Author Topic: Currently using Fidelity but thinking about switching to Vanguard. Should I?  (Read 2090 times)

xpauliber

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So I have a Rollover IRA from a previous employer that went bankrupt and I was 21 at the time and didn't know anything about investing.  I had to put the money somewhere and the person I spoke with suggested that I open a Fidelity account so I did.  I also have a Roth IRA that I started at Fidelity recently as well.

What's frustrating though is that I've been reading a TON about personal finance, wealth building, retirement, etc. and the overwhelming consensus from what I've been reading is to invest in differing Vanguard funds.  Obviously, I can't access Vanguard ETF's through the Fidelity brokerage and I'm frustrated because I can't compare apples to apples between the Vanguard ETF's I've read about and the iShare ETF's that I'm currently invested in.

I'm thinking about opening a Vanguard account and moving all of my investments over there.  Does anyone have any experience/insight into making the switch?  Are Vanguard funds really superior to Fidelity funds?

jamalot

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I have my investments at Fidelity (just happens to be where my first 401k was opened).

I have FSTVX (iShares Total Market Index) and IVV (iShares S&P 500 ETF), which I think correspond to VTSMX and VOO. FSTVX and IVV both have an expense ratio of .04%, which is the same as (or better?) than VTSMX and VOO.

Since iShare funds trade for free with Fidelity and as far as I know track the same indices as Vanguard, I haven't bothered to switch.

Curious what others think.

Snowman99

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We have our 529 accounts with Fidelity because you have to use Fidelity in our state in order to get the Tax deduction.  Our Roth's are with Vanguard.

Fidelity offers index funds similar to Vanguard, and as far as we can see there is no drastic difference.

One thing that Fidelity offers, that Vanguard does not, is a credit card that gives you 2% cash back that automatically gets invested into your account.  We do this with our 529 Accounts.

terran

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I have my investments at Fidelity (just happens to be where my first 401k was opened).

I have FSTVX (iShares Total Market Index) and IVV (iShares S&P 500 ETF), which I think correspond to VTSMX and VOO. FSTVX and IVV both have an expense ratio of .04%, which is the same as (or better?) than VTSMX and VOO.

Since iShare funds trade for free with Fidelity and as far as I know track the same indices as Vanguard, I haven't bothered to switch.

Curious what others think.

Same here. My solo 401(k) and my wife's 403(b) are at fidelity, so we consolidated everything there for simplicity.

FSTVX is actually a 0.035% expense ratio vs VTSAX 0.04%. They don't track the same index, but they're equivalent -- both total US market funds.

I'm led to believe Vanguard mutual funds are more tax efficient than any other companies mutual funds. Something about a patent that lets them somehow combine their mutual funds and ETFs. Since learning this I've been working on converting mutual funds in our taxable account to ETFs (and tax gain harvesting in the 0% capital gains bracket and switching to international for the foreign tax credit at the same time).

pecunia

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This may have little value to you, but I think Fidelity has more offices than Vanguard.  I have some money with Fidelity and even the Fidelity guy told me they (Vanguard) are a good outfit.

TheWifeHalf

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We use Fidelity also because that is where TherHusbandHalfs employer has their pension and 401k. (had some sort of account with them since 1992)
We started using their managed account and are very satisfied with the company.
Our net worth has quadrupled since '10, we don't really need anymore even if another has lower fees, so we haven't even looked into moving the accounts.

We do like that there is an office an hour north and 2 hrs south, and have been to one.

starguru

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Fidelity total market index fund has one significant disadvantage compared to vanguard’s.

For some reason the vanguard fund incurs less capital gains on distributions.  They talk about it all the time on the boggleheads forums and you could probably find more detailed info there.  Only matters for significant assets and doesn’t matter in tax advantaged accounts.   I wish I had known this earlier as it definitely affects me at fidelity to the tune of several thousand dollars a year in extra tax. 

You could buy the etf version of the vanguard funds and call fidelity to have them reinvest dividends.




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terran

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Fidelity total market index fund has one significant disadvantage compared to vanguard’s.

For some reason the vanguard fund incurs less capital gains on distributions.  They talk about it all the time on the boggleheads forums and you could probably find more detailed info there.  Only matters for significant assets and doesn’t matter in tax advantaged accounts.   I wish I had known this earlier as it definitely affects me at fidelity to the tune of several thousand dollars a year in extra tax. 

You could buy the etf version of the vanguard funds and call fidelity to have them reinvest dividends.

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It's because Vanguard has a patent that lets them make their funds basically the same as an ETF. Unless I'm mistaken Vanguard ETFs have no tax advantage over other ETFs on the market, so just use ETFs instead of funds in taxable at Fidelity and you'll be fine (there are plenty that don't have fees to trade).

Note that I'm not anti-Vanguard or pro-Fidelity. I'd probably use Vanguard if I didn't have employer accounts Fidelity that I don't want to or can't move. Now that I'm at Fidelity I probably wouldn't move though. Pretty similar options.

MustacheAnxiety

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I would not close the non-retirement Fidelity account.  Closing a non-retirement Fidelity account means you would have to pay a bunch of capital gains and is probably not worth it from a tax stand point.  Rolling the IRA should be pretty painless and no tax penalties.  Your tax situation may be different if you are expecting to get a giant raise in the future, if your accounts lost money, etc.

If you don't mind managing two accounts.  I would just open a second account with Vanguard.  If you want to track everything in one place you can always try personal capital (although giving all my account info to some additional company gives me the heebee jeebees, nothing against Personal Capital it just seems like my personal information has been hacked at plenty of secure places).

From my research, Fidelity has lower fees on some Mutual Funds and ETFs and on others Vanguard has the edge.  Last I looked Vanguard's low fee tech index fund beat the pants off fidelity, but fidelity's total stock market and S&P index edged out Vanguard.

I am all Fidelity right now.  I tried to open a Vanguard account but my data verification was rejected online and there were 20 pages that I had to take somewhere, and I was feeling lazy.  So still just Fidelity, which is probably the wrong call but not by a huge margin. 

The primary benefit to staying all Fidelity (or presumably all Vanguard) is they treat you a bit better if they have more of your money.  At 25K total in all accounts you can have a fee free HSA.  At 250K you get a financial advisor assigned to you. At 1M you get a fancier financial advisor.  Probably other thing I am not aware of, but some potentially minor drawbacks to splitting money between firms.

Telecaster

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What's frustrating though is that I've been reading a TON about personal finance, wealth building, retirement, etc. and the overwhelming consensus from what I've been reading is to invest in differing Vanguard funds.  Obviously, I can't access Vanguard ETF's through the Fidelity brokerage and I'm frustrated because I can't compare apples to apples between the Vanguard ETF's I've read about and the iShare ETF's that I'm currently invested in.

I'm thinking about opening a Vanguard account and moving all of my investments over there.  Does anyone have any experience/insight into making the switch?  Are Vanguard funds really superior to Fidelity funds?

Don't bother switching.  For reasons I won't get into, I have accounts at both Vanguard and Fidelity.  Vanguard is the first firm to offer low cost funds, so that's where the smart money went.  For legacy reasons, everyone still recommends Vanguard, but Fidelity now has equivalent low costs funds.  It is just easier to say "use Vanguard funds" instead of "use Vanguard funds or the equivalent low cost fund at another brokerage." 

Next, if you really want Vanguard ETFs you can buy them no problem in your Fidelity account.  Just punch in the symbol in the order box.  But you don't need to.  For example, here is the Fidelity EFT quote for VOO, the Vanguard S&P 500 ETF:

https://snapshot.fidelity.com/fidresearch/snapshot/landing.jhtml#/research?symbol=Voo&appCode=

Note that the equivalent Fidelity ETF, IVV, is the exact same thing, but commission-free.   You could switch, but why bother if it is the exact same thing? 

Kakashi

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There's really no current benefit to switch.  However, if you want a switch and then forever done switching, then I would recommend Vanguard.  The primary reason is Vanguard is a mutual company.  Fidelity, Schwab, and most other brokerages are for-profit stock companies.  And so, while both Fidelity and Schwab have index funds and etfs that are lower cost than Vanguard, whether they will stay that way 5, 10, 25 years from now is anyone's guess. 

For instance, just about a decade ago, Vanguard had those "Spartan" Fund that required $100K min to invest (for the premium class) with higher fees than Vanguard.  Only recently to "stay competitive" are they on par if not slightly better than Vanguard.
« Last Edit: May 19, 2018, 03:44:38 AM by Kakashi »

CoffeeR

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I'm thinking about opening a Vanguard account and moving all of my investments over there.  Does anyone have any experience/insight into making the switch?  Are Vanguard funds really superior to Fidelity funds?
The pro-vanguard crowd is pretty vocal. I for one will not invest in Vanguard. Their customer service is below average and while it may not matter most of the time, when it does matter it can really cause you problems. Go to the boggleheads forum to learn how they have messed up user transfers, contributions, re-characterizations, etc. Note that this happens in every company, but IMO the frequency and seriousness of these incidents has increased over the last few years. My comments relate strictly about investing with Vanguard, not about their mutual fund or ETF products. I have no problems investing in those (I currently do not since I prefer the no-fee low cost options at Fidelity and Schwab).
 


Reynolds531

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I really like Vanguard being a mutual. I like to think their interests are better aligned with their clients.

Frankies Girl

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I have 100% of my portfolio with Fidelity, and no plans to ever switch. Vanguard is a great company, but I have no real reason to switch to them since I'm perfectly happy with Fido. If you're unhappy with Fido, then by all means switch, but to do so without any real reason seems odd to me.

They offer index funds comparable with Vanguard. They have excellent customer service, free trades on tons of funds, lots of perks, credit card that gives 2% cash to your accounts, great technology and stay up to date on things.

The idea that Fido may eventually raise the expense ratios on their index funds (which are less than Vanguard's offerings) is a slight possibility, but honestly they offer the index funds (used to be called Spartan, but they are now all labeled "Fidelity index funds") as a loss leader to get investors in the door and stay with them. They are intent on staying competitive. As long as Vanguard is around, I believe Fido's index stable of funds will always be there, nipping at Vanguard's heels. They would lose old and new investors to Vanguard if they no longer offered something attractive enough to entice folks to invest with them.

And the idea that Vanguard is owned by its investors... It is a lovely ideal. But my thinking here is that without decent profits, they pay their employees much less, so not only is there higher turnover but you get less well-trained folks that may be really nice people but make more mistakes or don't have the answers to your questions, and they don't have a ton of funds to reinvest in developing and managing the company's site, offerings and basic structure so they're always a bit behind everyone else. Sure, I'd rather pay less and get more - but see, that's what is happening with me investing at Fido. I get a for-profit company's business structure that offers tons of perks... but as I'm investing in their index fund offerings and only paying their tiny expense ratio, I'm paying less than what the Vanguard folks pay to get the same type of funds, along with better service and perks.

Totally my opinion, not saying I'm right at all. Just throwing out my (probably skewed) thinking on this subject. :)

Reynolds531

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The idea that a for profit company automatically pays employees more or by default provided better service is a stretch.

It is however easy to draw a parallel between the two types of ownership and passive vs active investing. Most of the time you're paying managers/shareholders to not add any value.

slappy

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I would not close the non-retirement Fidelity account.  Closing a non-retirement Fidelity account means you would have to pay a bunch of capital gains and is probably not worth it from a tax stand point.  Rolling the IRA should be pretty painless and no tax penalties.  Your tax situation may be different if you are expecting to get a giant raise in the future, if your accounts lost money, etc.



This is not true. You can transfer funds from the non retirement account to a non retirement account at another firm without selling, unless there are proprietary funds that the receiving firm won’t hold.

Telecaster

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The idea that Fido may eventually raise the expense ratios on their index funds (which are less than Vanguard's offerings) is a slight possibility, but honestly they offer the index funds (used to be called Spartan, but they are now all labeled "Fidelity index funds") as a loss leader to get investors in the door and stay with them. They are intent on staying competitive. As long as Vanguard is around, I believe Fido's index stable of funds will always be there, nipping at Vanguard's heels. They would lose old and new investors to Vanguard if they no longer offered something attractive enough to entice folks to invest with them.


That's my belief as well.  As the word has leaked out about the benefits of low-cost index funds, Vanguard has gone from a bit player to the 800-pound gorilla of investment companies.   More new money is invested with Vanguard than the rest of the investment industry combined and it is not close. 

Fido and everybody else have to offer low cost index funds or get they will get completely steamrolled by Vanguard.  Fido even offers funds that are cheaper than Vanguard.  I suspect you are correct that they are doing it as a loss-leader type of thing. 

https://www.fidelity.com/mutual-funds/investing-ideas/index-funds

Cwadda

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Fidelity is also a great company, I think right on par with Vanguard. They offer the Spartan stock series (the name got changed recently though) which are just like Vanguard's low cost index funds.

spokey doke

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I'm happy to get the loss leader rate on our Fido funds, which is where we have most of our $.  Service is generally good with Fido.

But we did move our bond allocation to Vanguard a few years ago, because at that time Fido didn't come close to offering comparably low expenses on the bond funds we were interested in.

At the risk of stating the obvious, I would figure out what types of funds you want to invest in, then do a comparison of the comparable funds.

I also admit that while I don't like a lot of complexity in my investments,  I am more comfortable not having all my eggs stored at the same company.