I have had a S&P500 mutual fund for a number of years. I've appreciated how easy it is to directly transfer funds into the account automatically. I usually have a standing order that transfer funds on the day I am paid (every other Friday) and on occasion, e.g., when the market is down or I have a larger chunk to invest, I set up automatic transfers that occur daily or with some other frequency for some period of time. Sometimes I like to set up weekly tranfers, sometimes I want to transfer monthly. The interval that I choose for the sake of dollar price averaging depends on how much I have to invest and what the market conditions are at the time. This was all possible and easy to do with USAA mutual funds.
I opened a second account -- I thought another mutual fund, but it turns out that it was brokerage account with a bond mutual fund position -- and set up an automatic transfer. It was only later that I realized that my automatic transfers were just sitting in a money market fund and were not being invested in the bond fund at all.
After many phone calls, what I think I understand is:
1) Normally, when you transfer money into a USAA brokerage account, the money sits in a money market fund until give it a second instruction to purchase shares of something. Nothing happens automatically. You can set up an automatic investment, but the accounts are only designed to allow you to do that monthly, quarterly, or annually. They are not set up such that you can, for example, buy bonds every Monday for the next three weeks. That is not good for an investor like me.
2) The mutual fund accounts can have multiple positions -- that's great! And you can transfer funds from checking into any of the positions. But USAA is no longer setting up new mutual fund accounts. They are only setting up new brokerage accounts.
2) A very helpful and smart investment advisor manually set up a second position for bonds in my mutual fund -- that is still possible if you have an existing mutual fund. And, I could still invest automatically in any way I want. That's great! My problem is solved! But when I was transferred to a trader to move the funds in my brokerage account into my mutual fund, I was told that the mutual fund accounts are being phased out and that my existing mutual fund account will eventually be converted into a brokerage account. That is not good because I really want to be able to have long- and short-term automatic investments. And I want to be able to set those up to occur more frequently than once a month.
I have heard that the advantage of the brokerage accounts are that they offer more flexibility because they can hold all kinds of different asset classes. That's fine, but I use Robinhood for the small amount of active trading that I do for fun (no charge for trades), I have a non-USAA high-yield savings account, for my cash, I have actively managed investments with an investment advisor for a good portion of my portfolio, and I really just want -- for the funds I manage myself -- an easy way to plunk money in at whatever frequency I want to at the time without having to worry that I'll forget to do it on a certain day. If the market is down 10% and I want to purchase shares of the S&P500 mutual fund every day for three months, I want to be able to do that. If I want to set up a transfer to coincide with my biweekly paycheck, I want to be able to do that. (And I've been told that a biweekly transfer is possible... if I fill out a form that has to be downloaded and filled out and uploaded...that is not the type of transfer I'm looking for. I'm looking for one that's under my control without needing intervention from USAA.)
So, my question is: Is USAA really converting older mutual fund accounts into brokerage accounts? And if so, when is the conversion?
Although USAA does not have the least expensive S&P500 funds, I did really appreciated the ability to have short-term strategies that would be automatically executed without my having to log in every day to do it. I don't see any advantage to staying with USAA for investments if I cannot do that.
I should say that the trader said that I should be careful because most companies are moving to brokerage accounts. I believe that Schwab will allow for automatic transfers with whatever frequency the investor wants that can be initiated and cancelled electronically, but if anyone knows otherwise, I would like to know that, too.
I can't believe I'm the only person who wants to set up short-term standing orders that are executed on a daily or weekly basis and that can be easily cancelled at any time, so I can't believe that I'm the first to have identified this issue or to be worrying about the possibility of a conversion of existing mutual fund accounts into brokerage accounts.
Hello Pear Tree, I understand your concern about your mutual funds. I've forwarded your inquiry to a subject matter expert for further handling. They will follow up with you as soon as possible. Thank you for taking the time to post. - Ben