Vanguard Brokerage Services Review (VBS)

This is my third article about brokerage review. In my previous article, I have provided reviews about Just2Trade and Zecco brokerage. In this article, I’ll review Vanguard Brokerage Services also known as VBS. Vanguard is known for low cost mutual fund since the expense ratio is usually lower than most mutual fund provider. Not until recently, Vanguard will not be my first choice to trade. The commission for trading is $7.00 per trade for first 25 trades and $20 for subsequent trades. However trading Vanguard ETFs is free, for any account balance. This is a great choice for most passive investor.

Background

Vanguard Research

Vanguard was established on 1975 by John Bogle. John Bogle is known for his creation of index fund for investor. The current headquarter is located at Malvern Pennsylvania USA. It currently uses its own clearing Vanguard Brokerage Services as their clearing / asset custodial. Vanguard Brokerage Services, member of FINRA & SIPC, holds and clears all Vanguard client assets. All Vanguard accounts are insured under SIPC (up to $500,000 / $250,000 cash balance) and supplemental Lloyd’s of London coverage (up to $250 million) provided by its own clearing firm. What are the details?

Vanguard type of accounts

Vanguard Brokerage Services offer Stock, ETF, Bond, Mutual Fund, and CD. As mentioned above, the commission fees for trading is $7.00 per trade up to 25 trades and $20 for subsequent trades. The best deal of using Vanguard is their offering of ETF and Mutual fund. You get free trade to buy or sell vanguard ETF up to 25 trades per year for each ETF. The following is the details fees related to Vanguard brokerage Services:

• Products: Stocks, options, mutual funds, bonds, CDs, foreign securities, insurance, commercial paper
• Market Orders: Free & $7.00 up to 25 trades per year, subsequent $20.00.
• Limit Orders: Free & $7.00 up to 25 trades per year, subsequent $20.00
• Mutual Funds: $35.00 for transaction-fee funds. NTF funds available.
• Options: $30.00/trade+$1.50/contract
• Minimum to Open: $3000 ($0 VBS)
• Account Inactivity Fee: $0.00 though $20.00/yr for maintenance
• Account Maintenance fee: $20.00/year (balance < $50K)
• ACAT In/Out: $0.00
• Maximum Margin Rate: Unknown

How to open Vanguard Brokerage Services account?

Opening account is very straight forward by filling its online application. Most people will get their account information within 10 minutes after application submission. To apply for margin account, option trading account and Money Market Sweep Account, you will need to fill separate form. You need to mail in the forms for this application. For foreigner, you might need to check with Vanguard customer services. It is possible to open an account with filling the application form manually.

My Experience

Main account page

Opening Vanguard account is fast and easy. It took me 10 minutes to fill the application online and open my account. ACH electronic transfer also can be setup through online easily. Vanguard also offers various mutual funds as well as ETF for my account. One of the most famous things with vanguard is the low expense ratio of the funds. This can be very significant for long term investor most of the funds have lower than 0.50% expense ratio. For example Vanguard Total Stock Market ETF (VTI) only has 0.07% expense ratio. This means if you have invested $10,000 in this ETF, your expense for holding this ETF is only $7.00. There are currently 46 ETFs are offered by Vanguard.

Pros

• Free trades on 46 Vanguard ETFs as well as Vanguard mutual funds.
• Easy to open an account
• Low expense ratio ETFs and mutual funds
• Friendly customer service
• No limit balance to buy ETF shares.

Cons

• $20 account service fees
• Very difficult to navigate the hidden trading system
• Only Vanguard ETF is free & limitation of 25 trades per ETF
• Long hold for money transfer
• Difficult to get a margin account with low account balance
• No after hour trading

If you need more details about the advantage & disadvantage of opening Vanguard brokerage account, please check my next article. I think using Vanguard Brokerage account is suitable for people who will do buy and hold of Vanguard ETFs. If you look to trade ETFs actively, I will advise to use other brokerage such as fidelity or Zecco (10 free trades per month with $25,000 balance).

Other people complaints from research 

Other complaints about Vanguard are:

• Long wait time for customer service to buy corporate bond through their Fixed Income desk
• Vanguard doesn't let you cancel mutual fund orders.
• Difficult to navigate through their website
• No mobile app for trading

Disclaimer: I have no affiliation with Vanguard other than I use their brokerage to trade ETFs. Please do your own research for additional details. All information is as updated as August 9, 2010. Please trade responsibly.