There’s comes a time when you may want to switch to a new discount broker. In an unpredictable market, many people are looking for innovative online brokerages that think outside the box and that take the extra step with service. But how can you possibly face your current broker to terminate your relationship? Unlike personal relationships, you probably won’t even need to speak to your broker to end things with them.
Transferring Your Brokerage Account? Switch Brokers With Ease
To switch over to the best online brokers, you simply fill out a few forms and send them in. You won’t need to face off with your current stock broker so there should be no worries about confrontations or coercion. Thanks to today’s automated application process, you never have to talk to your broker at all. Imagine if affairs of the heart were this easy?
Let The Investment Brokerages Do The Work
Your brokers should do a lot of the work for you. All you need to do is fill out a few forms including an account application, a copy of your current account statement and a transfer authorization form. You can make the transfer process easier by using the same registration and by keeping the same name on the new account as on the old one with matching titles for all the various investments. Your new discount broker should set up your account and contact your current broker to arrange for your assets to be transferred to your new account. As a result, it should be highly unlikely for your current broker to use any intimidation tactics to get you to stay (not that you’d expect them to do this).
Discount Brokers and Their Transfer Fee Guidelines
Most stock brokerages charge an account closing fee. While this may seem unwarranted, a decent amount of paperwork is involved to close an account and transfer assets. Commissions must be paid from your account. But it may be better to pay those fees by check in order to avoid having to use your account’s invested funds to make such payments.
Here’s a list of our favorite brokers and their transfer fee guidelines. In particular, pay attention to what’s involved when closing your account. Note that a few brokers (e.g. check our OptionsHouse promotion code list) are running promotional offers to entice you to make the switch by waiving or reimbursing any transfer fees.
Tax issues are not a problem when transferring stocks, cash and exchange traded funds (ETFs). If you have an IRA or own mutual funds, they may need to be liquidated with the cash transferred if the accounts can’t be kept intact and seamlessly transferred to a new broker. Remember that selling the funds might incur capital gains taxes. The current broker should estimate your capital gains to determine possible tax consequences of a sale. Also, find out if your mutual funds require you to pay a back end load or redemption fee, which are special charges paid for liquidating the asset (particularly when held only for short periods).
Some Issues With Account Transfers
Small problems can cause big delays. Moving cash is simple but some securities have contracts near expiration which cannot be transferred from broker to broker. Study those contract expiration dates prior to a brokerage transfer to ensure that they are at least a month away. Because there are no standards, you need to carefully review your portfolio before switching over to the best online brokers.
According to Felix Davidson, managing director of operations at TD Ameritrade, “This lack of standardization or automation is likely why ‘account transfer’ is consistently near the top of the list of investor complaints filed with the Securities and Exchange Commission and the Financial Industry Regulatory Authority.”
How Long Does It Take To Switch Online Brokers?
When you initiate an automated customer account transfer (ACAT) the process takes about five to ten business days if there are no problems or questions. Delays are caused by incomplete paperwork or open orders with your former broker. The new broker might also request more information if your equity-to-margin ratio is low, which may indicate a high risk profile. Each issue slows down the transfer process a little more.
How Do I Find The Best Online Brokerages?
It’s great to find top investment brokers that charge lower commissions –- or is it? Make sure that your broker isn’t making up for those lowered commissions by charging other fees such as transfer fees, account closing fees, wire transfer fees, annual fees, IRA custodian fees, minimum balance fees and account inactivity fees. Tally up the costs to see if the switch is viable. You should shop around and review at least three different online brokers to find the best ones for your unique investment needs.
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