I must have been asleep when civilization collapsed. Anyone know the date?
I say this because I haven't done much with our mutual funds for a few years -- just tweaked 'em periodically. Most of the purchases have been through my employer -- 401K, ESPP, and so on.
Recently though I decided to do some realignment and cleanup at Vanguard and Fidelity. The results were ... interesting.
At Fidelity I discovered two of our larger funds were now in some kind of semi-frozen legacy mode. Sometime in the past few years Fidelity switched from managing mutual funds to managing only brokerage funds. Our mutual funds can be sold and we can do exchanges, but I don't think we can buy new shares (or at least it's not obvious). We have to move them into new brokerage accounts -- presumably without a tax event.
I'm sure Fidelity sent us some kind of notification, and I'm sure it was intentionally obscure. Why did they do this? I presume to avoid regulation or increase fees. I'm very sure they didn't do it for our benefit.
Ok, over to Vanguard. I'll see if I can get some olf-fashioned deposit slips ...
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Oookaayyy. I better report that ....
Hmm, let's see what happens when I try to deposit ...
Ahh, yes. The world financial collapse and the Zero Lower Bound. Vanguard (and Fidelity) don't earn any interest on US Treasuries, so they don't want me to buy any more. The "protection" is to prevent them losing so much money they have to "break the buck" and return less than $1/share. That's probably what induced the non-reportable bug with deposit slips.
Between them Vanguard and Fidelity manage $3-4 trillion. A trillion isn't what it used to be, but it's still a fair amount of money. Enough money that our family investments are just noise. The megafunds don't work for us any more.
I guess we'll just have to wait for hackers to use our stolen credentials to empty our accounts. At least then we won't have to beg Vanguard and Fidelity for some attention.
Thinking about this, I think it's a tiny artifact of the huge wealth concentration of the past thirty years.
When Emily and I first started putting money in mutual funds there was a market of self-managed investors. I'm guessing 5-10% of the population could put non-retirement money into mutual funds and wasn't wealthy enough to hire a full time professional money manager.
Flash forward to 2014. 0.5% of the population now holds most of our wealth -- and they almost all have professional money managers. About 98% is going to have money in home and retirement and cash. The fraction of the population that manages its own non-retirement mutual fund money is very small -- too small to be a market.
It's not the focus of this post, but for reference here's Fidelity's response on their reorg. Their response is not inconsistent with the hypothesis that ending their mutual fund accounts let them raise more fees (trading is a bad way to invest, but a good way to pay fees) and perhaps dodge regulations.
Fidelity started offering brokerage accounts, so customers can trade Fidelity and non-Fidelity mutual funds, stocks/ETFs, precious metals, CDs, and other fixed income products within the same account. In a mutual fund only account you can only trade Fidelity mutual funds.
You will not lose any benefits by moving your assets into a brokerage account, there are no fees to do that. There are also no account maintenance fees for brokerage accounts. Moving your assets in-kind from a mutual fund only account to a brokerage account is not a taxable event. We will continue to keep the cost basis of your positions.
FWIW, we decided to move the Fidelity US Treasury MM funds to a Vanguard Prime MM account -- mostly for sake of simplification and because the Treasury MM accounts look like they won't come back. We'll either move the S&P or liquidate and pay taxes. Overall we're continuing to slowly shift to Vanguard as the (slightly) lesser of the two evils.