Many of you are asking about USAA’s transfer of their investment products to Victory Capital and/or Charles Schwab. There is a lot happening, and it is confusing. I’m really not the best person to explain it. Thankfully my friend Doug Nordman has written a really good piece that explains what’s happening using small words and simple sentence and paragraph structures. Doug explains what is happening and why. He explains what it will look like to you when it is all over. He also explains why this move is better for USAA investors (better products and services) and also for those of us who use other USAA products (because USAA can focus on its core mission.)
Full disclaimer: I am not a financial planner, investment advisor, lawyer, or any other type of person with professional experience. This is simply my recounting of the process as an amateur investor who clearly doesn’t know everything. Do not make any decisions or take any actions based on the information herein.
Other full disclaimer: I have been working with USAA on various projects for 10 years now. I have visited their headquarters, at their expense, and have been treated to their famous breakfast burritos, meals, and cocktails in San Antonio, and also at other events like FinCon and the Military Influencer Conference. The people who work there are my friends outside of our business relationship.
Table of Contents with Quick Links
Why I Moved My Investments
I have been planning to move our retirement investments from USAA for, oh, years, because lowers fees are available elsewhere. But having everything at USAA was simple, and it never made it to the top of my To Do list because it sounded difficult and time consuming. The announcement that accounts were being transitioned was just the kick in the pants that I needed to move these funds. (You might remember that I planned to do it in February.)
Now, I’m the first person to admit that investments are not my thing. I’ve read the USAA press releases and the little notes they’ve been sending, and they mostly sounded like mumbo jumbo to me. I still don’t understand what is going to Schwab and what is going to Victory Capital. I thought that managed brokerage accounts were going to Schwab and straight mutual funds were going to Victory Capital. That may or may not be true, but it doesn’t seem that way from my experience.
Outside of my confusion, the consensus amongst my smart friends is that this move by USAA is a good thing in the big picture, and I don’t disagree. Many of you have said that you’d like to see USAA get back to it’s roots, and this is one step in that direction.
Requesting The Transfer
At USAA, I had an SEP IRA, and I had two Roth IRAs at USAA. That’s a total of three accounts at USAA.
I started the process of transferring these assets on 24 March 2020, by opening new accounts at Vanguard. I only had to open two accounts because both of my Roth IRAs can be together. It took me a couple of days to get to the actual business at hand:
27 March 2020: Now on to actually moving the funds. Apparently USAA requires “wet signatures,” which means that instead of authorizing the transfer electronically and making the process happen quickly, you have to wait for physical documents to be sent back and forth. On Friday, 27 March 2020, I printed and completed three sets of transfer paperwork and mailed them to Vanguard.
Note: A reader has reported that she was able to bypass the wet signatures by calling Vanguard and asking them to process it electronically. I can not verify that this can be done. Please let me know if you try!
Being Unnecessarily Complicated
At this point, I was trying to be clever and save myself a little money. I didn’t want to transfer my USAA funds to Vanguard in their current investments, because I had this idea that there would be a fee to sell the USAA fund shares once they were at Vanguard. To that end, I planned to sell the current investments, so that the money would transfer as cash. There is no fee to sell those particular funds at USAA. (There is a $20 fee to “close” the account at USAA. I have no idea if that is an industry standard but I think that’s pretty crappy.)
But I didn’t want to sell the shares unnecessarily early because the market was all over the place, and I didn’t want to miss out on a really good day. So I watched the progress of the transfer requests (that’s a whole different paragraph) and when it seemed like it might have gotten to USAA, I called USAA to sell my mutual fund shares.
2 April 2020: This is where things got interesting to me. I called USAA, who put me through to Victory Capital, and instructed that the two Roth IRAs be sold entirely and put into cash. I made it very clear that I was doing this for the purpose of transferring the money to another company. The rep couldn’t tell me when the sale would process, but I wasn’t too concerned. (In retrospect, I should have been, because I believe that his lack of knowledge about that question is an indication that he didn’t know enough to see what was going to happen later in this story. But who knows?)
However, when I wanted to sell my shares in my SEP-IRA, VC/USAA couldn’t handle that. They transferred me to someone else, I think it was back to USAA, because the SEP-IRA was not transferred to VC. I’m sure there is some really simple explanation of why, but it’s not obvious to me, because they were all mutual fund accounts. But I digress… I was eventually able to make the same sell order for my SEP IRA.
Trouble in Paradise
3 April 2020: I receive an email, titled “request missing information,” from Vanguard, asking me to call them. VC/USAA has rejected my transfer requests, and Vanguard asked me to call VC/USAA to sort it out.
I checked my USAA online account and saw my sell orders were executed, so the Roth IRAs were out of their mutual funds and in cash. I called VC/USAA and they told me that because I sold my shares, they changed the account numbers. And the transfer paperwork used the old account numbers, so the transfer paperwork was invalid EVEN THOUGH THEY COULD STILL CLEARLY SEE THAT IT WAS STILL THE SAME ACCOUNT. They could not transfer my money without new paperwork with the new account numbers. On paper, with wet signatures. Again.
I said a couple of sailor words. Well, maybe more than a couple. (I did not use sailor words to the guy at VC/USAA, though he was not confused about my unhappiness.)
But of course they couldn’t tell me about my SEP-IRA, so they transferred me to the other mystery (USAA?) desk where the rep and I determined that my SEP-IRA had vanished. At this point, I was baffled – surely the SEP-IRA would have the same transferring problems as the Roth IRAs, right? I figured that maybe a day of patience would reveal something.
At this point, I had liquidated all of my retirement assets into cash during a crazy up-and-down period in the stock market. I was not happy. I mailed a second set of transfer paperwork to Vanguard.
8 April 2020: The SEP-IRA funds turned up in my Vanguard account, but – surprise – they were not all in cash. A portion that had already been in cash was in cash, but the remaining portion was still in it’s USAA fund. Oops. Not the end of the world. It’s a solid fund, it can sit there for a while.
Also on this day, my cash leaves my USAA Roth IRA accounts. Still not happy that it has been in cash for 6 days, but at least it is progress. Trying to remain positive.
13 April 2020: At 4:23 pm (the time is important to me), I received an another email titled “request missing information” asking me to call Vanguard.
I call, and eventually get to talk to someone who seems like they can help me. They tell me that they had received a check from USAA that morning, but they couldn’t process it because they couldn’t tell whether it was a transfer from an IRA or a rollover from another type of account. Apparently USAA/VC hadn’t made any effort to indicate that on the check or the accompanying paperwork, and Vanguard didn’t think to look at the transfer paperwork that I’d sent them. I confirm that it is a transfer and all seems well. Vanguard says they don’t have the other check.
Finally Done – Nearly 3 Weeks Later
14 April 2020: I’m fully anticipating that I’ll receive the same email for the last remaining check, and I’m hoping to get the money into my account (and into the market) before the end of the day. Around 2 pm, I check my Vanguard account. My check from the day before seems to be in some sort of black hole, as I can see it pending but I can’t touch it, and there is no indication that the other check has been received.
Hoping to avoid losing a full day again (and also wondering why my other funds are stuck,) I call Vanguard and inquire. The representative was nice but clueless. He eventually puts me on hold for a LONG time and found someone who could actually help. They confirmed that the previous days check did not process until the morning and so it would be fully available at the close of business. Vanguard confirmed that the second check was received, and cleared it to be released. I gave them an order to use the full amount to buy specific shares and FINALLY the process was complete.
A Couple of Lessons Learned
As always with things financial, it cost me money to try to be smarter than the system. My money was sitting in cash for 12 days of market swings, during which the market increased around 12%. (Don’t check my math. Investments aren’t my thing, remember? Plus the whole thing makes me a little sick to my stomach.) I lost out on a significant amount of growth during those 12 days.
Also, always verify what you think you know. Vanguard now tells me that there is no charge to sell my USAA funds and move them to Vanguard funds. So that $50 or whatever fee I was trying to avoid with all this crazy? It seems it wasn’t a think in the first place. So all that drama was to avoid a fee that didn’t even exist.
As a side note, Vanguard’s “Track Your Transfer” page is not very accurate. I transferred three funds, twice each, for a total of six transfer requests. My Vanguard track your transfer page shows 9 transfer requests, with various dollar amounts that don’t align with the actual transfer request amounts – somehow it got the accounts and the dollar amounts crisscrossed. It doesn’t matter, but it didn’t help me track anything.
Takeaways For You
A few key takeways if you decide to move your funds from Victory Capital/USAA and or USAA (soon-to-be-Schwab):
1. Be patient. You’ll need to print the transfer requests, sign them, send them to the new company, and they will have to send them to VC/USAA or USAA (soon-to-be-Schwab.)
3. Don’t try to be smarter than the system. Don’t change your account numbers mid-process!
4. Keep an eye on the process in the hopes of finding errors early.
5. It really shouldn’t be that difficult if you don’t complicate things.
Should You Switch?
This is a very individual question. If you have a financial advisor, you should definitely speak with them. Consider why you used USAA before, and whether that benefit still exists when your accounts are no longer with USAA. For me, the choice was obvious. I invested with USAA for simplicity, and I knew I was paying higher fees for that simplicity. With accounts being transitioned to Victory Capital and Schwab, it was no longer simpler to be in USAA funds.
However, the right choice for me isn’t the right choice for you, and investments are definitely a personal issue. Both Victory Capital and Schwab have the capability to improve on the value provided by USAA investments, and staying with them might be the right decision for your unique circumstances.
I hope this has given you some insight into what it looks like to transfer your funds. I also hope you’ll learn from my mistakes and not make the process harder than it needs to be!
And one more reminder: I am not a financial advisor, investment professional, lawyer, accountant, or any other type of professional. This is simply my experience. Verify and make your own decisions!
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