It didn't sink in when I read: "Mutual Fund Service Members of NSCC
are eligible to use the [ACAT] service on a limited basis, only as the contra-party to a transfer initiated by a broker dealer or a bank for the purpose of re-registering a mutual fund position to or from them directly."http://www.dtcc.com/clearing-services/equities-clearing-services/acats
What this means is that ACAT cannot be used to move assets into a fund held directly with the fund family. Normally not an issue because the fund can do an EFT or wire transfer from your bank. But if it's an IRA transfer, apparently it goes by paper check, and that can take over a week.
This is a downside to using Vanguard's legacy accounts (mutual fund platform) rather than its brokerage accounts. I'm in the process of transferring IRA cash. I had to mail the transfer form to Vanguard (Dec 18th). Vanguard finally processed the form and sent it, apparently by pony express, to the old custodian (Dec 30th). That custodian received the form and cut a paper check (Jan 6). As near as I can tell, it is still the case that "the check is in the mail."
Had I used a Vanguard brokerage account, all of this would have been done electronically in days. Form submission online, funds transferred via ACAT. The cash would have wound up in the Vanguard Government MMF, instead of going directly into the target Vanguard fund. Still, it would have been there weeks earlier, and the money would not be floating around in USPS purgatory, not even earning interest.
One can ascribe the extra three weeks to the fact that these papers were "touched by human hands", or that transmission by USPS is orders of magnitude slower than electronic communication, or some combination of the above. It doesn't matter. Sending IRA assets (even cash) from a custodian directly to a mutual fund does not go via ACAT and thus takes significantly longer.
Earlier this year I transferred a (taxable) fund held directly with T. Rowe Price to an outside brokerage and it went via ACAT. No problems and no delays.
So I don’t even try to put these through electronically anymore. When mailing the request to TRP, they do appear get on it right away (which is in their own best interest). But it can take anywhere from two days after they receive the mailed request to nearly a full month before the transfer is completed. Go figure. It could be that their “digital relationship” with other fund houses varies from one to another, or perhaps different front office personnel implement the procedure differently. I am aware (from calling them) that more often than not they’ve had to wait to receive a paper check from the outgoing party. Why that check can take 10 days or longer to arrive after supposedly being mailed out, I’ve no idea.
Certainly “process” when working with tax sheltered accounts is critically important. I suspect it’s the extra care such transactions elicit that adds to the time. Not usually a problem for me. Generally I move money in “baby steps” and try as much as possible to do so “cash to cash” rather than risking a big change in markets.
I submitted the paperwork to Fidelity online on Jan 1, not a trading day. Within a couple of hours the system had processed the request and reported that it had been forwarded to Merrill Edge - Bank of America.
The next morning (Thurs), Merrill Edge showed that it had received the transfer request. The next day (Fri) it showed the transfer pending for Monday. Over the weekend, Fidelity showed the cash was transferred and available for trading as of Monday.
Merrill then slipped a bit. On Monday, its system reset and said the transfer was pending for Tuesday. Didn't matter to me. As far as Fidelity was concerned, the money was good and I could use it.
So pure electronic/ACAT can be a thing of beauty when it works.
Doing it the old fashioned, paper check way:
The check from Fidelity finally arrived at Vanguard. Not sure whether it happened on Saturday (5 days after Fidelity mailed it) or today (a week later). Vanguard's automated phone system reported one thing, the phone rep another. Vanguard's online transfer tracking system didn't know that Fidelity had even responded to the transfer request.
The money was supposed to go directly into a Vanguard fund. Instead, Vanguard created a new (empty) Gov MMF position within my IRA and entered a buy order for the MMF with the transferred cash. I called Vanguard to have them correct this.
@hank may feel that these transactions get extra care. If 'twere only so. Alas and alack.
It seems clear now that at least some of the delay originated at Vanguard. It received a check on Jan 11 (Saturday), and didn't enter a purchase order until after close of business Jan 13 (Monday). So the check sat uncashed at Vanguard through a full business day until it was used for a fund purchase on Jan 14 (Tuesday).
On the transfer form I specified a direct purchase into a Vanguard fund. (You can do this on the mutual fund platform.) Instead, Vanguard used the money to purchase shares of its gov MMF that I did not request. And it put a seven day hold on the MMF shares.
Finally this Tuesday, five weeks after mailing the transfer form, I'll be able to invest the money. Some of that time was due to using paper and snail mail (not going through ACAT), some was due to Vanguard's slow processing of paper. And some was simply Vanguard's not following the transfer instructions.
I left Vanguard more than 20 years ago because I entered a trade to sell an index fund at 9 AM and wanted to cancel at 10 AM and couldn't. I called a rep and he told me nobody can cancel this trade...what? I transferred the whole account within days.
With 401K it was very fast. I had a 401K with Fidelity when I retired I asked to rollover to my existing Rollover IRA. Fidelity sold the funds(that was my company rules) in the 401K and the next day I saw the money in my Rollover IRA and was able to buy new funds.
Vanguard is a sitckler for rules, but generally easy to deal with so long as one is aware of those rules. For example, if one is uncertain whether to make a trade on a given day, one can wait to make a final decision and then place the order (or not). It doesn't matter what time of day one places a fund trade; it is priced at market close.
Personally, that's what I do regardless of whom I'm placing a trade with. For me that's not a matter of accommodating Vanguard. It's just simpler, with fewer steps.
My present transfer is taking longer than I expected because I was unaware of the external limitations that exist on mutual fund platforms (as opposed to brokerage platforms). Not something specific to Vanguard. My fault for not paying more attention to the details. As I wrote at the top: it didn't sink in.
What Vanguard did wrong was to ignore my written instruction to purchase shares of a specific fund. Instead, it deposited the cash into an ersatz "settlement" fund. As Vanguard acknowledged to me, there is no such thing as a settlement fund on the mutual fund platform. The cash should have gone into the Vanguard fund I had specified.
Vanguard has promised (in writing) to unwind the transaction and record it as it should have been executed. Sooner or later.
Cash transfer to mutual fund platform (i.e. direct purchase of fund from family, not via brokerage); 4 weeks, by check, one week additional hold on moneys
Cash transfer to brokerage platform: 3 business days (5 calendar days including paper mailing), by ACAT system, no hold
These are the final timelines, based on doing one transfer each way in the past several weeks.
But I did ask some years ago of a fund house rep why paper checks were often used in custodian-to-custodian IRA transfers. My recollection is it had to do with some fiduciaries wanting to have a clearly visible “paper trail” should they be called on by regulators to account for conformity to tax laws at some future point. Not that electronic transfers were illegal or non-traceable. Just that some thought the paper route was easier to trace / document should that some day be necessary.
There was a thread on Medallion Guarantees a while back. If you want to try and avoid the hassle, I suggest calling the current (outgoing) custodian, mentioning your planned transfer amount and than asking about “amount below which the signature guarantee is not required.” Some houses only require one for amounts of $50,000 or more. I’ve found that asking about that limit is more likely to elicit a “not necessary” answer than if you just flat-out ask whether it’s required.
My recent Roth transfer went about as expected. T. Rowe apparently sent the request electronically to Invesco a day or two after they received my paper submission. I infer that based on Invesco’s withdrawing of the funds as soon as they did. However, after the funds were withdrawn it took nearly two weeks for T. Rowe to credit the monies. That suggests to me Invesco mailed a paper check (and not very promptly). As far as the Medallion Guarantee, Invesco’s phone rep said that it wouldn’t be required as long as they deemed the paperwork from T. Rowe to represent a legally binding “Letter of Instruction” bearing my signature (which it apparently did).