Vanguard Brokerage Services (VBS) Account Opening Process Review

Vanguard recently announced a much lower commission schedule for Vanguard ETFs (free!) and all other common stocks when using their Vanguard Brokerage Services (VBS) account. With VBS, I can now buy and sell stocks, bonds, ETFs, CDs, and non-Vanguard mutual funds. If you meet certain asset level requirements, this would allow folks to add a great deal of flexibility to buy to my account at no added cost. If you have less than $50k in total household assets, there is a $20 annual fee (although it still might be worth it).

Last week, I opened a new Vanguard Brokerage Services account in my existing Roth IRA, which previously only held Vanguard mutual funds. The process was straightforward and much like opening any other brokerage account, except that most of my personal information was already filled in. From the Vanguard Brokerage FAQ:

How do I open a Vanguard Brokerage Services account?
To open a brokerage nonretirement account, traditional IRA, Roth IRA, SEP-IRA, or education savings account, you can:

* Complete an application form online. Use an e-signature to sign it, and then submit the form.
* Download an application form. Complete the form and mail it to Vanguard Brokerage Services.
* Request a form by mail. Contact us and we will send you an account application.

You can also call them up and have them start your application for you over the phone, although you’ll still have to finish it online. After logging in, I clicked on the “Complete an application form online.” option followed by “Add a new brokerage account to your existing Vanguard relationship.” This brought me to an overview screen (click to enlarge):

Application Highlights

  • I confirmed the Roth IRA account and my personal information. As an existing client, all of the information was pre-filled.
  • I chose whether I wanted to automatically reinvest dividends or transfer them to my money market settlement account.
  • I chose the money market fund that I wished to be my settlement account. The only choice was the Prime Money Market Fund (VMMXX), as this was a retirement account. For taxable account, I could have also chosen the Tax-Exempt Money Market Fund. Since this is the sweep account where all the cash sits when not invested, there is no minimum balance requirement.
  • I entered my employment information and industry affiliations, which is required on all brokerage accounts.
  • I reviewed funding information (bank transfer, check, wire, selling shares). Since I already have some bank accounts linked, I can fund later using those methods after the account is opened.
  • I chose to electronically sign the application. It took about a business day or so for the account to be approved. I did not need a notary, medallion signature guarantee, or any other physical paperwork.

In total, this took less than the 10 minutes suggested. I knew that my account was approved when I logged in the next day and was asked to sign various agreement for stock quotes from the NASDAQ, NYSE, and Options Price Reporting Authority. While viewing my accounts, I really didn’t notice much difference except for the new money market fund that popped up in my Roth IRA.

I haven’t made any trades yet, but since it is an IRA and I’ve already made my contributions this year, I will have to either sell or convert some of my existing mutual fund holdings. I did make a few test runs on the stock trading interface. There is a regular interface like all other brokerages and a “guided trading path” version which is a Q&A-based system for “investors with limited online trading experience.” Nothing terribly special to report there.

In summary, in my experience the VBS opening process for an existing customer was very easy with no surprises. If this was a taxable account, I could simply use an online bank transfer and start trading as soon the funds were available. I am still doing some research on funds availability and settlement times for when you want to make a trade quickly.

Comments

  1. You have to love free, RIGHT? LOL…Seriously, I think ETFs go great with Vanguard. Vanguard is a great place to learn about the basics of investing. They keep things simple and low cost. I wasn’t aware they lowered their commission. I may have to consider transferring an account to Vanguard.

  2. Jonathan,

    Thanks for posting this review. Have you given much thought to whether you intend to have VBS convert your existing Roth IRA mutual fund holdings over to the ETF share class? I’m just curious as to what your plans are in general — or if you’re just testing the waters at this stage.

  3. Follow-up:

    For retirement accounts, the only sweep option is Vanguard Prime Money Market fund.

    For taxable accounts you can use either the Prime Money Market fund or the Tax Exempt Money Market fund.

  4. Ken in Georgia says:

    This is only a distantly related post for this topic, but as a long time Vanguard customer I had to say it. For as great as Vanguard’s funds and services are, their brokerage account statements stink. They even revamped them in the past year, and they still stink. We don’t have that large or sophisticated a portfolio with them, but our monthly statement is 8 to 10 pages long, with much information being hard to find or unnecessairly spread over several pages. And then there’s blank pages just taking up space. In contrast, we have a comparable size account with Fidelity, and they manage to convey all the information we need on 4 concise, easy-to-read pages.

    I love Vanguard, but they just can seem to get this aspect of customer service right.

  5. @Pete – So far, I’m seriously looking at converting my VEIEX shares to VWO due to the difference in fees being bigger than other mutual fund/ETF pairs.

    @Ken – Thanks for the insight. I do like Fidelity’s statements. Vanguard’s tend to be… verbose? And even though they 3-hole punch for you, there is always a cover sheet or two that waste space, and they alternate between landscape and portrait orientation. I might just go back to e-statements, but I like having a paper copy for my important documents.

  6. Jonathan, how can can you setup periodic auto purchases using ETFs? Or are you planning to setup automatic buys of the Mutual funds; sell them and buy the equivalent ETFs later?

  7. Ahhhh, so many of you American guys have no idea how good you have it. Vanguard is more than a place to learn about money, it’s an amazing place to grow your wealth with low cost indexes. Indexing with Vanguard will ensure that you beat just about everyone else. OK, it should put you in the 90th percentile after taxes, especially if you’re disciplined.

    What other non profit fund companies are there in the world? TIA Cref for teachers comes to mind, but even it’s more expensive than Vanguard and a lot less flexible. I’m jealous of the opportunities American investors have….I really am.

    Cheers,
    Andrew

  8. Jonathan,

    Are you planning on reinvesting your dividends?

  9. Senthil says:

    Jonathan,

    I have the same question as John.Is it possible to setup periodic auto purchases of ETF in Vanguard.

    Will appreciate any info in this regard.

    Thanks,
    Senthil

  10. @John, Senthil – No, there is no way that I know of to make periodic automatic purchases of ETFs at Vanguard. The only dollar-based stock purchases programs are at specialized sites like Sharebuilder.

    @Eric – I am reinvesting my dividends, yes. Definitely for the IRA, as this avoids having idle cash. One thing I don’t like about reinvesting dividends is the extra cost basis accounting, but that’s not a problem in IRA either.

  11. No Mames Buey says:

    how does Vanguard Brokerage Services (VBS) compare with Wellstrade with the 25K limit & 100 free annual trades? Anyone have experience using both? I’d love to hear your experience & opinion!

    My gut says VBS. pay the $20 annual account fee, & the few ~5 trades a year for non-VG ETFs, & have the comfort of knowing VBS is likely to continue as it is (or better) for years.

    Whereas with Wellstrade I feel they could randomly change the “account rules” & I’d have to pay bogus fees & have to transfer to another custodian ASAP.

  12. Jonathan – Would you be able to provide a quick breakdown of the pros and cons of investing in a Vanguard mutual fund vs a Vanguard ETF? I am uncertain as to which option to choose, though I am certain there are legitimate reasons to choose one vs the other. Thank you.

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