Why Is Vanguard Transitioning To Brokerage Accounts?

Vanguard has been attempting to persuade clients to transition their funds to their brokerage account platform for some time now. If you hold a Vanguard fund, you have likely seen emails or pop-ups asking you to transition your funds.

If you do not currently have a Vanguard brokerage account, you are probably among the many other customers wondering if you should make the transition.

Why Is Vanguard Transitioning To Brokerage Accounts? Vanguard is transitioning to brokerage accounts to better align with industry standards and to simplify their administrative processes.

By consolidating all of their clients’ accounts into a single brokerage account, Vanguard can offer a wider range of investment options, such as stocks, bonds, exchange-traded funds (ETFs), and certificates of deposit (CDs), all in one place.

This also allows Vanguard to streamline their operations and reduce costs associated with maintaining multiple account types. Additionally, transitioning to brokerage accounts may have helped Vanguard to upgrade their legacy software and improve their technology infrastructure

In this article, we’ll go over whether you should transition your Vanguard account and the potential benefits of doing so. I’ll also highlight some of the disadvantages of doing so and we’ll go over exactly what happens when you make the transition.

What happens if i don’t transition my Vanguard account?

Why Is Vanguard Transitioning To Brokerage Accounts?
Why Is Vanguard Transitioning To Brokerage Accounts?

Many Vanguard users have been reporting the appearance of a pop-up screen asking them to transition their account for some time now.

It is essential to understand that while Vanguard insists on doing this, it is voluntary.

Vanguard themselves have confirmed that customers are not required to transition if they do not wish to. So, the choice is really up to you. Let’s weigh the benefits and disadvantages of transitioning to get a better idea of what you should do.

Vanguard themselves have confirmed that customers are not required to transition if they do not wish to. So, the choice is really up to you. Let’s weigh the benefits and disadvantages of transitioning to get a better idea of what you should do.

Benefits of A vanguard transition to brokerage account

Benefits of transitioning to a Vanguard brokerage account
  • A way to diversify your investments: Transitioning is a way to diversify your portfolio. With a Vanguard brokerage account, you can hold mutual funds, ETFs, stocks, bonds, and CDs. You will also be able to hold ETFs from other companies. You can hold all of these in one account, making for more simplicity in managing your investments. 
  • Brokerage clients are insured by both the SIPC and Syndicates at Lloyd’s of London: All securities, including mutual fund holdings, are insured up to $500,000 USD (including $250,000 in cash claims) by the SIPC (Securities Investor Protection Corporation). Additionally, Vanguard has secured extra cover from Syndicates at Lloyd’s of London, which offers an aggregate limit of $250 million for all claims of securities and cash. It also incorporates a per client coverage limit of $49.5 million for securities and $1.9 million for cash.
  • Account management that is simple and hassle-free: You will receive more simplified records in the form of one statement and one consolidated tax form in the first year after the move to the new platform. The Vanguard brokerage platform also offers personal advisor services that include a customized financial plan, goal-setting, and investment advice. The personal advisor service does come with a fee of 0.03% of your total assets. 
  • Fee-free transition: Vanguard does not charge any fees, nor are there any tax implications for transitioning to the brokerage platform. 
  • Transitioning may help lower overall costs: Vanguard insists that streamlining their services and phasing out the old platform can help keep costs low for investors. Since Vanguard is known for its low-cost investments, this could be one reason to make the transition. If more people transition, Vanguard could consolidate costs and keep offers low. 

Disadvantages of transitioning to The vanguard new platform

do vanguard etfs automatically reinvest dividends

The brokerage platform leaves something to be desired: Some users report that they are unhappy with the brokerage platform. The Vanguard app does not get the best of reviews, as opposed to some other brokerage services. 

Vanguard users report that the app feels a bit outdated and could do with newer and more user-friendly features. The usability is somewhat lacking, and as a whole, the platform seems quite outdated compared to other brokerage platforms. 

A Money Main Street Reader helped provide some important information regarding this transition to Vanguard Legacy Account.

Its very important to know that this transition may well have tax consequences if you move your mutual funds over to the brokerage accounts.

In particular, your funds will be locked into whatever they were on the date of transfer. So anything you had, say, in average cost tax basis will be stuck in that.

They say no tax consequences and that all of your historic information switches to the new platform, but that is a misrepresentation and could cost you thousands of dollars because you will be giving up the ability to manage your cost basis on shares you transfer over.

You cannot direct dividends from one fund to another: If you transition to a brokerage account, you won’t be able to redirect dividends and capital gains distributions from one mutual fund into a different one.

You will also be unable to transition them into a sweep account. You will need to either reinvest shares of the distributing holding or distribute them in cash to your money market settlement fund.

Some employers may have restrictions on brokerage accounts: If you or your spouse are an employee of a financial services company, the employer may not allow you to have a brokerage account with Vanguard.

If you are in the financial services industry, you should check with your employer to see if you are permitted to hold funds in a Vanguard brokerage account on your current contract.

If you are in the financial services industry, you should check with your employer to see if you are permitted to hold funds in a Vanguard brokerage account on your current contract.

You cannot set up transfers in kind on certain investments.

These investments include: 

  • CDs held directly with a bank
  • Certain options
  • Limited partnerships and private placements
  • Certain mutual funds and other investment products are offered exclusively by your current firm
  • Certain low-priced securities traded over the counter (OTC) or on the pink sheets market
  • Commodities
  • Annuities
  • Life insurance policies

The minimum on funds is higher than some other brokerage platforms.

While minimums on mutual funds are somewhat common, many brokers waive the fees if investors agree to certain terms, such as monthly auto-deposits.

With Vanguard, most fund deposits are set at a minimum of either $1,000 or $3,000 USD. This may be a bit high for novice investors or those looking to set up a fund with a smaller deposit. 

Use this for vanguard legacy account transition https://logon.vanguard.com/logon.

What will happen to my accounts if I transition?

does vanguard withhold taxes on dividends

Most services will still be available on the brokerage platform. 

Some services will require you to fill out new forms, such as check writing. 

You will only need to fill out the form if your brokerage account does not have check-writing available already.

It is important to understand that check-writing privileges that you had on Vanguard funds will not carry over to the new brokerage account, and this is when you will need to submit a form and get a new checkbook. 

before after Vanguard broker

You will also need to establish any third-party access on your new account. This means that agents will not have immediate access to your account unless you grant access after transitioning. 

How long does the transition take?

The move will usually complete on the next business day if you transition before 4 p.m. EST. Mutual find assets will usually appear in your account on the second business day. 

Alternative To Vanguard:

If you are willing to use a more modern and self directed approach I really like M1 Finance.

The bottom line: Why Is Vanguard Transitioning To Brokerage Accounts?

Why Is Vanguard Transitioning To Brokerage Accounts? When it comes down to it, making the transition of your Vanguard account is not a bad decision. The good outweighs the bad, as there aren’t too many disadvantages associated with making the move.

Along with the benefits, transitioning will put an end to you being bothered by those pesky pop-ups and nagging messages about moving to the new platform!

Before you go…


What are common vanguard transition problems?

Common Vanguard transition problems include issues with the brokerage platform, delays in getting tax statements, and difficulties in transferring funds or investments. u003cbru003eu003cbru003eSome users have reported being unhappy with the Vanguard app and brokerage services compared to other providers. Additionally, the transition process may take longer than expected, and some users have experienced errors or glitches during the transfer of funds or investments. u003cbru003eu003cbru003eIt’s important to carefully review the terms and conditions of the transition and seek assistance from Vanguard customer support if you encounter any issues.

Why is vanguard switching to brokerage accounts?

Vanguard is switching to brokerage accounts to streamline their services and simplify their administrative processes. u003cbru003eu003cbru003eBy phasing out their old platform and consolidating their accounts onto one platform, Vanguard aims to lower costs for investors and provide better services. u003cbru003eu003cbru003eAdditionally, switching to brokerage accounts allows Vanguard to align with what other providers offer, such as Fidelity and Schwab. This change also allows Vanguard to move away from legacy software that they can no longer upgrade or maintain. u003cbru003eu003cbru003eBy transitioning to brokerage accounts, Vanguard can offer a wider range of investment options and better technology to their clients.

Do i have to transition my vanguard account

You are not required to transition your Vanguard account to a brokerage account if you do not wish to do so. u003cbru003eu003cbru003eWhile Vanguard has encouraged customers to transition to their new platform, they have confirmed that customers can continue to use their existing accounts if they prefer.

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