Transferring large sums of money from one account to another can be intimidating enough. Attempting to transfer assets from one brokerage to another can be a terrifying prospect. However, with a bit of know-how, it absolutely should not be enough to stand in the way between you and potential financial growth.
It takes around six business days to transfer brokerage accounts. The process is a relatively simple one in most cases. If you’re transferring accounts from a bank, mutual fund, or credit union, the process may take slightly longer, a few weeks at most.
In this article, we’ll be discussing reasons why someone might transfer brokerage accounts, as well as how you can begin that process yourself. Read on to understand a little more about transferring brokerage accounts and how it can work for you.
Why Would You Transfer a Brokerage Account?
If you’ve held a particular asset within the same brokerage for a long time, it may be time to check out the competition and possible bonuses.
Transferring shares in a brokerage account is important because you can keep your assets and avoid paying the tax involved with selling stock. If you see that another brokerage is offering a better rate for a more competitive service, it might be worth making the switch.
As the stock market grows and changes, so do the fees and expenses. To make the most of your money, you should be sure that you aren’t simply settling with what you have because it feels familiar.
How To Transfer Brokerage Accounts
Once you’ve decided to transfer your current brokerage to another option, it’s time to actually put that thought into action. Luckily, this process is heavily regulated and almost entirely automated, making the amount of work you have to put forth minimal.
Note: Some brokerages don’t track cost basis in their apps, you will need to enter it. But, it is always recorded by the clearing house. So it will be recorded in your tax documents.
The National Securities Clearing Corporation, commonly known as NSCC, operates a service that handles most of the work involved with transferring brokerage accounts. If you might be expecting this to involve mountains of paperwork, you’ll be surprised by exactly how little effort it takes.
The process includes the following steps:
- Complete a transfer initiation form.
- Wait for a few days.
- Check your funds.
Let’s talk more about them now.
1. Complete a Transfer Initiation Form
The Transfer Initiation Form differs from one firm to another, which tends to be fairly brief. It typically requires just your name, your social security number, and the details of the accounts you want to transfer.
You’ll receive this form from the brokerage that you want to transfer your accounts into, and they can walk you through the process of completing it. The new firm also handles the job of sending the TIF to your previous firm, saving you the awkwardness of delivering this paperwork.
2. Wait for a Few Days
As previously mentioned, this automated process is a relatively quick one. In most cases, you’ll find that all of your accounts have been transferred within six business days.
This window of time takes into account two critical steps: validation and delivery.
Before your brokerage can transfer funds, these funds need to be validated. This process typically involves double-checking information on your form with the assets mentioned, is usually completed relatively quickly, and should last no longer than three days.
From here, it should take around three business days for your funds to complete their electronic delivery into the new brokerage.
There are a few factors that can slow this process down. If the account you’re transferring assets from isn’t a traditional brokerage, they may need to jump through a few hoops to complete the switch fully.
3. Check your Funds
Once your assets have been appropriately transferred, it’s a brilliant idea to check that they all made it through. While it’s rare for anything to go wrong in this process, it’s better to catch any and all errors as early as possible.
Possible Causes of Delays
Though this process is a relatively quick and easy one, that doesn’t mean nothing could possibly go wrong. If your transfer includes any delays, you may find yourself waiting several weeks for the process to finish.
Any of the following could cause an issue with your transfer:
- Using the incorrect form.
- Incorrectly filling out the form.
- Liquidating any of your assets around the time of transfer.
- Transferring between different types of accounts.
- Changing any ownership information.
When you know that you might transfer your assets to another brokerage, it’s best not to take any action with your stocks for several days before the transfer. Doing so can create time-wasting confusion in the otherwise easy process.
It’s also a good idea to look over all forms with a fine-toothed comb, searching for any possible mistakes. The most common cause of delays can be connected to typos or silly errors.
Other Things To Know
Before you begin the early steps of transferring your brokerage account, there are a few more things you may need to know upfront.
Every Asset Might Not Transfer
When you’re attempting to make the switch from one brokerage to another, you may find that not all your accounts can quickly transfer. These include:
- Assets handled and sold exclusively by your original firm.
- Mutual funds are not available at your new firm.
- Limited partnerships in private placements.
- Annuities
- Bankrupt accounts
If you find that you can’t transfer one or more of your assets, you have two options, which include maintaining that portion of the account with your old firm, or selling those assets and reinvest.
In some rare cases, you may be able to take ownership of the non-transferable possession, but these cases are few and far between.
The Transfer May Involve Fees
As the old advice goes, it takes money to make money.
When you make a move to transfer brokerage accounts, you may find that you’re subject to additional fees. In some cases, your old brokerage charges a sum for releasing your information.
In other cases, your new brokerage may request a sum for initiating the transfer. Most of the time, these fees range between $50 and $200.
While these fees are unfortunate, they aren’t unexpected. Be sure to ask your new brokerage about these fees before beginning the process to avoid being hit by an unexpected charge. These fees are typically described in detail in your official transfer agreement.
Though the fees can understandably be a pain, they’re still low enough to be worth the cost in the long run.
You still save far more than this amount by avoiding the taxes involved with liquidating your funds as you would if you couldn’t transfer your assets. These fees are often associated with the labor of the firms as well.
Most people would agree that $50 is a small sum to pay for knowing that your transfer is successfully being completed.
Some brokerages may even offer bonuses to transfer your account. In my case I transferred shares from Wells Fargo to Webull and was paid 1 share of Facebook worth around $300. This more than made up for the transfer fee and netted me a nice profit.
There May Be Delays in Dividends
Sometimes, dividends, interest, and proceeds from sales continue to be sent to your previous account even after you’ve officially completed your transfer. While this doesn’t mean you won’t get your money, it does mean that you may have to wait a while before you do.
You don’t have to do anything for this to happen, it will happen automatically and actually happened to me when I was paid out a dividend to my old account, even after the stock had been transferred.
Your old firm is legally required to transfer all of the above funds to your new account within ten days of receiving them. This process will continue for six months, after which you’re unlikely to see any issues in the first place.
You Can’t Change Your Account During Transfer
You have no access to your accounts in the range of time that your transfer is being completed. This means that you can’t buy, sell, or trade stocks during this window.
While this news can make some nervous, you have nothing to fear, as value investing is a long-term game. The best way to grow your funds is to reliably invest, research the best brokerages, and leave your funds alone.
In completing this transfer into a more lucrative brokerage, you’re already taking more than enough action. There’s no need to fret over your funds for the week or two this process may take.
Transfers Shouldn’t Involve Your Roth IRA
If you’re hoping to transfer your assets directly into your Roth IRA, you may be out of luck. Unfortunately, you can’t move the unsold stocks you already own into your IRA account.
To transfer wealth from a regular brokerage into a Roth IRA, you must sell the stocks you own, take the tax hit, and then contribute that money to your retirement account. Even then, remember that there’s a legal cap on how much money you can contribute every year.
The current limit of Roth IRA contributions is $6000, however you can rollover your entire 401K into a Roth IRA, known as the backdoor Roth IRA. The issue with this is all taxes are due upon the transfer. This can be great if you still have 20+ years of investing ahead of you, but terrible if you are on the verge of retirement.
Converting a large brokerage account to an IRA can be done, but only with a significant amount of time, patience, and willingness to pay those extra taxes upfront.
Don’t Be Afraid to Transfer Brokerages
The good news about successfully transferring brokerage accounts is that much of the process is automated and out of your hands.
If you’re someone easily intimidated by paperwork, you’ve got nothing to fear from this process; most of the hassle will be handled by the brokerage itself. This process can take anywhere from six days to several weeks, depending on a variety of factors.
Regardless of the time frame, you should receive all of your funds, dividends included, promptly.