How to Transfer Your Brokerage Account

Anybody that has tried to change their satellite or cable service knows how much of a pain in the butt it can be.

You’ll spend at minimum an hour on the phone and most likely by the end of it you’ll be so disgusted that even a hot shower won’t make you feel any better.

One of the biggest fears that investors have when starting with a new brokerage firm is what happens if you want to quit or break up with your financial advisor.

Are you going to be stuck in the same situation as trying to transfer your satellite service and are you going to be hit with a massive amount of surrender fees?

Is this something that you worry about?

Let’s take a look at how it works if you want to transfer your brokerage account.

If you’re in the process of hiring a new financial advisor or opening an online brokerage account, the first thing you want to do is ask,

“What happens if I ever want to leave? What type of cost or transfer out charges would I incur?”

If it’s really a concern of yours, I wouldn’t accept the explanation verbally. Get it in writing. Make sure you can see exactly how much you would pay if you had to pay anything at all.

Many people don’t realize how easy it is to actually transfer your brokerage account elsewhere. It’s easier than switching banks. It’s easier than dropping your cable. It’s easier than changing your cell phone provider. Yes, that’s easy!

The beautiful thing about transferring is that you actually don’t even have to talk to the institution that you’re currently with. Say,”What?” Yes, that’s right. You can actually transfer out without ever having to notify them that you’re leaving. How beautiful is that?

Brokerage Account Transfer Example

Let’s say for example that you have a brokerage account with Edward Jones and you’ve been with them for four years. You’ve now decided that you want to work with XYZ Financial.

Instead of contacting Edward Jones and telling them why you’re leaving, you would actually go to XYZ Financial, open the same type of brokerage account that you have opened at Edward Jones, and then sign XYZ Financial’s transfer paperwork.

XYZ Financial’s back office should then contact Edward Jones’ back office and the transfer is all done for you. The reason that this is so simple is that most brokerage firms use an account transfer process called the automated customer account transfer service or ACAT.

The rules that govern the ACAT system require firms to complete various pages in the transfer process and in a very specific period of time window. If the transfer is made using the ACAT system, then the transfer should take no more than six business days.

Here’s a brief description of the ACAT process directly from the SEC website:

Most account transfers between brokerage firms are made using the Automated Customer Account Transfer Service (or “ACATS”) system.

The National Securities Clearing Corporation operates ACATS, and both the New York Stock Exchange and the National Association of Securities Dealers, Inc. require their member firms to use ACATS.

These rules require firms to complete various stages of the transfer process within a limited period of time. If the transfer is made through ACATS, and there are no problems, the transfer should take no more than six business days to complete from the time your new firm enters your form into ACATS.

There are situations where the accounts may not be able to utilize the ACAT system. In those cases, you can expect upward to two weeks for the transfer to take place.

In the last couple of years, I’ve only encountered a few situations where an account could not be transferred utilizing ACAT. Most likely, you won’t run into this situation.

Brokerage Transfer Out Fees

What about the cost?

All brokerage firms are going to charge some type of transfer out fee.

That fee can range anywhere from $50 up to $100, at least what I’ve seen.

It may also be more for an IRA. Another potential cost that you may incur is an IRA custodial fee.

I know some firms will charge you both for the transfer out fee and a prorated cost of the IRA custodial fee. I know in one case a client had to pay $115 to transfer out his IRA. Ouch!

The only other issue that may come up is depending on what type of investments you hold. I’ve seen some mutual funds that aren’t able to be transferred “in-kind” so they have to be sold at the brokerage firm that you’re currently with before the account can transfer. 

In that case, you would have to contact them to give them instructions to sell what can’t be transferred. If you want to avoid the phone, you can always draft a letter with your instructions to liquidate the investments and then transfer the account upon settlement of those funds.

Please also note that insurance or annuities are a whole other animal when it comes to transferring.

It’s pretty simple to change the broker record on annuity accounts, but there also may be surrender charges on the actual policy itself.  Be sure to verify with the insurance company before liquidating any annuity contracts.

Bottom Line: Transferring Your Brokerage Account

Transferring your brokerage account is simpler than most anticipate, often easier than changing banks or service providers. Typically, one need not communicate with their current institution.

Instead, they’d open a similar account with the desired firm and authorize the transfer. Many transfers utilize the ACAT system, ensuring a swift process, usually within six business days.

However, there are costs involved, ranging from $50 to $100, with some additional charges for IRAs. Certain investments might require liquidation before transfer, and insurance or annuities have distinct transfer rules. Always seek clarity on fees and conditions beforehand, ideally in writing.