Why do some platforms take so much longer than others to credit dividends on the same investment?

FatherTireseus

I hold a small quantity of Vanguard FTSE 250 ETF (ticker: VMID) in both a Vanguard account and an AJ Bell / You Invest account.

The dividend is payable quarterly in March / June / September / December.  My Vanguard account says the dividend "is expected to be paid within 10 business days of the payable/effective date."  The effective date is March 30th.

In my AJ Bell account, the dividend was credited on March 31st.

In my Vanguard account, I'm still waiting for the dividend to be credited, although it is showing as a corporate action not yet posted.

I could understand it better if it was the other way around and Vanguard paid dividends on their own investments promptly into your account while other platforms took a bit longer as presumably they have to wait for Vanguard to remit the funds to them before crediting to individual investors.

Does anyone have any thoughts on why it takes Vanguard so long to credit dividends (on this fund at least).  I could only think they're trying to extract as much cash flow advantage as possible but any thoughts welcome. 

Thrugelmir

Vanguard may well a number of their funds making distributions making quarterly distributions on the same day. Simply a resource issue in doing the internal administration required.

FatherTireseus

Thrugelmir said:

Vanguard may well a number of their funds making distributions making quarterly distributions on the same day. Simply a resource issue in doing the internal administration required.

Good point, thanks.

GeoffTF

Vanguard holds your investments on a third party platform. Vanguard pays the dividends to that platform and the platform pays the dividends to Vanguard. At the turn of the year, Vanguard did not receive the amount that it was expecting. It took time to resolve the issue. The last dividend that I checked was paid on the due date.

tebbins

I've never had this issue on any other platform so it is disappointing that with a 0.15% platform fee, Vanguard are experiencing these delays with their own direct investors. I would much prefer if they offered the accumulating variants of of VMID, VMIG, and ideally without the pointless, unnecessary equity investment trusts (I have no issue with the REITs and infrastructure ITs, only the ones that are simply a vehicle to owning other listed equities).
My FTSE 250 holdings aren't far off an amount to make switching to L&G UK Mid Cap in my iWeb ISA more worthwhile.

dunstonh

Some platforms pre-fund transactions.  Others wait until they have actually received the money.  Platforms without prefunding will be slower than direct to fund house offerings.

However, as some fund houses have introduced a third-party platform branded under their own name to hold their own funds, they rarely prefund and are often slower than platforms that prefund.

I've never had this issue on any other platform so it is disappointing that with a 0.15% platform fee, Vanguard are experiencing these delays with their own direct investors.

The platforms at the budget end rarely prefund.   Prefunding costs money to implement.

GeoffTF

There are regular complaints about iWeb and the other Lloyds brands. The biggest complaint I have seen was about Interactive Brokers (not Interactive Investor) a few years ago. If it is cheap, you usually have to put up with the occasional indignities. Vanguard's pricing policy is a bit of an oddity. Cheap (or even free) for some, but not cheap for others. IIRC the average portfolio size is about £30K, which equates to £45 at 0.15%. That is in budget territory.

FatherTireseus

Thanks for all the comments.  The dividend was finally credited on April 11th.  Not that it was a huge amount, but I was just curious as to why other platforms paid out so quickly - dunstonh's comment about prefunding makes perfect sense and not something I'd really thought about up to now.

Overall with the investments I hold, I have found Hargreaves Lansdown to be fastest at crediting income payments (for the fees they charge I should hope so!), then AJ Bell, and Vanguard bringing up the rear.

Thrugelmir

Yesterday (12/04) I was credited with the dividend on my TOTAL holding that was due on the 1st April. Accounting wise the transaction has been correctly dated. 

I wouldn't expect a platform to prefund. As then company funds are being intermingled with those of clients. There should be a clear demarcation line . In the same way that solicitors are required to operate. The brokers that have failed in recent years all had a lack of inadequate internal financial controls. 

Linton

Thrugelmir said:

Yesterday (12/04) I was credited with the dividend on my TOTAL holding that was due on the 1st April. Accounting wise the transaction has been correctly dated. 

I wouldn't expect a platform to prefund. As then company funds are being intermingled with those of clients. There should be a clear demarcation line . In the same way that solicitors are required to operate. The brokers that have failed in recent years all had a lack of inadequate internal financial controls. 

Nevertheless some platforms do prefund and some don’t. I had not thought about prefunding dividends but it can be a significant benefit when selling one fund and buying another.

it is not the case that the more expensive platforms prefund and the cheap ones don’t. IIRC Bestinvest and AJBell don’t prefund whilst II does.