Vanguard is trying to encourage folks with Mutual Fund accounts to move to Brokerage Accounts. I will summarize below reasons why you might want one account type or the other. If folks make valid points I will update this master list. Also, since there is a separate thread about misconceptions on the Brokerage account I won't list those here. I will start a list here about misconceptions on the Mutual Fund Account Type/Platform in order to better inform folks that may have read some of these statements below or in other threads.
Reasons to keep your Vanguard Mutual Fund account:
- It's what you used for years. If it is working for you, why change
- You work in the financial industry and holding a Brokerage Account may break compliance regulations (or holding a Brokerage account may require you to report every transaction to your employer).
- You want the ability to auto-reinvest dividends/gains between different Mutual Funds (you currently can't do this with Brokerage Accounts)
- You don't want to be tempted to buy other Vanguard products which are only available to folks with Brokerage Accounts
- 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
- Mutual Fund accounts provide year end statements showing a full year of transactions, Brokerage account does not.
- Ability to write checks on multiple individual funds (one checkbook possible per fund).
- You can make a direct transaction/trade between two mutual funds. For brokerage, all transactions go through the sweep account, which shows as two transactions for each exchange.
- The fund shares are held in your name as the registered owner, with a Brokerage account the owner is Vanguard Brokerage Services. This isn't really just an "Account Type" or "Platform" change (if it were; Vanguard could shift you to the new "platform" without your permission). It is also a legal structure change (and some feel adding the Brokerage holder to your Mutual Funds inherently adds risks; although most agree with Vanguard those risks are minimized).
- If you shift from "Fund Account" to "Brokerage Account" you will have two sets of tax-forms for the year within which you make the change.
Reasons to move to a Vanguard Brokerage account:
- You want to invest in ETFs, stocks, or other investments; beyond just Mutual Funds.
- You have grown tired of Vanguard asking you to move; you have decided for you there is no downside to making the move
- You want to give Vanguard the benefit of the doubt and move to their platform as requested.
- All fund dividends are reported as a single line on 1099B versus Fund account which has each fund as a separate line item from a separate payer.
Some common Misconceptions:
- Regarding misconceptions about Vanguard Brokerage Accounts, Cheez-It Guy has an on-going discussion here: viewtopic.php?p=5577271
- Misconceptions about the Mutual Fund Platform/Account-Type include:
- New Users can NOT open an account on the Mutual Fund Platform: There have been mixed reports on whether or not this is true. The default account type is now Brokerage and while it may no longer be possible to open an account on the Mutual Fund Platform online; some users have reported success in getting accounts recently opened by mentioning regulatory compliance as the reason they need a Mutual Fund Account (others have reported they were unable to do so) - call vanguard to see - paper submitted applications will be necessary.
- All the difference are already summarized by Vanguard in this PDF: https://www.vanguard.com/pdf/vbafqm.pdf. NOT True. Some of the differences listed above have been missed in this paper. There are also some misleading statements that may be irrelevant to the decision listed (e.g. SIPC protection). For more details reference discussion below.
- Vanguard has confirmed they will start removing features from the Mutual Fund Platform. This has NOT been confirmed, the most recent email I received stated that they "may" remove features. If features are removed I will add them to the list above.
- SIPC insurance is an advantage of Brokerage accounts. FALSE. In a brokerage account, the broker holds the funds which is why you want SIPC protection. In a Fund account you are the direct owner of the fund shares such that SIPC is not necessary. Explained further on the wiki (https://www.bogleheads.org/wiki/SIPC_pr ... tual_funds).