Vanguard recently announced that they are selling their individual 401(k), multiple-participant SEP, and SIMPLE IRA plan business to Ascensus (press release). They’ve already updated their small business retirement plan page. One-person SEP IRAs will stay at Vanguard.
Ascensus will provide custodial and trustee services, recordkeeping, client servicing, transaction processing, tax reporting, and other services, and plan participants will retain access to a diverse lineup of Vanguard mutual funds via the Ascensus platform.
This will affect a lot of small business owners who previously chose to open a Traditional Pre-Tax and/or Roth Solo 401k plan directly with Vanguard. The new stated fee schedule includes a $20 annual fee per Vanguard fund per account holder in the Individual(k) plan and a $20 annual fee per participant for custodial services. I believe the previous fee schedule was just the $20 annual fee per Vanguard fund per account holder, but it was waived if at least one participant had at least $50,000 in qualifying Vanguard assets.
I also find this move interesting in the context of the Vanguard company as a whole. This same week, Fidelity continued moving gradually towards being an “all-in-one” financial marketplace, recently adding a high-yield sweep option to their full-featured Cash Management Account. (I will note though, Fidelity does directly not offer a Roth Solo 401k option!) Fidelity is competing directly with the fintechs like Robinhood and SoFi that also want to be everything finance.
Meanwhile, Vanguard already shut down their own Cash Management option, VanguardAdvantage, in 2019. They made their Admiral Shares mutual funds more expensive than their ETF equivalents (they were initially the same expense ratio), which removed a major incentive to use a Vanguard brokerage account (as most other brokers won’t let you trade Vanguard Admiral mutual funds). There isn’t much reason to hold Vanguard ETFs inside a Vanguard brokerage account now that everyone has commission-free trades, and Vanguard seems perfectly fine with that. Now, they are no longer going to service their past Solo 401(k) clients, whether they wanted to stay with Vanguard or not.
Vanguard definitely seems to be narrowing their focus towards offering investment products like ETFs and mutual funds and simple investment advice. They appear happy to move away from anything that requires high-touch customer interaction like phone calls and paperwork. (I would note that my more recent customer service interactions with Vanguard have been more positive with lower hold times.) This is not necessarily a bad thing, especially if it leaves more resources for their other customers, but definitely a different direction than others.
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Vanguard is definitely becoming less and less the company I invested with a number of decades ago. This move will affect me in that I have both SEP-IRA and SIMPLE IRA accounts from previous employers there. I’m hoping I will have the option to move those funds into rollover IRAs and remain at Vanguard; I need to check into the details on that. Because of my total assets at Vanguard, I have not paid any fees for these accounts in years. I am not pleased with idea of being hit with account and fund fees if these accounts are moved to Ascensus. If all else fails, I might just move these accounts to rollover IRAs at Fidelity — which seems to be much customer focused these days — in the way Vanguard used to be.
To update, I was able to move my Simple IRA into a rollover account and remain and Vanguard. It turns out my SEP-IRA was unaffected by all of this. On a side note, I was really dreading calling Vanguard about this — given all the negative things I’ve read about customer service there over the past few years. I was anticipating waiting on hold for a long time only to be connected to a rep who had no idea of what I was talking. So I was quite pleasantly surprised to be promptly connected to someone who was competent and able to take care of the transaction in just a few minutes while I was on the phone with her. And yes I have checked my account online since then to make sure it indeed did go through. Maybe I just got lucky, or Vanguard is improving customer service.
Bit upset with this, but what can you do?
Right now I’m trying to figure out where I should transfer my solo 401k. Right now I’m leaning towards Fidelity.
I’m looking for a different solo 401k that can help get the newish auto-deduction tax credit of $500 per year for three years. From what I can tell, Fidelity and Schwab aren’t set up for this yet – when I called Schwab about it today the associate knew nothing about it. https://www.irs.gov/retirement-plans/retirement-plans-startup-costs-tax-credit
What are you talking about? Why does a tax deduction matter for a tax deferred fund?
Any other broker offering promotion to move these assets?