QP2005, Strange Recording of Investment Dividends and Fees

Recently I opened a Roth IRA at Vanguard, which auto-downloads into Quicken. I purchased an index fund (VTSMX). In addition to a $10 custodial fee, Vanguard charges a $2.50 quarterly fee for index fund balances less than $10K. Well, on 6/24, the fund issued a dividend, which is automatically reinvested, and at the same time, they charged me the $2.50 fee. Here's the strange behavior:

Two transacations were recorded as follows:

  1. ReinvDiv, total dividend was .29, yet it recorded the total dividend but *net* shares (i.e., shares calculated on .29-.50=.79), so the transaction calculated an artificially inflated share price.

  1. MiscIncX, -.50, commenting that it's an account maintenance fee.

I thought this was rather strange, so I called Vanguard thinking it was a Vanguard reporting issue. They said they had gotten "a couple" other complaints about this, so they were looking into it and hoped to have it corrected by the next quarterly dividend/fee time in December.

So I figured I'd manually "fix" these two strange transactions. I deleted the two downloaded transactions and created a new ReinvDiv transaction entering the $6.29 dividend, shares calculated on the full $6.29 (not the net $3.79 as in the downloaded transaction), and $2.50 under Commission, with a comment noting that the $2.50 was an account maintenance fee. Before I clicked Enter/Done, the correct share price was reflected. But here's the strange part -- when I clicked Enter/Done, two transactions were entered, exactly like the two I downloaded from Vanguard! (See above) Clearly, the error is due to Quicken's interpretation of the data, and not how Vanguard reports it. (The transaction is correctly reflected in my account data on Vanguard's web site.)

Now, my only other investment account is a Fidelity 403b, and I've had it for so long that there are no fees associated with it. My question is, am I nuts, or is this an incorrect way to represent the activity on this IRA account?

Incidentally, I also paid a $10 custodial fee when I opened the account. When I run an "investment performance" report, Quicken reports the $10 custodial fee and the $2.50 acct maintenance fee as positive amounts in the "Returns" field. Am I missing something here?

Confused and dazed, ;-)

Margaret

Reply to
Margaret Wilson
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I can't tell you why, but Q2005 does convert a reinvestment transaction that has a "commision" into two transactions. Quicken doesn't seem to assume that "commission" is really a commission; I think that's why the memo field for the MiscIncX transaction, says it's a "fee". If you enter a regular buy transaction, the amount you designate as "commission" stays with the original transaction as commission.

I think Quicken is being consistent here; I can't say whether that is an "error" or not. I believe that Vanguard downloaded the transaction with a "commission" amount and Quicken is treating it the same as it would if you entered the transaction manually, as you discovered.

I think that at least part of the problem is that your account fee isn't a commission (it is not necessary for there to be a dividend declared for an fi to charge a fee - it might be convenient to take a fee at the same time as a dividend is declared, but suppose you had securities that were not paying dividends, the fi would still get the fee ... by selling shares. So I think an account fee is not a commission).

I would normally record the event(s) at Vanguard as a Dividend for $6.26, a Buy for $3.79, and a MiscExp for $2.50 - if Vanguard took the fee out of the dividend before reinvesting it. If Vanguard truely reinvested the entire dividend, then they must have sold shares to get the fee, in which case I would have recorded a Reinvestment for $6.29, a Sale for $2.50, and a MiscExp for $2.50.

Reply to
John Pollard

Thanks for the clarification, John. See comments within text.

Vanguard took the fee from the dividend before reinvesting it. According to the transaction on their web site, there's:

gross dividend = $6.29 net dividend = $3.79 transaction shares = 0.133 transaction NAV = $28.42

Because 0.133 x 28.42 = 3.79, I know they took the fee before reinvesting the dividend. (But I fiddled with the transactions some days ago, thought I put 'em back they way they were, so) I goofed in my previous explanation of the transactions. Quicken recorded three as follows:

ReinvDiv = 6.29, shares = 0.133, with a share price of ~$47.29... DivInc = 2.50 (Comment = additional dividend applied to fees) Withdraw = 2.50 (Comment = mutual fund fees paid as dividend)

Entered this way, the share price is artificially inflated till the next price update. If I edit the ReinvDiv transaction to show net value of $3.79, which seems to correctly reflect the transaction (share price is correct), my cost basis is off, isn't it? With the ReinvDiv corrected to $3.79, reports show dividends of $6.29, which is correct, but a cost basis of 2003.79, which is incorrect, isn't it? I purchased shares with $2000 (plus $10 for the custodial fee). When I do a portfolio performance report, both the $2.50 and $10 fees show up under the "Investments" and "Returns" columns, cancelling each other out. There's no mention of any dividend, reinvested or otherwise. Shouldn't my dividends show up in a performance report? (Or is the performance report supposed to show only gains, not dividends?) An Investment Activity report correctly shows dividends of $6.29, if I correct the ReinvDiv transaction total to be $3.79. I guess I need to know how to correctly calculate cost basis. To correctly reflect my investment performance, shouldn't dividends and all fees be included?

A little less confused and dazed ... I hope, ;-)

Regards,

Margaret

Reply to
Margaret Wilson

Well I just got off the phone with Vanguard's technical support. They explained to me that cost basis is what I actually put into my investment, so it should only include share purchases and reinvested dividends. So, with John's help (and an understanding of what cost basis is), I've determined that the three transactions that get downloaded from Vanguard are correct, *except* that *gross* transaction dollars is entered into Quicken along with *net* transaction shares. If *net* transaction dollars got entered, all would be correct. So the question is, is Vanguard sending the wrong info, or is Vanguard sending *all* the info, and Quicken is picking up the wrong amount (gross dollars instead of net)?

My question still stands on why aren't my dividends showing up in the "investment performance" report? And on the "investment activity" report, my fees are showing up as "withdrawals." So when the time comes, and I start withdrawing from my Roth IRA, actual withdrawals will be lumped together with fees.

Ideas? Am I a dunce, or am I starting to see the limitations of Quicken's investment reporting?

I *have* found one other problem with IRA account transactions in Quicken. When I transfer $$ from my checking to my Roth IRA account, the deposit is automatically assigned to 2005. But if I later go back to edit that transaction (the comment, for example) in the IRA account, it tells me I must enter 2003 or 2004. Not a big deal, but definitely something that got overlooked when Intuit updated Quicken for 2005.

Thanks and Regards,

Margaret

Reply to
Margaret Wilson

Hmm.... I have aVanguard Roth, but I don't recall the custodial fee? I know for low acc't balances they have the maint. fee as you describe.

Think about this. Vanguard only actually bought shares for $3.79, they took the $2.50 as a fee. So I doubt the share price was "artificially high" as they would only have bought as many shares as $3.79 could buy.

I've been downloading Vanguard for ages, I have never found problems with the way they transmit transactions.

Reply to
Mike B

See comments within....

My statement shows a $10 custodial fee. Whether it's one-time or annually, I don't know. It's still cheaper than buying this fund through a brokerage account.

Perhaps I wasn't clear. The ReinvDiv transaction that got downloaded into Quicken showed shares purchased of 0.133, gross transaction dollars as $6.29, net transaction dollars of $3.79, and a $2.50 account maintenance fee. The actual share price was $28.42. But because Quicken downloaded the

*net* shares and *gross* transaction dollars, the resulting share price (in Quicken) was ~$47.29. That's what I meant by an artificially inflated share price. Once I changed the dollar amount to *net*, all is properly calculated. The remaining $2.50 in dividends gets transferred out as a fee. So the whole thing takes three transactions to be properly represented in Quicken.

If they're not charging you fees, you'll never see this problem. I talked with Vanguard's web tech support, and they said they'd gotten a few other calls about this same issue. They're going to work with Intuit to see whether they're sending the wrong info, or if Intuit is grabbing the wrong info from what Vanguard sends them. In the meantime, now that I know what's wrong, I can easily correct it after the transactions download. But there

*is* a problem, whether you've seen it or not. Vanguard comfirms it.

Regards,

Margaret

Reply to
Margaret Wilson

Unfortunately we may never know. Vanguard only offers direct downloads; this would be one time when a web-connect download would be very useful: you could save the QFX file and read it in a word processor.

Dividends? Or reinvested dividends?

Here is my take on it. I think no reinvested dividends show up in the Investment performance report as transactions because their "contribution" is included in the Total Returns (they have already increased the number of shares you own, and that number of shares has been multiplied by the current price and included in the Total Returns).. Dividends, on the contrary, show up because they make only a cash "contribution" to the total.

I think that fees have to be treated as withdrawals; they are literally so. But I do not think you need worry about them being confused with any "income" you may have when you begin withdrawing funds from your IRAs when you retire. Withdrawals to provide you retirement income will probably be "transfers" from your IRA account(s), and if you set your Account Attributes/Tax Attributes correctly, transfers out of your IRA accounts will be assigned to the correct tax form line number (or none), while your fees will be categorized to some "mutual fund fee" type of expense category, not income at all.

There still may be problems of which I am not aware; I have not reached that point of withdrawal for retirement quite yet.

Yes, this is a known bug: you have to modify those transactions in non-tax deferred accounts - unless they happen to be 2004 contributions. And you can't change the tax year by changing the FROM account transaction, you have to delete the FROM account transaction and re-enter it. It has been reported to Intuit, though I doubt it will be fixed for Q2005; but one can hope that it will be in Q2006 ... something which you will soon be able to tell us. :)

Reply to
John Pollard

That's interesting, John. My Vanguard access offers both direct and web-connect downloads. The Quicken Participating Financial Institutions list also indicates that both types of download are available. I wonder if you are using a different interface?

Jim Orson...

Reply to
Jim Orson

OK, see my comments within as well...

I can't agree more.

You made me go back and check my facts, which left me more perplexed than before. I cannot recall the exact details as to how I've entered this accoun't data into Quicken, but it has a placeholder on 8/4/2002.

In transactions prior to that date (6/23/2000), the transactions were as follows. A ReinvDiv and a MiscIncX transaction.

Later (12/22/2000), the transactions change to a ReinvDiv and a MiscExp, which, if I edit it, shows as an Income transaction with $0, so I don't know what Quicken is thinking here.

Then after the placeholder (which is when I assume I started downloading data), the transactions change to a single ReinvDiv with a commission of $2.50, as you describe.

The puzzling part of this, is that there is a Description line on the transaction which cannot be entered from the transaction details window, it is generated by Quicken from transaction details.

For 6/5/2003 (last purchase before she stopped paying the acct. maint. fee), the details read ".545 shares @ 91.74" and the amount shows as $50. For the Reinvest transaction where she pays the fee, the line read ".108 shares @

91.57" for a transaction amount of $9.89. The share price is roughly the same as the preceding buy, and all the numbers tally if I calculate them. Now for the strange part.

If I edit this ReinvDiv transaction, then the window shows a Dividend of $12.39 buying .108 shares for a calculated cost (my calculation) of $114.72. Presumably this is the price you suggest is inflated. However, in the Commission box, There is the fee of $2.50 and then Quicken adds the $2.50 to the 12.39, to get to a transaction total of $14.89, a figure that is reflected nowhere else in the transaction, but which would suggest an even higher share price of $137.87.

I'm still digging into this, but perhaps you could look at the one-line description of one of your transactions and then edit the transaction to look at the internal details as well?

It would seem that the problem is somewhere in Quicken, as Quicken reflects different values in different parts of the transaction, imho.

Reply to
Mike B

You could of course look in the OFXLOG that you can investigate from the Quicken Help menu. But you'd have to do it while the data was still in the OFXLOG.

Reply to
Mike B

"My statement shows a $10 custodial fee. Whether it's one-time or annually, I don't know. "

It's an annual fee for accounts less than $5,000. What you should do is ask to pay the amount from funds outside the Roth. The IRS allows that and it doesn't count as a part of the annual contribution. Same with the index fund fee for accounts less than $10,000.

If you want to experiment. Go the the Vanguard site and log in. Go to My Portfolios and then Accounts & Activities and look at the top right. You'll see a Download Transactions button. That will enable you to select accounts and dates to download. Select download spreadsheet and it will download a csv file you can read in Excel. That will give you some idea if it's Vanguard's problem.

Reply to
Charlie K

You are so right; not sure quite how I blew that one. I think I went to Vanguard's web site some months ago, hoping to be able to do a web-connect download so I could see what was in the transactions they were sending me. I think I could not find the web-connect download page and assumed they did not have one. Either my memory is very bad, my web site navigation was faulty, or they added something since then. I would tend to lay this one on my memory. Thanks for pointing this out.

The good news is that Margaret should be able to take a look at the transactions that Vanguard is sending to see just how they are being formatted; I'm hoping it is fairly straightforward (the OFX specs are readily available at the OFX web site as a downloadable pdf file).

(Start a new Qucken file, if you want a repository for the transactions (and you may need it to convince Vanguard/Quicken that you don't already have the transactions); then go to Vanguard's site and initiate a web-connect download; tell Quicken - or Windows Explorer - to save the QFX file).

Reply to
John Pollard

You're right, I had sort of forgotten about that; good point.

To make the ofxlog experience a little friendlier, it might be a good idea to select the records of interest in the ofxlog and copy/paste them into a word processor. It can be useful to use a Find for locating tags, dates, etc.

Reply to
John Pollard

And as soon as I click Send, I notice that you can do a "Save As" on the ofxlog in Quicken, which would probably lead you to essentially the same destination I had in mind, though it might have data for other fi's that you were not interested in.

Reply to
John Pollard

Yes, when I made my initial deposit, I paid the amount from extra funds outside my Roth. That is, my initial deposit of $1000 was $1010, $10 going to the custodial fee.

Thanks for this tip, Charlie, I hadn't thought of that.

Regards,

Margaret

Reply to
Margaret Wilson

Wow, I'm having trouble following your calculations. I'll bet you had the same trouble following mine. :-) It all became clear to me with John's initial response to my message, and looking at the actual transaction on the Vanguard web site.

The facts are:

  • Vanguard takes the fee *before* reinvesting the dividend, so there are three Quicken transactions required to accurately represent Vanguard's single transaction.

  • Vanguard reinvests "net" shares and shows both "gross" (before fee) dollars and "net" (after fee) dollars.

The three transactions required in Quicken are:

ReinvDiv - unfortunately Quicken picks up the net shares but *gross* dollars, losing the fee. That's why the share price is so high, and incorrect. (This is easily editable to change the amount to *net* dollars, which makes everything balance.)

Inc - $2.50, with a comment of "additional dividend applied to mutual fund fees".

Withdraw - $2.50, with a payee of "Vanguard Group", and a comment of "mutual fund fees paid from dividend".

So there are two types of dividends here: those remaining after the $2.50 fee is paid, which are reinvested. The uninvested dividends are never used to buy shares, they go directly to pay the $2.50 fee.

I've only had this account since 6/1/2005, and I've made two deposits of $1000 each, so I don't have a lot of transactions to look at. But even though I paid the $10 from funds outside the Roth, the transaction showed up in my Quicken Vanguard Roth account, with an amount of $0.00. I did some editing to show the $10 that came into the account and went out, not buying shares, of course. (Adding the deposit makes it all balance and correctly represents what happened IMO. It just bugged me to have a "custodial fee" transaction with an amount of 0.)

Hope this helps to clarify.

Regards,

Margaret

Reply to
Margaret Wilson

The report shows neither types of dividends, only the fees that go in and out.

Heheh, yes, I planned to deposit the full $4000 to my Roth for 2005, but I probably won't get all that in there before the end of the year. So I hope QP2006 allows me to enter deposits for 2005!

Regards,

Margaret

Reply to
Margaret Wilson

Hmm, mine shows dividends. How have you sub-totalled your report? It looks to me like when I leave the subtotal as the default (no subtotal), I don't see dividends either. But when I subtotal on security, I see dividends.

< snip >
Reply to
John Pollard

Currently I'm subtotalling by account, and I see no dividends listed. When I change it to subtotal by security, it makes no difference. The dividends are not listed. Of course, the total value is correct, so the dividends, though not listed, are getting counted.

Regards,

Margaret

Reply to
Margaret Wilson

OK, I downloaded the spreadsheet to see what transaction data Vanguard is sending. I can see that Vanguard is sending the correct share price, shares (net), gross amount, and net amount. There is no mention of a fee, however. But, share price x shares = net amount.

Columns include:

Account Number, Trade Date, Process Date, Transaction Type, Transaction Description, Investment Name, Share Price, Shares, Gross Amount, and Net Amount.

The "shares" column shows net shares (that is, minus the $2.50 fee, which is mentioned nowhere in the transaction). The transaction type is "distribution," and the transaction description is "Income Dividend .09". It seems that Quicken is picking up "shares" (net) but "gross amount", and calculating the share price rather than taking it from what Vanguard sends.

Seems like the problem might be due to the somewhat incomplete info that Vanguard sends (leaving out mention of the fee) and how Quicken interprets the data. Then again, if Quicken looked at "share price", "shares", "gross amount" and "net amount", the leftover $2.50 could be interpreted to be a fee. Right?

Anyway, the upshot is that now that I know how this works, I can simply edit the ReinvDiv transaction, replacing the downloaded "gross amount" with "net amount," and all balances.

Thanks and Regards,

Margaret

Reply to
Margaret Wilson

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