How to Switch Brokerages and Move Your Investments
Navigate the complete process of transferring your investment accounts and assets between brokerages with confidence and ease.
A brokerage transfer involves moving investment holdings from one financial institution to another. This process allows individuals to consolidate investments or seek new services. It facilitates the movement of various investment types while minimizing disruption, typically involving coordination between existing and new brokerage firms.
Preparing for a Brokerage Transfer
Thorough preparation is necessary before initiating a brokerage transfer. Understand the account types involved, such as taxable brokerage accounts, Individual Retirement Accounts (IRAs), Roth IRAs, and 529 plans. An IRA must transfer to another IRA of the same type to maintain its tax-advantaged status, and a taxable account should transfer to another taxable account.
Identify the specific assets held within the current brokerage account. Easily transferable assets include publicly traded stocks, exchange-traded funds (ETFs), bonds, mutual funds, and options. Some assets may be non-transferable, such as alternative investments, private placements, proprietary mutual funds not offered by the new firm, or fractional shares. Non-transferable assets might need to be liquidated to cash or remain with the original firm, which can trigger tax implications if sold in a taxable account.
The Automated Customer Account Transfer Service (ACATS), developed by the National Securities Clearing Corporation (NSCC), is the primary method for transferring accounts. ACATS automates and standardizes the transfer of investment products like stocks, bonds, and mutual funds. An “in-kind” transfer moves assets as they are, avoiding capital gains taxes. A “cash” transfer involves selling assets and moving cash proceeds, which can trigger a taxable event. For assets not supported by ACATS, such as certain private placements or physical certificates, a direct registration system (DRS) transfer or physical delivery may be necessary.
Anticipate potential fees associated with a brokerage transfer. The outgoing brokerage firm often charges a transfer fee, typically $50 to $100 for a full transfer. Some new brokerages might reimburse these fees. Account closing fees, especially for IRAs, may also apply from the old brokerage, separate from the ACATS transfer fee.
Gather necessary information from the current brokerage account, including the exact account number, account type, and a recent statement. The new brokerage will require this information to initiate the transfer. Confirm that the new brokerage supports all existing asset types and account registrations to prevent delays.
Initiating and Managing the Transfer
The transfer process is typically initiated by the new brokerage firm, also known as the receiving firm. Contact the new brokerage, often through their website or customer service, to request a transfer of assets. This ensures the new firm manages the necessary paperwork and coordination with the old brokerage.
Complete a transfer initiation form (TIF) provided by the new brokerage. This form requires details like the old account number, delivering firm’s name, and transfer type (full or partial). Providing accurate information that matches old brokerage records is important, as discrepancies can cause delays or rejections. A copy of a recent statement from the old account is often required with the TIF.
Most brokerage transfers between NSCC member firms are processed through ACATS. Once the new firm submits the TIF, the old firm has one business day to respond. The ACATS system facilitates electronic asset movement, typically taking three to six business days. However, transfers involving non-ACATS eligible assets or manual processing may take longer, up to 30 days or more.
Monitor the transfer’s progress through the new brokerage’s online portal or customer service. During the transfer period, typically five to seven business days, the account may be temporarily “frozen,” restricting trading. Avoid making trades in the old account once the transfer is initiated, as this can cause delays.
A partial transfer is an option for those not wishing to transfer their entire portfolio. This allows specific securities or a portion of the account to be moved, while other assets remain. When initiating a partial transfer, list the specific securities and quantities on the form.
Assets not transferable in-kind through ACATS, like certain proprietary mutual funds or fractional shares, require specific handling. The delivering firm will ask what to do with these non-transferable assets. Options include liquidating assets and transferring cash proceeds, or leaving them in the original account. Liquidated assets may be subject to taxation in a taxable account.
Potential issues that can delay or reject a transfer include mismatched account information, insufficient funds for fees, or restrictions on the delivering account. If a rejection occurs, the new firm should communicate the reason. You may need to contact both brokerages to resolve discrepancies and provide corrected information or additional documentation.
Post-Transfer Steps
After the brokerage transfer, verify all transferred assets in the new account. Confirm that all expected securities have arrived, check quantities, and review cost basis information for each holding. While cost basis transfers with assets, verify its accuracy, as this information is necessary for calculating capital gains or losses for tax purposes.
If a full transfer was executed, confirm the closure of the old brokerage account. Ensuring the account is officially closed prevents lingering fees or unexpected activity. If not automatically closed, contact the previous brokerage to formally request its closure.
Update account information at the new brokerage. This includes reviewing and updating beneficiary designations, ensuring all contact details are current, and linking external bank accounts for future funding or withdrawals.
Organize and retain tax documents from both the old and new brokerages for the year of the transfer. Since assets may have been held by two firms within the same tax year, both will likely issue tax statements, such as Form 1099. Retain these documents for accurate tax reporting and potential audit purposes, as the IRS recommends retaining investment records for seven years.