How To Transfer To Other Brokerage Account
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To initiate the transfer of assets between stock brokers, simply request an Automated Customer Account Transfer Service (ACATS) form from your new broker and fill it out. Once filled, your new broker will forward the request to your old broker for review. If the request is approved by your old broker, your asset will be transferred to your new broker.
Investors may find the need to transfer their assets to a different brokerage firm for various reasons, such as better investment opportunities, lower fees, and better services. However, recent reports from Finance Magnet revealed that three out of five investors have never switched platforms due to significant issues encountered during the transition process. To this end, Traders Union (TU) experts have curated a comprehensive guide on how to transfer to another brokerage account without hassle. In this article, we delve into details for transferring to a brokerage account, providing a step-by-step roadmap to ensure a smooth transition between stock brokers.
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Is there a fee to transfer from one brokerage to another?
Yes, most brokers impose a fee for transferring to another broker, possibly to cover transaction costs or as a measure to dissuade users from leaving. However, it is worth noting that some brokers do not impose such fees.
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How do I transfer money from my brokerage account?
To transfer funds from one broker to another, simply withdraw and deposit to the preferred broker.
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Can I transfer mutual funds from one broker to another?
Yes, some brokers support the transfer of mutual funds to another broker, while others do not allow it.
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Is there a penalty for withdrawing from a brokerage account?
As a rule, there are no penalties for withdrawing funds from a brokerage account, but some brokers may charge a fee for transferring funds or a penalty for early account closure.
How to transfer to another brokerage account: tutorial
Transferring from one brokerage account to another is via cash transfer or in-kind assets. Therefore, here is a step-by-step guide on how to transition to a new broker, covering both cash transfers and in-kind transfers:
Step for cash transfer
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Liquidation of Assets: The first step for cash transfer is fixation of all open deals and liquidating all assets held in the old brokerage account, such as stocks, bonds, mutual funds, etc., and converting them into cash. This liquidation is to generate funds to finance your new brokerage account
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Cash Withdrawal: Once the assets are liquidated, withdraw the cash from the old brokerage to your bank account
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Fund Your New Brokerage Account: Finally, deposit the withdrawn cash into your new brokerage account to start trading
Cash transfer is one of the most popular and easy ways for traders to transition between two brokerage accounts. However, it does have some demerits, which include prematurely closing promising assets, potential transaction charges, and taxes on profits earned.
In-kind transfer
The second method of transferring to another broker account is the in-kind transfer. Unlike the Cash transfer, this method allows investors and traders to move their assets from one broker to another without liquidating their assets into cash. In other words, no cash deposit is required for the in-kind transfer method to switch between stock brokers.
The in-kind transfer process uses the Automated Customer Account Transfer Service (ACATS), which facilitates the electronic transfer of financial assets between brokerage accounts without disrupting your investments. So, instead of selling your assets before transferring the cash proceeds to another broker, ACATS offers a more convenient way to transfer to another broker with less hassle.
To use this transfer method, simply contact your new broker to know if they accept in-kind transfers. If your new broker accepts it, you can request the ACATS form and fill it out to initiate the transfer process.
While the in-kind method enables a smoother transition between brokers without investors selling their assets, it also has some demerits. One of the challenges of using the ACATS system is certain assets are not transferable to the new broker. So, investors should contact their new broker on the list of assets supported for the transfer before proceeding. Another downside of in-kind transfer is the transfer of assets to a new broker does not happen instantly; it usually takes some time for the transfer to be completed. However, it is worth the wait to keep your investment secured.
Four steps to transfer a brokerage account
Having outlined the cash transfer method, let’s also delve into the step-by-step process of transferring to another brokerage account using the in-kind transfer method.
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Open an Account: The first step is to have an account with a reputable online broker. You can easily use Traders Union's Find my Broker tool to choose a broker based on dozens of parameters. So, sign up for an account with your preferred broker and submit the requisite documents to complete the account verification. Only users with verified accounts are eligible to switch between brokers
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Organize your Information: You need supporting documents and details of the current brokerage account and asset you wish to transfer. These details include the account number, types of investments, and the recent statement of account of your old broker
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Initiate the Transfer: Contact your new broker to request the in-kind transfer form. Carefully fill out the form and submit it to initiate the transfer process from your old broker to the new one. Most brokers have support teams to help investors, guiding them through the paperwork, and ensuring a smooth transition. Once you submit the form, your new broker will work diligently with your old broker to ensure a smooth transition of your assets
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Await the Arrival of your Asset in the new account: Patience is key when transferring assets between brokerage accounts. Typically, the transfer is completed within six business days. However, in the unlikely event that the old broker hesitates to release the assets or a technical glitch arises, the transfer request would be deleted from the ACATS system after this period
Top-3 stock brokers
Why do users decide to switch brokers?
Investors and traders switch brokers for several reasons, often influenced by their personal experiences with a broker or financial considerations. Let’s look into some major reasons why users might decide to switch brokers:
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High Fees: One of the primary reasons for users to switch brokers is due to high fees. Brokers with significantly high trading fees for transactions, account maintenance, or other services tend to eat deep into the overall financial returns of investors over time. Hence, users may switch to a broker with a lower trading fee to maximize more of their profits
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Poor Customer Service: Customer service is crucial for users’ satisfaction. Investors who encounter constant delays in response or unhelpful responses to their queries from the support team might become frustrated and feel the need to change a broker. So, investors may consider switching to a broker with a more responsive, knowledgeable, and accessible customer service team for a better trading experience
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Limited Investment Options: Another salient reason investors switch brokers is for better investment opportunities. Brokers with limited investment options may lose investors seeking better investment opportunities to diversify their portfolios across a wide range of assets
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Technology and Platform Issues: A reliable, user-friendly, and technology-driven broker is essential for optimal trading experience. So, a broker with a poor user interface, slow execution speeds, and frequent technical glitches, for instance, can disrupt trading activities, impacting users’ overall trading experience and satisfaction. Therefore, users tend to switch to a platform with a user-friendly interface and intuitive technology infrastructure to experience better trading experience and productivity
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Better Incentives or Promotions: Users may switch brokers due to enticing incentives or promotions offered by a competitor broker with similar functionality. These incentives may include signup bonuses, referral rewards, etc., to attract new users or encourage the existing ones. These promotions can provide immediate financial benefits or perks that users find appealing, prompting them to switch to a competitor broker
What to do before you transfer a brokerage account
Before transferring a brokerage account, it is essential to understand how to prepare effectively for a smooth transition. Here are some salient things to do before you transfer a brokerage:
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Review Your Investments: Make a list of your investments held within the current broker to note the transferable assets and the ones that cannot be transferred. For instance, mutual funds, bankrupt securities, annuities, and assets sold exclusively by a broker may not be eligible for transfer to the new broker
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Download Task Documentation: Obtain relevant tax documents from your current broker for task reporting purposes
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Contact Your New Broker: Reach out to the new broker you intend to transfer your asset for details on their transfer process, supported assets eligible for transfer, requirements, and documentation needed to initiate the transfer. You can also verify the timeline for the transfer to understand how long the transfer process is expected to take
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Check Fees and Penalties: Review the terms of your current broker account to identify any potential fees or penalties associated with transferring your account to another broker. Some brokers may charge users fees for account transfer, account closure, or penalties for early withdrawal
Fees to transfer a brokerage account
Several fees can be involved when transferring a brokerage account, including account transfer and termination fees. However, it is worth noting that some brokers may cover a portion of the transfer fees, usually up to a certain amount per account.
Now, let’s look into each type of transfer fee you might encounter:
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Account Transfer Fee: This is the fee a broker charges an investor as a transaction cost when transferring partial or whole assets to another broker. The account transfer fee is also referred to as the ACATS processing fee in some brokers and ranges from $50 to $100, depending on the brokerage firm and the type of account being transferred. For example, a broker may charge $50 for transferring a standard account and could charge around $100 for transferring a retirement account like the Individual Retirement Account (IRA)
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Termination Fees: Termination fees, also known as account closure fees, are imposed by some brokerage firms when an account is closed within a certain period after opening. This fee can be as much as $75 or more, which may vary depending on the broker. For example, some brokers may charge a termination fee of $50 if you close your account within the first 90 months. However, some brokers may waive this fee under certain conditions, such as for clients above a certain age or in cases of termination due to death or disability
Tax Implications of switching brokers
Switching stock brokers can have tax implications depending on the type of accounts involved (e.g., taxable or tax-advantage) and the assets being transferred. For example, the transfer of taxable accounts does not attract immediate tax. Conversely, transfers of tax-advantaged accounts, such as the Individual Retirement Account (IRA), for instance, attract taxes.
Moreover, taxes may apply if investors sell their assets in one brokerage account and then transfer the cash to another account. Any capital gain realized from selling investments in the original broker would be taxed.
Expert opinion
To ensure successful registration and account opening with a broker, you need to consider several factors. Firstly, provide only accurate information. Secondly, ensure the correctness of what and how you write. For example, if you make a mistake in your name or taxpayer ID number, it becomes a problem later. The third factor is directly related to the first two – verification. Be prepared to provide the necessary documents. Remember that these don’t necessarily don’t have to be scans of paper documents. For example, you can confirm your address by requesting a statement through the bank’s mobile application. In just a few seconds, you will receive a document that allows you to quickly confirm your residential address.
Conclusion
In conclusion, transitioning between brokerage accounts can be a significant decision for investors to experience better service, low fees, or improved investment opportunities. The TU step-by-step guide streamlines the process, detailing cash or in-kind transfers via ACATS to assist investors in switching brokers with less hassle.
Team that worked on the article
Joshua Francis is a professional Forex trader with 4+ years of experience in the financial industry. He trades the XAU/USD and GBP/JPY pairs. He is also a ghostwriter and author for Indicatorspot and Traders Union, where he puts his intensive research skills and deep knowledge of the financial markets into freelance writing.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).