Vanguard "switch" is sloooow

hallmark

Anybody else think Vanguard's switch facility takes longer than it should?  I switched some money from their sterling MMF into LS on Monday.  I didn't think that the sell and the buy would occur simultaneously (although they call it switch I think in reality it's a sell then a buy, switching just means you do one transaction not two).  However I expected the sell to happen Monday and the buy Tuesday or at the latest Wednesday.  The buy has only just happened today.  Hard to see exactly why it wouldn't be the sell transaction 9am then the buy transaction 9am the next day.  What are they doing with the money in between?

Barkin

From the help pages:

---x---

How long does it take to switch from one fund to another?

 

A switch usually takes 4 to 7 working days, depending on the funds you're switching between. To carry out a switch we need to sell one fund first and then buy into the other funds on your behalf. Each part of the process can take a few days. There will be a period where you aren't invested, with the chance that prices fluctuate.

For Exchange Traded Funds (ETFs), the switch is quicker and can happen within 1 day.
---x---

https://www.vanguardinvestor.co.uk/need-help/answer/how-long-does-it-take-to-switch-from-one-fund-to-another

dunstonh

My understanding is that Vanguard do not prefund any of the transactions.   So, you have to wait for settlement periods.

owever I expected the sell to happen Monday and the buy Tuesday or at the latest Wednesday.  The buy has only just happened today.  Hard to see exactly why it wouldn't be the sell transaction 9am then the buy transaction 9am the next day.  What are they doing with the money in between?

Your expectations are wrong.    If the platform used prefunding then you would expect something along those lines.  However, I don't believe many of the budget platforms pre-fund (or have limited prefunding).   

They are not doing anything with the money as they don't get the money until the settlement date.

hallmark

To clarify, I wasn't suggesting they were doing anything sinister with the money, just that it's surprising (IMO) it takes so long for funds from their own MMF fund to clear & be usable.

dunstonh

hallmark said:

To clarify, I wasn't suggesting they were doing anything sinister with the money, just that it's surprising (IMO) it takes so long for funds from their own MMF fund to clear & be usable.

Settlement periods apply to all.  Most funds are T+2 or T+3.    If you chose a platform that prefunded, then it would be quicker.  Prefunding usually eliminates the settlement periods but the platform uses its own money to fund that.  So, its a feature you don't tend to see on the lower cost platforms.   Some years back, there was some research that found that if you are making regular contributions, prefunding could be worth around  0.07% to your returns over the long term.   So, a platform with a 0.15% charge without prefunding could give a similar outcome to a platform with prefunding that costs 0.22%.

It wasn't in the research, but I guess the same would apply for those drawing on their investments as the prefunding platforms can delay the sale for a few more days than the platforms that do not prefund.

ColdIron

Don't forget that the Vanguard platform is a different company from Vanguard investments and subject to the same timescales as every one else using their funds

boingy

hallmark said:

  What are they doing with the money in between?

I might be wrong but I think they put all of the money into a large wheelbarrow then wheel it through their living room throwing bunches of notes into the air and whooping. A bit later Mr Vanguard Senior makes them collect it all up and stack it neatly in your account again.

But, yes, reckon on about a week to switch funds. Not lightning quick but it shouldn't be something you need to do very often. Invest and forget is usually the best option.

Albermarle

As said the more expensive platforms will speed up the switch, using their own funds briefly.
HL & Fidelity do this I think. Not sure about others.

Alistair31

I have just initiated a switch from their income STMMF to the accumulation version, presumably it will go through the same process, and timeline, as described in the replies above? 

Swipe

Alistair31 said:

I have just initiated a switch from their income STMMF to the accumulation version, presumably it will go through the same process, and timeline, as described in the replies above? 

Yes, a switch is a switch

GeoffTF

dunstonh said:

Settlement periods apply to all.  Most funds are T+2 or T+3.    If you chose a platform that prefunded, then it would be quicker.  Prefunding usually eliminates the settlement periods but the platform uses its own money to fund that.  So, its a feature you don't tend to see on the lower cost platforms.   Some years back, there was some research that found that if you are making regular contributions, prefunding could be worth around  0.07% to your returns over the long term.   So, a platform with a 0.15% charge without prefunding could give a similar outcome to a platform with prefunding that costs 0.22%.

The Vanguard OEICs settle T+2, and, in may experience with Vanguard's platform, the money can then be reinvested or withdrawn. Vanguard is no slower than the competition here. Most platforms (including cheap as chips iWeb) make funds available to trade on the same day as debit card payment into the account. Vanguard is the only exception that I know. With Vanguard, the funds are not available to trade until the next working day. That is not impressive. Vanguard does, however, support Faster Payments to withdraw money, whereas some of the competition use BACS,

The "research" that you quote does not make sense. If all your subscriptions are delayed by one day, you will lose very nearly one day of the average investment return on your entire investment. That will not amount to much. If you are investing a big lump sum in one go, however, there is no averaging and you could lose a significant sum if the market jumps on that day.