Vanguard Brokerage versus Mutual Fund Account Decision thread

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SmileyFace
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Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

[Please see the OP's 2022 update in this post --admin LadyGeek]

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).
Last edited by SmileyFace on Tue Nov 03, 2020 12:20 pm, edited 19 times in total.
Fclevz
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Fclevz »

Is there really a decision, other than in the short-term?
It seems Vanguard will force the change eventually, or invite you to go somewhere else.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by bling »

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

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?

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Trev H »

Got an email from Vanguard recently suggesting we make that change... have not done it yet.

But notice below.. in the text from their email...

==
More about the retirement

We're working toward the retirement of our old investment platform, which supports accounts that only hold Vanguard mutual funds. 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.
==

2022 or earlier...

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...

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 ?

Thanks

Trev H
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

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?

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.
I am trying to stick to the facts in original post.
I wouldn't consider "because Vanguard want me to" to be a reason - why do they want me to? Maybe because they want to sell me other products. They probably want me to pay for PAS but I am not doing that either.
I clearly say auto reinvest between "different" funds.
I don't know for certain it is only 1-2 weeks. If someone validates dates (not IRS regulation dates but real receipt dates) I will update.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by stan1 »

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 ?
It takes multiple business days (2 or 3) to do the account conversion, so you'd really have to get good advice from Vanguard on whether this is even possible. It is not overnight.

Vanguard does not make it easy.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by LadyGeek »

This thread is now in the Investing - Theory, News & General forum (general discussion).

Cheez-It Guy has an on-going discussion here: Vanguard Brokerage Account Misinformation Correction Thread
Cheez-It Guy wrote: Sat Oct 31, 2020 8:53 am After reading probably dozens of threads touching on some variant of the conversion from Vanguard Mutual Fund Accounts to "New Format" Vanguard Brokerage Accounts (or sometimes the differences between mutual funds and ETFs), I notice many of the same pieces of misinformation repeatedly popping up. I don't suggest there's anything malicious here, but it seems to be either based on dated information which may have once been correct but no longer is, or it is simply repeated wrong information as an unwitting form of confirmation bias. While I've frequently posted attempts to correct this on an individual basis, I hope this topic can serve to concisely dispel some of the apparently ongoing misconceptions, and I hope at least some users find it helpful. I have been on the new platform for several years now.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

SmileyFace wrote: Sat Oct 31, 2020 1:16 pm I wouldn't consider "because Vanguard want me to" to be a reason - why do they want me to? Maybe because they want to sell me other products. They probably want me to pay for PAS but I am not doing that either.
I guess it depends on whether you believe Vanguard or not. The stated reason they want you to is so they can simplify and support a unified platform going forward rather than splitting resources between two or three. I'll give them the benefit of the doubt that they know better than me what drives their costs and operational efficiencies. I'd agree that it's not a strong reason in isolation, but you posed the question as "why change", so I stated what I think is at least a valid one -- because the administrator of your accounts wants you to change. Sure, you can push back, and certainly you should give your feedback at every stage, but don't think you're taking a brave stand by doing this, because you're only going to become increasingly bitter and dissatisfied. Given their huge size, Vanguard is unlikely to care too much about losing the assets of any individual retail investor. Again, I don't care what individuals do when presented with the facts upon which to make the best decision for them, but if making this small change after the increased nagging is still a big hurdle, indeed, perhaps it's better to look elsewhere (which of course is actually a bigger change, but maybe it will make the individual feel better).

SmileyFace wrote: Sat Oct 31, 2020 1:16 pm I clearly say auto reinvest between "different" funds.
I'm really not looking to argue over minutiae, but your leading post should be factually correct and unambiguous. Read your original post. It does not contain the word different. I think that adds clarity. It's an important distinction, because some demonstrably believe that dividend reinvestment is completely unavailable on the new platform, which is not the case.

SmileyFace wrote: Sat Oct 31, 2020 1:16 pm I don't know for certain it is only 1-2 weeks. If someone validates dates (not IRS regulation dates but real receipt dates) I will update.
https://investor.vanguard.com/taxes/tax-forms/
1099-DIV When it will be ready
- Mid-January for most mutual fund accounts.*
- Late January for brokerage accounts with only Vanguard mutual funds and/or ETFs and simple securities that don't typically reclassify income.*
- Mid-February for brokerage accounts with complex securities and additional mutual funds and/or ETFs.*
*Mutual fund or brokerage accounts with the REIT Index Fund and the Managed Payout Fund will be available mid-February.
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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

Cheez-It Guy wrote:
I'm really not looking to argue over minutiae, but your leading post should be factually correct and unambiguous. Read your original post. It does not contain the word different. I think that adds clarity. It's an important distinction, because some demonstrably believe that dividend reinvestment is completely unavailable on the new platform, which is not the case.
Okay - I inititially said "between" - which to me was unambiguous. Added the word "different" based upon this feedback.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

Cheez-It Guy wrote: Sat Oct 31, 2020 2:28 pm
The stated reason they want you to is so they can simplify and support a unified platform going forward rather than splitting resources between two or three. I'll give them the benefit of the doubt that they know better than me what drives their costs and operational efficiencies.
Added another bullet to the "why brokerage" list.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Nate79 »

Fclevz wrote: Sat Oct 31, 2020 12:15 pm Is there really a decision, other than in the short-term?
It seems Vanguard will force the change eventually, or invite you to go somewhere else.
Correct. The platform will be shut down in a couple of years. The first step, already confirmed is that they will be severely restricting the accounts and eventually freeze and then all will be transitioned.

I do not understand the folks who want to do the transition by force at the last second. Instead I would do it on my own schedule when nothing critical is happening such that if it doesnt go smoothly you are not in a bind.

Regardless in a couple of years this will be moot when everyone has transitioned. For those that continue to stick their heads in the sand, well, get ready. Its coming.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

SmileyFace wrote: Sat Oct 31, 2020 2:45 pm
Cheez-It Guy wrote: Sat Oct 31, 2020 2:28 pm
The stated reason they want you to is so they can simplify and support a unified platform going forward rather than splitting resources between two or three. I'll give them the benefit of the doubt that they know better than me what drives their costs and operational efficiencies.
Added another bullet to the "why brokerage" list.
Another bullet for the "Why Mutual Fund" is that as some people in other threads have mentioned the UI/UX of the MF Platform is cleaner and the workflows are more straightforward. The Brokerage UI/UX is cluttered and not as easy to use.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Miriam2 »

I have been at Vanguard since early 1990's. Being a Luddite :mrgreen: I resisted the move to brokerage accounts.

Then when we rolled over our 401k's to Vanguard, the only option for new accounts were the brokerage accounts. So into the Rollover IRA brokerage accounts went the 401k's. As far as I could tell, they were really no different than our old Schwab and TDAmeritrade brokerage accounts that held stocks and mutual funds.

So I then simply switched all our accounts at Vanguard to brokerage accounts; took about a day for the transitions to be completed, not several days. Everything transitioned smoothly, even in the middle of receiving dividends and capital gains. Quite frankly, none of my old Luddite fears really mattered. Once we had them, they were fine.

Reminds me of my fears of transitioning from Windows 7 to Windows 10. I resisted and Microsoft did it for me without my "approval" :annoyed of course, I learned the new features and all is well with my computer :mrgreen:

For mutual fund investors who have never had brokerage "settlement accounts," it will be a short learning curve. They are useful accounts to collect funds, dividends and cap gains before deploying them where I want them to go, even to my kids' accounts. I did lose the ability to send dividends and cap gains from one mutual fund to another, but now that that's gone, I wonder why I even needed to do that anyway.

With the brokerage accounts, the year-end statements are for that quarter and do not list the full year's transaction activity. It's not a problem because we simply download the account's transaction history document from Vanguard for the full year and put that with our statements. Yes, I still print out statements, not sure how many Bogleheads still do that.

I had my kids do the brokerage transfers themselves for their accounts - their attitude was, "oh, ok, done." In fact, new investors at Vanguard have only brokerage accounts. They don't know what they missed 8-)
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by tfb »

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."
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by tfb »

SmileyFace wrote: Sat Oct 31, 2020 12:11 pm Reasons to keep your Vanguard Mutual Fund account:
From the other thread, add "check writing on multiple individual funds." If you have two funds that support check writing, you can have two separate checkbooks. It sounds like the brokerage account only has one checkbook which uses the settlement fund plus one fund as the backup.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Broken Man 1999 »

DW and I are on the brokerage platform, and listed below are the dates of our 1099R tax documents:

-1099-R 2020-01-11
-1099-R 2019-01-13
-1099-R 2018-01-14
-1099-R 2017-01-16
-1099-R 2016-01-19
- Consolidated Form 1099 2015-02-23

Those are the dates of our only tax documents since we transitioned to the brokerage platform. In 2015 we received our last Consolidated Form 1099. W haven't had any dividends in our taxable account for years, though I screwed up and will have some this year.

IMHO, those document were received in good time, more than good for us as we always owe taxes and aren't in any hurry to send them.

The 1099R forms aren't downloaded by me until I finish our taxes. I already know exactly what the numbers are before the end of the calendar year.

We don't receive any paper documents from Vanguard except the household statement at the end of the year.

Now, honestly these are the only dates I have to work with. I don't download them until I am ready to do our taxes, usually in mid April, this year in mid July. I would think the forms would be available for download on or very close to the date on the forms.

I'll make a point to see when they are available for download next year.

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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by sycamore »

SmileyFace wrote: Sat Oct 31, 2020 12:11 pm If folks make valid points I will update this master list.
Here's a (very) small point in favor of converting...

For those who hold multiple funds in a taxable brokerage account, the funds' dividend distributions are recorded as a single amount from Vanguard Marketing Corporation, so you only have to enter one line on Schedule B of your tax return.

On the old platform, each fund's distribution is recorded from a different payer (one per fund) so you have to enter multiple lines on Schedule B. Well, I suppose some people will just add up all the dividends and enter it as a single value anyway, but I always listed them out separately.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

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sycamore wrote: Sat Oct 31, 2020 3:10 pm
SmileyFace wrote: Sat Oct 31, 2020 12:11 pm If folks make valid points I will update this master list.
Here's a (very) small point in favor of converting...

For those who hold multiple funds in a taxable brokerage account, the funds' dividend distributions are recorded as a single amount from Vanguard Marketing Corporation, so you only have to enter one line on Schedule B of your tax return.

On the old platform, each fund's distribution is recorded from a different payer (one per fund) so you have to enter multiple lines on Schedule B. Well, I suppose some people will just add up all the dividends and enter it as a single value anyway, but I always listed them out separately.
Thanks. Point added.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Danw »

If you are grandfathered in a joint taxable mutual fund account with a beneficiary, there seems to be no guarantee that you will keep the beneficiary if you transition to a brokerage account.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

Danw wrote: Sat Oct 31, 2020 4:00 pm If you are grandfathered in a joint taxable mutual fund account with a beneficiary, there seems to be no guarantee that you will keep the beneficiary if you transition to a brokerage account.
What happens to the beneficiary if you transition to a brokerage account?
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Danw »

I suspect it is removed.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

Danw wrote: Sat Oct 31, 2020 4:26 pm I suspect it is removed.
Presumably you can set it up again? What is the process for doing this?
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Broken Man 1999 »

palanzo wrote: Sat Oct 31, 2020 4:10 pm
Danw wrote: Sat Oct 31, 2020 4:00 pm If you are grandfathered in a joint taxable mutual fund account with a beneficiary, there seems to be no guarantee that you will keep the beneficiary if you transition to a brokerage account.
What happens to the beneficiary if you transition to a brokerage account?
Nothing at all happened to our joint account beneficiaries when we transitioned. That was a few years ago, a Vanguard rep set up everything while we were on the phone with him.

Can one do a transition without a rep now?

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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Danw »

That is good to hear.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Miriam2 »

palanzo wrote:
Danw wrote: If you are grandfathered in a joint taxable mutual fund account with a beneficiary, there seems to be no guarantee that you will keep the beneficiary if you transition to a brokerage account.
What happens to the beneficiary if you transition to a brokerage account?
All our beneficiaries remained accurate in all our accounts that we transitioned from mutual fund accounts to brokerage accounts. Furthermore, our Full Agent Authorizations (that allow us to fully see and access each other's other accounts, including IRAs, and to make investment changes in those accounts) also fully transitioned over.

However, it's always a good idea to check your beneficiaries in all accounts everywhere each year or so, to make sure there are no surprises :wink:
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by JD2775 »

I’m confused....

Didn’t they start this transition over a year ago? My Roth and Taxable are both Brokerage accounts now, but I still have my cpl index funds invested in them. VTSAX and VFIAX. Nothing has changed and I haven’t noticed any differences at all, but maybe I am missing something
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by stan1 »

SmileyFace wrote: Sat Oct 31, 2020 12:11 pm Reasons to keep your Vanguard Mutual Fund account:
- You work in the financial industry and holding a Brokerage Account may break compliance regulations.
This one isn't that big of a deal. There's a way forward. People can easily convert their Vanguard indexed mutual funds to ETFs and transfer them to the brokerage(s) that meet their employer's compliance department. They can transfer their active Vanguard funds there too and just buy ETFs going forward. I suppose there's a few outliers who still would want to buy shares in Vanguard active mutual funds or who are philosophically/morally opposed to ETFs despite no data to support that belief.

Or if they really like Vanguard they can quit their jobs that have a compliance requirement.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

JD2775 wrote: Sat Oct 31, 2020 5:06 pm I’m confused....

Didn’t they start this transition over a year ago? My Roth and Taxable are both Brokerage accounts now, but I still have my cpl index funds invested in them. VTSAX and VFIAX. Nothing has changed and I haven’t noticed any differences at all, but maybe I am missing something
Yes - started over a year ago. They were originally saying it would be discontinued 2021 or earlier; now saying 2022 or earlier. We will see how long they keep kicking the can down the road. To most people the conversion probably doesn't matter. My goal here was simply to summarize the points made over many pages in the back-and-forth on other pages. There is a separate thread that lists "corrected misinformation" which is mostly a list of items you can get with either account type - I did not repeat those here.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by tibbitts »

Is Vanguard going to provide the ability to direct dividends and capital gains from one fund to another in a brokerage account? What's preventing this from happening?
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by SmileyFace »

tibbitts wrote: Sat Oct 31, 2020 6:13 pm Is Vanguard going to provide the ability to direct dividends and capital gains from one fund to another in a brokerage account? What's preventing this from happening?
Good questions. I don't know the answer to either one. Vanguard couldn't tell me. If you get an answer from them please let us know.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by tibbitts »

Historically, Vanguard has allowed mutual fund account holders to retain Admiral class funds where the balance has dropped below the required minimum due entirely to market activity. Does anyone have experience knowing if Admiral class is retained following a conversion to a brokerage account, even without a minimum balance? I believe it can't be retained when moving from mutual fund account to another (like from tIRA to Roth), even in a mutual fund account (very annoying, incidentally.)
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

tibbitts wrote: Sat Oct 31, 2020 6:18 pm Historically, Vanguard has allowed mutual fund account holders to retain Admiral class funds where the balance has dropped below the required minimum due entirely to market activity. Does anyone have experience knowing if Admiral class is retained following a conversion to a brokerage account, even without a minimum balance? I believe it can't be retained when moving from mutual fund account to another (like from tIRA to Roth), even in a mutual fund account (very annoying, incidentally.)
I don't know the answer, but I suppose you are aware that Vanguard dropped the minimum investment for Admiral share class on many funds not too long ago, and effectively eliminated the old investor share class? I guess it depends on specifically what fund you're referring to, because some (especially active funds) still have fairly high minimums, but maybe it's a non-issue. Check your funds for new minimums if you haven't already. They've lowered several times over the years.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by Cheez-It Guy »

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."
I can't tell whether you're joking or not on this one. Everyone's entitled to their interpretation, but you could also say that two seconds is twice as long as one second. That doesn't make it a long time. What if we instead look at a percentage of the time to tax day in a non-leap year? That's 31 + 28 + 31 + 15 = 105 days to April 15. Getting 1099s on January 16 (just a guess for "mid-January") is 15% of the way to tax day, leaving you 85%. Getting 1099s on January 26 is 25% of the way to tax day, leaving you 75%. Both are plenty early in my opinion.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by tibbitts »

Cheez-It Guy wrote: Sat Oct 31, 2020 6:55 pm I don't know the answer, but I suppose you are aware that Vanguard dropped the minimum investment for Admiral share class on many funds not too long ago, and effectively eliminated the old investor share class? I guess it depends on specifically what fund you're referring to, because some (especially active funds) still have fairly high minimums, but maybe it's a non-issue. Check your funds for new minimums if you haven't already. They've lowered several times over the years.
I don't believe Vanguard dropped any minimums for active funds, although I think they should have. $50k - $100k is a bit steep, especially since some of them don't give that much of an expense break for Admiral.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by UpperNwGuy »

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by mkc »

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by arcticpineapplecorp. »

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by sycamore »

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 :)
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by beyou »

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by UpperNwGuy »

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?
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by UpperNwGuy »

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by rkhusky »

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.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

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
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by UpperNwGuy »

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?
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by abuss368 »

I made two changes:

* Transitioned to Brokerage platform as Vanguard said this would be required of everyone in next year or two.

* Moved from traditional mutual funds to ETFs.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by palanzo »

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 is very easy to criticize. Perhaps you would volunteer to rewrite it in that case? There are other threads on how Vanguard mutual funds hold their assets in comparison to the Vanguard brokerage. I'm really surprised that people are not more aware of how their assets are actually held and the risks.
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by abuss368 »

Fclevz wrote: Sat Oct 31, 2020 12:15 pm Is there really a decision, other than in the short-term?
It seems Vanguard will force the change eventually, or invite you to go somewhere else.
I had a few telephone calls with Vanguard in the past couple of weeks and this was what I was told as well. The plan is to move everyone over the the brokerage platform. Once I completed the transition, I really did not see what the big deal was. In fact I prefer the new system and ETFs. I was tired of the 30 day bans everytime I would rebalance with the traditional mutual funds.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Vanguard Brokerage versus Mutual Fund Account Decision thread

Post by UpperNwGuy »

palanzo wrote: Sat Oct 31, 2020 10:07 pm
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 is very easy to criticize. Perhaps you would volunteer to rewrite it in that case? There are other threads on how Vanguard mutual funds hold their assets in comparison to the Vanguard brokerage. I'm really surprised that people are not more aware of how their assets are actually held and the risks.
How am I going to rewrite it when I don't even understand it? Usually the experts on our forum write such things.
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