Investing is more popular than ever, and there are many high-quality choices available for investors when it comes to selecting an online brokerage. And with so many brokers vying for a piece of the enormous investment pie, many have slashed fees and offer strong bonuses for new customers.
Thanks in part to all of this competition, online brokerages offer investor-friendly benefits. Most offer no commissions, and many allow you to buy fractional shares — as small as one one-hundred-thousandth of a share, in some cases. So, you don’t have to shell out $1,000 or more for a single share.
As a result, you may want to consider switching brokers, especially if you have accounts at an older brokerage that still charges high fees. However, simply selling your shares at your current broker and transferring cash to the new one could result in a number of issues. Although the process isn’t always easy, it can be well worth it if you’re paying high fees.
When to consider switching brokers
Switching brokers isn’t a minor decision, especially if you have a large portfolio. But there are many reasons why you may want to switch. Your existing broker may have any number of issues:
- High fees/commissions. Many brokers today have very low or no commissions. The same is true for monthly fees, inactivity fees, and minimum balances. If your broker is burdening you with any of these, it may be time to look elsewhere.
- Poor or minimal customer service. If your broker charges no fees whatsoever, it may not offer much in the way of customer service. For some traders and investors, that’s no problem. But if you occasionally or often need help from customer service, it’s important to work with a broker that offers it.
- Outdated website or a wonky app. User experience on broker websites or mobile apps can vary greatly. Some offer advanced trading tools, an easy-to-use interface, and extensive educational tools. If your broker’s website is arcane and difficult to use or your financial app seems to keep crashing, it might be time for a change.
- Limited investment options. Not every broker is created equal in terms of investment options. Besides the usual domestic stocks and ETFs, some offer international stocks, low-cost options trading, mutual funds and other more arcane things such as cryptocurrency, but not all do. If the investments you want to make are not available with your broker, you may want to shop around.
- Proprietary funds. Some companies may offer some of their own proprietary mutual funds only to customers of their brokerage. So if you’re looking for a specific fund, it may be available only at a specific brokerage. Alternatively, if you switch brokers, you may not be able to continue buying those funds elsewhere, so it can cut both ways.
A new broker may offer more favorable options for any of the above, which would be an added benefit of switching. Thus, before pulling the trigger, you should do your own research and consult a tax professional where appropriate.
How to transfer brokerage accounts
Switching brokers is not uncommon for any number of reasons, including those mentioned above. If you decide you do want to switch, you have two ways to move your money.
Cash transfer
The most basic way to move your investments from one broker to another is a cash transfer. If you have a brokerage account, this isn’t too difficult. You simply sell all of your securities and then move the cash to the new brokerage. You may not even need help, since you can withdraw the cash. Then you can invest the money how you choose at your new broker.
If you have a lot of securities though, this approach can be cumbersome, and selling could trigger taxes on any capital gains. Even relatively modest gains could make it more advisable to go with an in-kind transfer, so that you can avoid the tax consequences.
In-kind transfer
Fortunately, there is a way to transfer your shares without having to sell. In fact, there is a special clearinghouse just for this process called Automated Customer Account Transfer Service (ACATS). These transfers are commonly referred to as in-kind transfers.
When your account undergoes an in-kind transfer, it essentially means “as is.” In other words, all of your shares, buy/sell history, and cost basis are transferred to the new broker just as they were at the old one.
The easiest way to complete an in-kind transfer is moving an account to a new account of the same type. That means if you have a taxable brokerage account, it should be transferred to another taxable brokerage account. The same applies to a traditional IRA, Roth IRA, and so on. While it is possible to transfer to a new account of a different type, it may delay the process. Plus, you may have to provide additional documentation proving ownership in this situation.
It’s also important to have the right paperwork when switching brokers. You will need to fill out a transfer initiation form with the new broker, also called the receiving broker. This will ensure you not only avoid unnecessary fees but also that the process won’t be delayed.
When filling out your transfer initiation form, you will need key pieces of information, such as:
- Name
- Account number
- Social Security number
- Previous broker’s information
- Whether this is a full or partial transfer
Another thing to keep in mind is that while this form is going to the new broker, it should match the information on file with the old one. If you had a name change, for example, you should use the name on file with the old broker. You can always change it later with the new broker, if necessary.
If you’d like to complete an in-kind transfer, reach out to your new broker to start the process. Here are the steps involved:
1. Contact your new broker
The new broker will be more than willing to help since they want your money invested with them. Ask about their process and let them know what you are planning to move. Also ask about any incentives or promotional bonuses they may have. If they offer a bonus, it could be a good time to open an account with them if you don’t already have one.
2. Gather information from your old broker
You will also need your most recent account statement from the old broker, as well as your buy/sell history. The latter is important because it will help you avoid tax issues if any of the information is lost in the transfer. You will also need the cost basis for your existing securities.
3. Wait for the new broker to move your account
Thanks to ACATS, you shouldn’t have to do anything while your account is being moved. The process normally takes three to six business days. Keep in mind that you will not have access to any of the securities being moved while the transfer is in progress.
4. Get acquainted with your new account
If you had opted for a cash transfer, you might still have quite a bit of work to do with your new broker, including purchasing your investments But with an in-kind transfer, you may just have a few basic items to take care of, such as ensuring your bank account is linked and setting up auto-deposit.
Beware of transfer fees
Something that is often overlooked when requesting an in-kind transfer are possible fees. Perhaps you are focused on the negatives of your old broker and how the new broker will be much better. Whatever the reason, many brokers charge a fee if you decide to have your account transferred. Not all do, but there may be a fee of up to about $150 for leaving your old broker.
On the other hand, some brokerages offer incentives encouraging people to switch. Although your existing broker may charge a fee to move your account, the incentive the new broker offers can more than make up for that fee. Some brokers offer bonuses of several hundred dollars and may even offer to pay the fees of the old broker if you incur them. Read the fine print carefully on the new broker’s site to see exactly what’s needed to qualify for these promotional incentives.
Tax implications of switching brokers
One of the biggest reasons to let your new broker handle the account move via an in-kind transfer are the tax implications. If you opt for a cash transfer and sell all of your securities, you could trigger capital gains. And if you sell securities you’ve owned for one year or less, you may run into short-term capital gains, which have an even higher rate than the tax rate for securities owned more than a year.
In addition to the risk of selling securities for cash, there are tax implications if you are transferring retirement accounts. These accounts have special rules when transferring, including a custodian requirement. And if you are under the allowed retirement age, the transfer could be treated as a distribution if not handled properly,resulting in taxes and penalties. Plus, if the transfer isn’t completed within 60 days, that, too, could trigger a distribution.
As you can see, there are quite a few tax considerations when moving your accounts. Your new broker will be familiar with the process and know how to handle it the right way. Allowing the brokerage to take care of the transfer is usually the best way to avoid costly errors.
Bottom line
There are many reasons you may want to switch to a new broker, including high fees, poor customer service, or a frustrating website or app. Whatever the reason, you can transfer your account via cash transfer or an in-kind transfer.
If you work with your new brokerage on an in-kind transfer, the process shouldn’t be too difficult. Just be sure you do your research and have all the information needed to make the switch. Thankfully, your new broker will do most of the heavy lifting once you start the process. And once they do, you’ll be ready to start using your new-and-improved account.
FAQs
An in-kind or ACAT transfer allows you to transfer your investments between brokers as is, meaning you don't have to sell investments and transfer the cash proceeds — you can simply move your existing investments to the new broker.
Can I transfer my investments from one broker to another? ›
An in-kind or ACAT transfer allows you to transfer your investments between brokers as is, meaning you don't have to sell investments and transfer the cash proceeds — you can simply move your existing investments to the new broker.
What happens when you transfer brokers? ›
Once the transfer request is validated, the delivering firm will send a list of the assets in the account to the receiving firm via ACATS. The receiving firm will review the list of assets to decide whether it wishes to accept the transfer of the account.
What is the procedure to transfer a brokerage agreement to another broker? ›
The seller must agree that they want to be represented by the new brokerage. The original brokerage needs to release the seller from their agency agreement and remove the property from the MLS and cease all other marketing efforts. A new listing agreement must be executed between the client and the new brokerage.
How do I transfer mutual funds from one broker to another? ›
NSDL account: Submit the following documents to the NSDL DP, i.e., the other broker.
- Delivery Instruction Slip (DIS) which can be obtained from the other broker.
- On the DIS, mention the number of units and the Zerodha demat account number. ...
- Submit the DIS to the other broker.
Online demat account transfer
- Go to the CDSL website and click the 'Register Online' option to register.
- Complete the form with the required information.
- Select the option to print the form from the drop-down menu.
- The Demat Account is transferred to the Depository Participant.
For transferring the shares online, you have two options. First is to do this via your demat account and the second is via the relevant depository's (CDSL/NSDL) website. While certain brokers may offer an online transfer option, the process may not be completely online due to safety reasons.
How much is a broker to broker transfer fee? ›
Broker-to-Broker share transfers are free.
That your name, salutation, postal address, account number and HIN on the originating account exactly match the details of the destination account. The quantity of shares being transferred.
Is it hard to transfer brokerage accounts? ›
If you have a brokerage account, this isn't too difficult. You simply sell all of your securities and then move the cash to the new brokerage. You may not even need help, since you can withdraw the cash. Then you can invest the money how you choose at your new broker.
How do I avoid brokerage transfer fees? ›
Fortunately, transaction fees are easily avoided by selecting a broker that offers a list of no-transaction-fee mutual funds — most do. Many funds on this list will be from the broker itself, but other mutual fund companies often pay brokers to offer their funds to customers without a transaction cost.
Most brokerage account transfers take 4-8 business days to complete once you request the transfer.
What is the transfer procedure in investing? ›
Transfer procedures are used whenever a buyer and seller transact between one another (the asset is transferred from the seller's custodian to the buyer's), or when the owner of an asset changes brokerage firms or transfers assets between one or more brokerage accounts that they control.
Can you transfer a joint investment account to an individual account? ›
You can transfer money from the individual account to the joint account. You cannot transfer money from the joint account to the individual account.
How do I move transfer my existing mutual fund investments? ›
There are three ways to transfer mutual fund holdings out of Coin:
- Transfer to another CDSL demat account: The transfer can be done online via CDSL easiest. ...
- Transfer to an NSDL demat account: The transfer is done off-market.
Moving Investment Funds to Another Brokerage Firm
Generally there are no tax penalties or fees associated with moving investment funds from one brokerage firm to another. Some brokerage firms charge a fee to close an account or for some other service in connection with the transfer.
How do I transfer shares from one broker to another offline? ›
Offline transfer of shares
If the investor or the shareholder is holding shares in NSDL or CDSL depositories, he has the option of transferring shares offline. He can do so by filling out a Delivery Instruction Slip (DIS).
Can I have two online brokerage accounts? ›
The second question is easy to answer: Yes, you can have multiple brokerage accounts. And it may even be beneficial, provided you can answer the first question: How do you know which brokerage services are best for you? (Learn how to choose the best online broker.)
How do I transfer stocks from one Fidelity brokerage to another? ›
Go to Fidelity.com/TransferMoneyShares or call 1-800-544-6666. Use this form to transfer assets from one Fidelity brokerage account to another Fidelity brokerage account. Do NOT use this form to change the registration of an existing account or to transfer from or to a Mutual Fund Only account.
Can you transfer a portfolio? ›
Most portfolios can be transferred to a new provider as they are, however there are a few assets you may not be able to transfer directly. It can also take a little time for some assets to be released. This depends on the provider and is worth investigating before you make the move.
What is the best way to transfer stock to another person? ›
The owner must endorse the stock by signing it in the presence of a guarantor, which can be their bank or broker. 2 There may also be a form on the back of the certificate, which relates to the transferring of ownership. After the certificate is complete, it will be rendered non-negotiable and becomes transferable.
For being about to transfer shares, the shareholder would require the board members' approval and the approval of all the other shareholders in the company. Once this is done, the share transfer form is filled in, and the new share certificate is issued accordingly to the person getting the shares.
What is a full transfer fee? ›
This fee is commonly charged by credit card companies when cardholders move balances from one card to another. The fee is usually a percentage of the total amount transferred by the debtor.
What is the lowest transaction fee brokerage? ›
TD Ameritrade and Interactive Brokers combine robust trading software with low commissions and competitive margin rates. Robinhood, SoFi, and Webull are the lowest commission brokerage accounts across stocks, ETFs, options, and cryptocurrencies -- they don't charge commissions.
Which is better Fidelity or TD Ameritrade? ›
TD Ameritrade: Range of Offerings. TD Ameritrade offers all the usual suspects you'd expect from a large brokerage firm. While Fidelity supports trading across multiple assets, futures, options on futures, and futures on cryptocurrencies are missing from its product offerings.
Is it safe to keep more than $500000 in a brokerage account? ›
Is it safe to keep more than $500,000 in a brokerage account? It is safe in the sense that there are measures in place to help investors recoup their investments before the SIPC steps in. And, indeed, the SIPC will not get involved until the liquidation process starts.
Does it hurt to have multiple brokerage accounts? ›
While multiple brokerage accounts may provide benefits to a narrow range of retail investors, the added work may outweigh any advantage. Having more than one account means getting multiple emails, handling added 1099 tax forms, negotiating different platforms, and using many passwords (which carry hacking risks).
Why can't I transfer money out of my brokerage account? ›
You can only withdraw cash from your brokerage account. If you want to withdraw more than you have available as cash, you'll need to sell stocks or other investments first. Keep in mind that after you sell stocks, you must wait for the trade to settle before you can withdraw money from your brokerage account.
Is there a penalty for closing a brokerage account? ›
Brokerage firms often charge account closure fees. You could pay around $75 or more to close a brokerage account. While you may want to avoid the fee, it could be worth paying it to move to a better broker.
What is a good brokerage fee? ›
Realtors and real estate brokers typically charge around 5% to 6% of the selling price of a house. 2 This is often split between the seller's agent and the buyer's agent. Some discount real estate brokerages may charge a lower rate or instead offer a fixed-fee service.
Should I keep all my money in a brokerage account? ›
A brokerage account is likely the choice for you if you want to invest your money for the long or short term, with maximal gains being at the forefront of your mind. This way, you can select higher-yield investments in a diversified portfolio so you can save for your long-term goals, like retirement.
Investors must settle their security transactions in three business days. This settlement cycle is known as "T+3" — shorthand for "trade date plus three days." This rule means that when you buy securities, the brokerage firm must receive your payment no later than three business days after the trade is executed.
How long does it take to transfer portfolio? ›
If your transfer goes smoothly, count on the whole process taking two to three weeks. But this time frame may vary depending upon such factors as the assets involved, the types of accounts, and the institutions between which the transfer occurs.
Does it cost money to transfer investments? ›
Many brokers charge a fee when you transfer brokerage account assets. The typical fee ranges from about $50 to $100, but not every broker has an account transfer fee. The only way to know how much your old broker charges is to check its list of fees or contact customer service.
What are the four types of transfer? ›
The Following are The Various Types of Transfers:
- (A) Production Transfers: ADVERTIsem*nTS: ...
- (C) Versatility Transfers: ADVERTIsem*nTS: ...
- (E) Remedial Transfers: ADVERTIsem*nTS:
Myth 1: Brokerage transfers require you to pay taxes.
If you do an in-kind transfer, meaning you move your stocks from one brokerage to another without buying or selling, you won't pay taxes because the transfer isn't considered a taxable event.
Who pays the taxes on a joint brokerage account? ›
To report the income to the other parties, the primary account holder may need to issue a Form 1099 to the owner of the income, usually the other joint tenant. This is called nominee reporting. Consult your tax professional for assistance with nominee reporting.
What are the 3 types of brokerage accounts? ›
The basic types of brokerage accounts
- A standard brokerage account is the most common. ...
- A margin account is a special subset of a standard account. ...
- A retirement account is a brokerage account that has special tax status, with money growing in the account tax-free.
Cons of Joint Brokerage Accounts
If one of the owners of a joint brokerage account encounters trouble with debts and creditors, the joint account could be seized if the creditors come after the assets of one of the individuals. That puts the other individual in financial jeopardy.
Can you transfer investments to another account? ›
Yes, it is possible to transfer stocks and other investments from one brokerage account to another. There are many reasons that you might want to do this. For example, you might have started a new job that uses a different company for its retirement accounts.
What are the benefits of switching mutual funds? ›
Investors can switch mutual funds without selling their shares and paying capital gains taxes, which allows them to change their investment approach. A switch fund investment organisation takes money from several investors and buys equities, bonds, and short-term debt. Mutual funds' portfolios are their holdings.
Tax implications of switching between mutual funds
If you switch out of an equity fund, your gains will be taxable similar to equities. Short-term capital gains tax will be levied for gains if you switch within one year.
What happens when you transfer stocks to another broker? ›
Your new broker communicates with your old broker to set up the transfer. Your old broker must validate the transfer information, reject it, or amend it within three business days. Assuming your old broker validates the transfer and there are no issues, the transfer should be completed within six business days.
Do you pay capital gains on switching mutual funds? ›
Point to note: go through the relevant tax laws before switching mutual funds. For instance, switching equity funds before one year of the investment would imply 15% taxation on capital gains. However, if you switch after one year of investment, the move is tax-free.
Can I transfer investments from one broker to another without selling? ›
An in-kind or ACAT transfer allows you to transfer your investments between brokers as is, meaning you don't have to sell investments and transfer the cash proceeds — you can simply move your existing investments to the new broker.
Is it free to transfer shares from one broker to another? ›
Your old brokerage firm may charge a transfer fee. Fortunately, the best online brokers frequently offer deals in which they pay any transfer fees the old broker charges. Before you start your transfer, check if there will be a fee and if your new brokerage firm will cover it.
Can you transfer stocks from Fidelity to another broker? ›
Go to Fidelity.com/TransferMoneyShares or call 1-800-544-6666. Use this form to transfer assets from one Fidelity brokerage account to another Fidelity brokerage account. Do NOT use this form to change the registration of an existing account or to transfer from or to a Mutual Fund Only account.
Is transferring brokerages taxable? ›
Generally there are no tax penalties or fees associated with moving investment funds from one brokerage firm to another. Some brokerage firms charge a fee to close an account or for some other service in connection with the transfer.
Does Fidelity charge a transfer out fee? ›
Fidelity doesn't charge a fee for sending or receiving EFTs, but the receiving bank may charge a fee. Fidelity also doesn't charge fees to process wire transfers to a bank or other recipient.
Can you transfer stock from Fidelity to Schwab? ›
Most assets, such as publicly traded stocks and ETFs, mutual funds, and bonds, can be transferred to your Schwab account.
Can I transfer stocks from Fidelity to TD Ameritrade? ›
How do I transfer my account from another firm to TD Ameritrade? Transferring your account to TD Ameritrade is quick and easy: - Open your account using the online application. - Once your account is open, you can log in and go to My Account > Account Transfer or use the Mobile Website to transfer your account.
What brokerage firms do billionaires use? Many very wealthy individuals use the top brokerage firms, such as Fidelity, Schwab, Vanguard, and TD Ameritrade, among others. They invest in private equity and hedge funds.
Do wealthy people have multiple brokerage accounts? ›
Some investors have several brokerage accounts to keep their retirement funds and active trading accounts separate, while others prefer to keep their niche accounts with companies that specialize in them. Still others see benefits in estate planning or simply want to take advantage of multiple sign-up perks.
How much cash should I leave in my brokerage account? ›
A general rule of thumb for how much of your investment portfolio should be cash or cash equivalents range from 2% to 10%, although this very much depends on your individual circ*mstances.
What is the maximum money transfer without tax? ›
How much money can you wire without being reported? Financial institutions and money transfer providers are obligated to report international transfers that exceed $10,000. You can learn more about the Bank Secrecy Act from the Office of the Comptroller of the Currency.
How much tax do you pay when transferring shares? ›
For the seller, the share sale triggers a capital gains tax (CGT) when shares are held on capital account. CGT is calculated on the difference between the sale price and the original price of the share when they were bought by the seller.
Can I transfer mutual funds without paying taxes? ›
If you move between mutual funds at the same company, it may not feel like you received your money back and then reinvested it; however, the transactions are treated like any other sales and purchases, and so you must report them and pay taxes on any gains.
