I rolled my 401K (previously held by Vanguard) into a brokerage account (currently at Waterhouse).

On the Vanguard form, there is something that stated that I could "transfer shares in kind." To me, that meant that all of my S&P 500 shares would transfer directly to Waterhouse AS SUCH. I knew that Waterhouse offers the fund, so I never suspected a problem.

So, my money finally shows up in my Waterhouse account in the form of -- CASH! In a money market fund! This is NOT what I wanted! My shares were liquidated!

Vanguard said that it is their policy to liquidate ALL 401K funds and issue a CHECK to the broker. But how can this be if they had a form that said to transfer shares "in kind"? And why didn't Waterhouse immediately repurchase my fund?

Waterhouse is saying this is Vanguard's fault and Vanguard is saying this is Waterhouse's fault. Meantime, my money has been OUT of the nice run-up from 115 to 125.

Each company is saying that it is the other's responsibility to give me a "day-of trade," which is to essentially go back to the day my money was transferred, and get me back into my S&P 500 fund at the price it was on the day I my money was transferred. Neither of them wants to eat the losses they'd incur in doing this.

What should I do?! Help is MUCH appreciated!

--AF

AliFool,

I know this isn't an answer to you question but I can't help wondering what your reasoning is for transferring your VFINX holdings from Vanguard to Waterhouse were you now have to pay a $24 transfer fee every time you buy shares? Am I missing something here?

ES

Hi... yes -- you are missing these things:

I didn't want to sell and rebuy, only TRANSFER from Vanguard 401K to Waterhouse Rollover IRA.

I wanted to transfer because I wanted to keep all my accounts with the same broker.

--AF

Thanks AliFool for your response, I'm glad to know those were the reasons. I have accounts are with TDW and Vanguard as well and I like to keep up to date.

I wish I could help out on the transfer question but I have no idea why they did it that way. It seems to me you were pretty clear on what you wanted.

Thanks again,

ES

I don't know if this helps, but when I opened my IRA with Vanguard, I wanted them to transfer my 500 index fund into the IRA. I was talking to them on the phone during this and at first they were going to cash enough shares to equal $2000 but I told them I would rather they transfer the shares into the IRA instead, which they did. Anyhow, maybe it is their policy to transfer cash and not shares, unless told to do so.

Thanks for the help. I think that this is so for regular IRAs, but may be slightly different since mine is from a former 401K plan with Vanguard. Thanks!

--AF

I certainly think your message should sound a warning for those who own mutual funds in self directed IRA accounts with brokerage firms. When you buy stocks in these accounts, I have never encountered any limit on what I can own. It is clear that the fees structure there is very standardized.

With mutual funds there are often problems. I suspect this means that the fee structures are negotiated between your broker and each mutual fund company. They prefer to liquidate shares rather than transfer them just to make sure what is in your account is within their contracts. Clearly it is very complicated.

So if your IRA account contains mutual fund shares, make sure you ask the receiving broker what happens--and maybe even get it in writing--before you attempt a transfer. Otherwise, you risk unexpected, hidden costs or at least frustrations getting it right.

I don't have an answer, AliFool, just a reaction. This is an outrage! It is very clear to me that Vanguard didn't follow your instructions. I encourage you to make some noise. Be a very squeeky wheel. Get the SEC involved, if you have to. You deserve to get all your shares back, without kicking in any more dollars. Sheesh!

Good luck.

Michael

Thanks for the supportive comments.

Well... Vanguard is once again looking into things. It will take them 3 days to dearchive my paperwork. Then, as long as I ONLY checked the "transfer in kind" box, and NOT ALSO the "transfer balance as cash" box, they will probably have to do some sort of reversal, or make an adjustment by paying me the difference of the value of the shares on the transfer date (Oct. 18) and the day they resolve this.

IF, on the other hand, I DID check the box saying "transfer balance as cash," there will be nothing they can do. I really DON'T think that I checked that box, so things should be OK.

Geeeeeeez... I'm SO glad they want to help! When a small investor like me loses some money over an error, it's a big deal, but for them it would be a small price to pay to compensate me for their own ridiculous paperwork and poor administration -- and for my retirement money that has been lost in the market in the meantime!!!

YOU CAN NEVER BE TOO CAREFUL!!!

--AF

When attempting this type of transfer I always include a letter with wording from my CPA or benefit plan specialist that makes very clear my intentions, just in case I get the form screwed up. Filling in forms is not my strong suit, but I can usually articulate my needs adequately in a letter. I have never had a problem with this way, even if an error occured (people handle these things), my backup paperwork clarifies the situation and any mistakes are corrected pronto. So far, anyway.

"Well... Vanguard is once again looking into things. It will take them 3 days to dearchive my paperwork. Then, as long as I ONLY checked the "transfer in kind" box, and NOT ALSO the "transfer balance as cash" box, they will probably have to do some sort of reversal, or make an adjustment by paying me the difference of the value of the shares on the transfer date (Oct. 18) and the day they resolve this.

IF, on the other hand, I DID check the box saying "transfer balance as cash," there will be nothing they can do. I really DON'T think that I checked that box, so things should be OK.

Geeeeeeez... I'm SO glad they want to help! When a small investor like me loses some money over an error, it's a big deal, but for them it would be a small price to pay to compensate me for their own ridiculous paperwork and poor administration -- and for my retirement money that has been lost in the market in the meantime!!!

YOU CAN NEVER BE TOO CAREFUL!!!"

Did you keep print-outs or copies of the forms? I usually do. This confirms me paranoia for continuing to keep copies of my coorespondence.

I have dealt with more than a few transfers and everytime I have dealt with Vanguard, I have been impressed with their quality and speed of service.

It sounds like they are willing to make the adjustment if you filled out the paperwork as you said. I have found Vanguard to be one of the easiest and best mutual funds to deal with.

There are many others that are good and only a few where I've had problems.

Please let us know how this turns out.


BGP