Transferring a brokerage account seems a little intimidating to many investors. But if you are in an unhappy brokerage relationship don’t let the paper-work scare you. Dump your broker and educate yourself on how easy the transfer process can be and what you should ask for to make it as inexpensive as possible.
There are a lot of reasons to leave one broker for another. You may be able to get a much better deal somewhere else with commissions; perhaps you are unhappy with the services or tools your broker offers or you may want access to a broader product line of options, bonds, futures and forex. Whatever your reasons for leaving, its easy to get it done if you know the right questions to ask.
There are two general ways to transfer one account to another broker. If your current account is all in cash you will probably have an easier time with a check or wire transfer. However, if you have open positions and don’t want to close them it gets a little (but not much) more complicated.
Securities brokers have a process called ACATS (Automated Customer Account Transfer Service) that is managed by the NSCC (National Securities Clearing Corporation) for moving open positions and cash from one broker to another. An ACATS transfer essentially takes your account from one broker and replicates it, including your open positions, with another broker. Here are a few tips to make this process as pain-free as possible.
1. Let your new broker handle it
The ACATS process can be initiated by your new broker. They want your business and are motivated to make sure the transfer is done quickly and smoothly. Typically, your new broker will ask you to fill out a transfer form with the details about your old account. That form may be online or one they will ask you to fax back to them. It authorizes them to initiate the transfer without you having to talk to anyone at the old firm.
2. The new account must be a mirror image of the old one
It is important to make sure your new account looks exactly like the old one. That means that if it is a joint account your old account must be a joint account. If you used your middle initial in the title of your old account you will need to use that middle initial again. If you had an IRA in the new account you must use the same type of IRA in the new account. Essentially you are trying to create a mirror image of your old account with your new broker. Learn more about the differences between IRA types here.
3. The transfer process can take several days
Keep in mind that the ACATS process can take several days and it is not uncommon (although they won’t admit it) for your old broker to drag their feet a little. During the transfer process you will have limited or no access to your open positions. For long term traders this is probably not a big deal but short term traders may want to make sure they have appropriate risk coverage or have exited open positions.
4. Your old broker will charge you for this service
To add insult to injury your old broker can charge you for initiating an ACATS process. Most of the time this fee is between $50-$100 per account. However, this may not be an issue at all. Keep in mind that your new broker wants your business. It is very likely that they will reimburse you for this expense but you have to ask for it. Don’t hesitate to find out whether they will cover these costs for you.
5. If you only have cash in your old account it is quicker to just ask for check or wire
Because the ACATS transfer process takes several days it may be easier to just ask for a check or wire to be send to your new account. The ACATS process really designed for an account with open positions that you don’t want to close.
It is always useful to remember who works for whom when you are working with your broker(s). Don’t be afraid to ask for things and to talk to your broker often. Use your new broker to take the pain and frustration out of the account transfer process and get on with your investing life.