny on the dollar.
The additional coverage is irrelevant in my opinion.
palanzo
Posts: 2146
Joined: Thu Oct 10, 2019 4:28 pm

Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

telemark wrote: Sun Nov 01, 2020 1:35 pm
palanzo wrote: Sat Oct 31, 2020 9:34 pm
arcticpineapplecorp. wrote: Sat Oct 31, 2020 8:12 pm con to transfer to brokerage:
arbitration

pro to transfer to brokerage:
SIPC

i haven't transferred yet, but was already told if in the future I inherit (along with my brother) any of my mom's assets remaining at Vanguard (now in brokerage) I'd have to transition to brokerage to aquire those assets (IRA/Roth IRA, brokerage).

hopefully that's a long time off, but before then it appears Vanguard will be making the switch or asking me to go elsewhere. The countdown begins.
SIPC coverage is not a pro. It's required in a brokerage account because of the potential for the brokerage to fail. It only covers up to $500,000. What are you going to do with amounts in excess of $500,000?

https://www.sipc.org/for-investors/introduction

The mutual fund arm of Vanguard cannot fail in the same way that a brokerage can fail. I think it is deceptive of Vanguard to market this as a feature.
I tend to agree. Vanguard never says outright that your money is safer in a brokerage account. That would be incorrect. But they do leave the door open rather invitingly for customers to reach that conclusion on their own.
Even worse a Vanguard representative told me it was better to move to the brokerage account because of the SIPC insurance. I think that Vanguard has created a script for the representatives to follow.
Post Reply