FURIOUS with Vanguard - Secondary Bond Buying Warning

[MomTo2Boys]

I've bought 30 year bonds off the secondary market via Vanguard three times now. Once in September, once in October, and once in November.

My first two purchases (September and October) went without a hitch. I'm a new investor but I'm relatively computer savvy and so even though I had never invested before, I found the whole thing to be seamless.

I *thought* November's buy had gone without a hitch because, for me, it went exactly like September's and October's buys did. I actually bought the bonds along with five other purchases (as I'm DCAing into the PP). The day in November that I invested, I bought ETF, ETF, ETF, then the bonds on the secondary market, then an ETF and then two Vanguard mutual funds.

This past week I was looking through my holdings and I didn't see November's bond purchase reflected in my holdings. Everything else I had bought in November on the day I DCA invested was there... my ETFs and funds... just not my secondary-purchase bonds.

I called Vanguard and asked about my bonds. They initially told me that I probably hadn't completed the buy... that a lot of people don't follow all the way through the purchase and click "buy" - and that's probably what went wrong. But I told them I was certain I had gone all the way through the purchase and that the whole purchase had been finalized.

So then they told me that they record every single thing that we customers do on the website. Every click, every typed entry, everything, and that they would pull the recording for me of my online activities that day, take a look at the recording, and let me know what happened. Great, I said.

So the next day I talked to them again and they put me on the phone with some guy from the bond desk. He proceeded to explain to me that, yes, I was correct, I had gone all the way through the purchase and clicked "buy" and made it a done deal on my end... I had completely and totally executed the buy... but that at some unknown time after that, as Vanguard was executing the buy for me, the transaction had been cancelled because the price of the bonds had changed!

The Bond Desk Guy then blamed ME for not knowing that my buy had been cancelled because, according to him, everyone buying bonds on the secondary market at Vanguard needs to go back the next day or two later after they execute their buy to VERIFY that their purchased bonds were actually bought and placed in their holdings, showing that the sale had indeed gone through.

(Now, mind you, there is no and I do mean NO mechanism at Vanguard for notifying you that your executed purchase for bonds on the secondary market had been cancelled. Nothing shows up on the screen, no messages or alerts or anything are sent to you - if the order is cancelled after you execute the order, the only way for you to know is to look at your holdings later on and see that your buy isn't reflected there.)

He was, actually, really mean to me. Which I find odd. I mean, come on, my husband and I are Voyager clients.

I told him, look, your platform is to blame here. The prices on these bonds do fluctuate, of course, but instead of having a mechanism for coping with that like you do when you're buying ETFs (when you're buying ETFs the price updates very frequently and if the price changes during your buy the platform will tell you/make you refresh) you just let the customer complete and execute the buy and go on their merry way thinking they now have their bonds. You don't tell them or give them a popup or message or anything at all letting them now their buy was cancelled after the fact by Vanguard. And he argued with me over and over again that it's MY fault that I don't have my bonds because, again, I didn't log in the next day or two later and make sure that the bonds had shown up in my holdings.

So now I'm down thousands of dollars of bonds that I THOUGHT I had purchased in November. And I'm out money, too, because OF COURSE bonds have done well since that day I thought I bought them. And I am SO angry at Vanguard for having so sucky of a bond buying platform... that leads you to think that you've bought your bonds when in fact your order could be cancelled after the fact.

So I'm whining because I'm mad. And I also feel like I'm the one in the right. Vanguard ought to structure their secondary bond buying platform just like their ETF platform - such that if what you're trying to buy changes prices, that you're told during the buy and/or the price is updated. And if not, for the love of everything holy they ought to INFORM you that your buy had been cancelled. Pick a method! Either by popup or by message sent or something. To tell the customer, "Yes, you did buy those bonds but then the price changed so we cancelled the order and it's all your fault you didn't realize this sooner because you didn't log in the day after to check your holdings!" is a big huge lump of hooey, especially with so much money on the line.

[jimbojones]

I feel your pain, MomTo2Boys.  My first bond orders were cancelled too.  Whenever you place an order, check the Order Status screen to see whether it has been fulfilled, cancelled, or remains open.  Essentially, you placed a limit order for the bond and nobody was willing to sell at the price.  With a stock, your order would likely remain open, but apparently the bond desk cancels bond orders right away. 

You are absolutely right that there should be immediate notification either if the price changes or if an order is cancelled.  Maybe your complaints will resonate with Vanguard and future bond purchasers won't have the same issues.

[2thefuture]

Interesting MomTo2Boys........ When making your follow-up verification order status on a secondary bond market purchase, be aware, you may find a duplicate order for the same bond. One will be marked as "executed" and the other shown as "pending". You may think you placed two buy orders.  I was told secondary market purchases are manual and there is a time lag for the system to remove the "pending" order.  And yes, my perception is the bond desk lacks customer contact skills aka "mean".

[Tortoise]

MomTo2Boys, I'm really sorry to hear that you were jerked around by someone from Vanguard's bond desk. My interactions with Vanguard representatives have always been completely professional and friendly, so this is surprising to hear. But I have not yet had to call up Vanguard's bond desk, so maybe things are just a little different over there.

You might consider writing a polite letter of complaint to Vanguard (both the bond desk and Vanguard itself) about your bond desk mishap, and explain to them how a certain improvement in their bond desk's user interface would have prevented the problem. That may be your best chance to effect an actual change at Vanguard.

In my experience, writing polite letters of complaint often results in someone from the company sending me a freebie or something similar as a token of appreciation for the helpful feedback.