Maybe you want to move your investments, but you feel intimidated to go through the paperwork and stress of transferring your brokerage account.
The good news is the process is less painful than you think and can be done in a short amount of time with little hassle. Let’s take a look at what’s involved in transferring brokerage accounts.
Why Transfer Your Brokerage Account?
You may decide to leave your current broker for a number of reasons. Perhaps you feel they’re not investing your money well or the fees are too high. Maybe you’ve found a better broker that can devote more time to your portfolio, or maybe they have a broader range of investment tools.
Whatever is driving you to explore other options, there are many benefits and drawbacks to consider when transferring a brokerage account. These include:
- Brokerage relationship: You may have established a relationship with your current broker built on trust, and it may feel uncomfortable ending that relationship to start over elsewhere.
- Paperwork: When you set up your investments, you likely had to complete paperwork to get it started. With the transfer, you may have to complete additional paperwork you may not have anticipated.
- Fee Structures: You should be familiar with your current fees, but when you transfer a brokerage account, you may have to learn about new fees and become familiar with how this affects your investments.
What Can Be Transferred?
When you wish to transfer brokerage accounts, you may be curious what kind of accounts can be transferred. Typically cash, stocks and bonds of domestic companies, and listed options are available for transferring between brokers. It’s important to have all of your account information readily available when you begin the transfer process.
It’s also important to understand some funds may be easier to transfer than others. For example, if you have an account with a bank that’s all in cash, it might be easier to write a check to your new broker than go through a lengthy transfer process.
However, not all investments can use this method, so make sure to discuss your goals with your new broker and create a strategy that’s right for you.
Important Steps to Take
Making the decision to transfer your brokerage account can be challenging, but beginning the process is simple.
According to the Securities and Exchange Commission (SEC) webpage on transferring brokerage accounts, the process can take two to three weeks if you don’t run into any delays. The estimated time frame varies based on a few factors: the assets involved in the transfer process, the types of accounts you have, and the institutions involved in the transfer.
When you decide to transfer your brokerage account, tell your new broker about your intentions. He or she can then begin the process of transferring your brokerage account.
According to the Learning Markets website, you can general transfer your account in one of two ways. First, if your account is all cash, a wire transfer or a check sent from one account to the other is an easy solution. This process involves fewer forms and can usually be done with smaller investments.
However, many investments such as IRAs can’t be transferred this way due to the fees involved. The process can be a little more complex.
If you don’t want to lose the positions in your current investments, but still wish to transfer your brokerage account, you may be able to work within the Automated Customer Account Transfer Service (ACATS) process. The National Securities Clearing Corporation (NSCC) manages ACATS to help investors move investments from one broker to another.
Before ACATS, NSCC ran a manual asset transfer system. Today, the process is much more efficient and automated, giving investors a better timeframe and process.
Once the transfer process begins under ACATS, it can take several days to complete. With the ACATS process, your broker essentially replicates your previous account positions with your new account once the funds have transferred.
Understanding Fees and Timelines
Before you breathe easy about transferring your brokerage account, it’s important to keep in mind the fees you may incur from your previous broker. If you initiate the ACATS process with your new broker, your previous broker will likely require a fee for each account. However, this might not always be the case, so discuss this concern with your new broker before beginning the transfer process.
Are you concerned about the transfer process timeline? Transfers where the delivering entity isn’t a broker-dealer (such as a bank or credit union) may take more time to complete the automated ACATS process. You may also face a longer timeline if your accounts involve a custodian, such as transferring an IRA or an account for a minor child.
Helpful Resources for Transferring Your Brokerage Account
Your new broker should be able to offer you a detailed explanation of the transfer process and answer your questions about expected timelines and any fees you might incur. However, there are additional resources available to you for free online:
ACATS Transfer Guide: Created by Interactive Brokers, a brokerage firm founded in 1978, this guide provides a comprehensive overview of the ACATS process.
U.S. Securities and Exchange Commission: The regulatory body for the securities industry that sets the standards for brokerage firms and other securities organizations.
If you’re stuck in a brokerage relationship you can’t get out of or want to explore other investment options, it might be time to consider a switch. Once you’ve done your homework on the right type of broker for you, a funds transfer can solidify your decision and lead to a better outcome for your investments.
Transferring your brokerage accounts is a fairly straightforward process. Once it’s done, you’ll be glad you not only went through with the decision, but can look forward to a future where your investments can continue to grow.
Have you ever been through the process of transferring your brokerage account? What was your experience like? Why did you switch brokers?