Transferring Your Brokerage Account? Switch Brokers With Ease

by Silicon Valley Blogger on 2010-04-058

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.

Discount Brokerage
Commissions/Transfer Fees
TradeKing $4.95 per stock trade; Any transfer fees incurred are reimbursed up to $150.
Zecco $4.50 per stock trade; No fees for an ACAT (automated) transfer, additional fees if non-ACAT.
Scottrade $7 per stock trade; Will reimburse up to $100 charged by another broker when you transfer an account with a total value of $25,000 or more.
OptionsHouse $3.95 per stock trade; Transfer fees (from your old broker) are reimbursed up to $100.
optionsXpress $9.95 to $14.95 per stock trade; Transfer fees (from your old broker) are entirely reimbursed.
E*Trade $7.99 to $9.99 per stock trade; Outgoing transfer fees may be charged ($60 for an outgoing IRA transfer).
TradeMonster $7.50 per stock trade; Transfer fees (from your old broker) are reimbursed up to $250.
ShareBuilder $4 per stock trade; No transfer fees charged, but won’t reimburse fees charged by other brokers.

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.

Copyright © 2010 The Digerati Life. All Rights Reserved.

{ 7 comments… read them below or add one }

basicmoneytips April 6, 2010 at 3:51 am

The one thing I would note here, is make sure you record you buy price of the securites you are transferring. Most of the times, that information does not transfer over.

So if you sell, your new discount broker may not have your buy price, which you will need when you do taxes and have to calculate the gain or loss.

Neal A. Deutsch, CFP April 6, 2010 at 6:53 am

While your article may try to be helpful, surveys show that over 75% of investing consumers in the past two years are unhappy with their brokers due to lack of service in the past few years. Switch to an on-line broker or low commission broker who only makes money when they sell you something? Better service than full service independent CFP who prides themselves on taking the best of care of their clients, trained in all facets of financial planning? Do you patronize the cheapest doctor to save a couple of bucks, regardless of their training or experience? If planning your financial future is based on how cheap you can get it done, you deserve what you get. Sorry…I can’t agree with you on this one…

Silicon Valley Blogger April 6, 2010 at 9:56 am

While I think there are customers who would benefit from more service, there are those who would be perfectly happy with taking the tradeoff of cheaper rates with less service. I’m one of those people, actually. In fact, I sometimes get annoyed when I receive “courtesy” calls from some of these banks/institutions; I’ve explored advice from CFPs, planners from insurance companies, brokerages and mutual fund companies before, and there’s nothing they’ve told me that I didn’t already know. But I suppose, it depends on each person — and there are people (many in fact), who may do better with full financial services from somewhere. It depends on one’s exposure to finance.

On a different note, my parents were actually “victimized” by a well meaning full service broker. They had a friend of theirs (a stock broker) end up churning their accounts and they lost a great deal of money from this experience. It was one of those events that cemented my resolve to take on my personal finances as independently as possible.

Stephen April 7, 2010 at 10:11 pm

@Neal — care to provide a citation for the survey? I would be interested in reading it and understanding what services are lacking. For me, I do all my purchases online and I’m not sure exactly what I’d be missing if I went to a “full service” broker.

Helen April 19, 2010 at 10:07 pm

I recently transferred my accounts to Schwab. They reimbursed me for the fees my old brokerage charged me for closing the accounts. Also, we had a real person help with the asset transfers. Quite helpful. Schwab recently lowered their fee for online equity trades to $8.95. Plus their end of the year statements made filling out the 1040 Schedule D a snap. They do a good job of tracking basis, so you can easily figure out your gain. I’ve been really happy with them.

O. Stanley April 23, 2010 at 8:16 am

It’s not always about price; you should look for a combination of price, service execution, requirements and live customer support.

Tim September 10, 2010 at 11:16 am

ShareBuilder does in fact charge $75.00 to transfer your account to another broker!

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