How to Transfer Stocks from One Broker to Another

There are many reasons you might want to switch brokers, including looking for better fees or other investments your firm doesn’t offer. Although you might think switching brokers would be difficult, in most cases, you can move your investments without much trouble.

Before you get started, though, there are some things you should know. For instance, not every type of asset can be transferred, and there may be fees involved. We’ll cover the “right” way to transfer your stocks from one broker to another to ensure things go as smoothly as possible.

When should you consider switching brokers?

There are many reasons you might consider switching brokers. Everyone has their own reasons, and any of these may apply to you. Common reasons for switching to a different broker include:

• Lower trading or management fees
• Better customer service
• More intuitive website/mobile app
• Better investment selection

How to transfer stock between accounts

The best way to transfer your stocks to a new account depends on a few factors, such as the type of account and whether the new brokerage offers the same type of investment. If you aren’t satisfied with your current broker, check out our guide on how to choose a brokerage account.

Cash transfer

One way to transfer stocks is with a cash transfer. In this case, you sell all your investments and simply transfer the cash to the new broker. This method is preferable in certain situations, such as when the new broker doesn’t offer the asset you are transferring. Certain mutual funds, for instance, are broker-specific and can’t be transferred.

Another example is to roll your 401(k) from a previous employer into an individual retirement account. You might want to do this if your employer only offered mutual funds with high fees or if their selection of investments was limited. IRAs with large online brokers often have more options for investing money than employer-sponsored retirement plans.

Keep in mind that if you opt for a cash transfer, there may be capital gains involved. You generally pay capital gains on accounts such as the traditional 401(k) when you sell stocks. So, you may have to pay capital gains when you initiate a cash transfer.

Learn more about how to avoid capital gains tax on stocks.

In-kind transfer

The best way for most people to transfer is with an in-kind transfer, also known as an automated customer account transfer service (ACATS) transfer. The National Securities Clearing Corporation (NSCC) facilitates in-kind transfers. This process makes things easier for those making a relatively uncomplicated brokerage account transfer, such as when moving a few exchange-traded funds (ETFs).

With this type of transfer, the same asset is moved from one broker to another without making any changes. For instance, if your outgoing account has 50 shares in an ETF, you will have 50 shares of the same ETF at the receiving brokerage after the transfer.

When making a transfer request, you’ll work with the new broker to which you will transfer your investments. The new broker should give you a transfer initiation form (TIF) to fill out to start the process.

Once you submit the form, the new firm will contact your old brokerage to begin the transfer. Although this process often goes smoothly, there could be a holdup if there are any issues with the form, such as discrepancies with your contact information. If that happens, you will have to work with your brokers to resolve any issues before the transfer can move forward.

You should expect the entire process to take around one week. The ACATS part of the transfer should take around three business days. From there, the transfer is completed as soon as your broker finishes their part.

In some cases, a transfer could be completed in less than a week. However, your account may be out of commission for a full week and you may not be able to trade during that time. Even if you can, trading while a transfer is in progress can complicate things, so it’s best to avoid it.

Your new broker should notify you when the transfer is complete. At that point, you’ll want to be sure all of your investments have successfully moved to the new broker. If you notice anything missing, work with the new broker to resolve any issues.

Limits to moving assets

Although transferring stocks from one broker to another is usually fairly easy, you may run into some hurdles if your portfolio is more complicated.

For instance, there are many types of assets that can’t easily be transferred with an in-kind transfer, such as broker-specific mutual funds. The following types of assets also can’t be transferred in-kind to the brokerage:

• Mutual funds or money market funds not available at the new firm
• Limited partnerships that are private placements
• Annuities
• Bankrupt securities

Other brokerages may limit other types of transfers. Check with your new broker to find out if it will accept everything you want to transfer.

You may also run into problems if you have a margin account or investments like futures or options. If you have anything other than a basic brokerage account holding stocks and ETFs, you’ll want to contact the receiving brokerage firm to ensure everything goes as smoothly as possible.

Another hangup can occur when transferring retirement accounts. For instance, you can usually roll an old 401(k) into an IRA at your preferred brokerage with a transfer. However, if the transfer isn’t completed within 60 days, you could be subject to early withdrawal penalties.

Should you sell your investments and start over?

Although it may be possible to cash out your investments and start over with a new broker, it could be more costly than the convenience is worth. The reason is that you may incur capital gains and penalties depending on the type of account.

If you sell investments you’ve held for less than a year, you will incur long-term capital gains tax, which is a lower rate. But if you sell investments held for less than one year, you may face a short-term capital gains tax, which is a higher rate.

Things could get even worse if you sell all of your investments in a traditional IRA or 401(k) before age 59 1/2. In that case, you’ll pay a 10% penalty in addition to any applicable capital gains.

There are some scenarios where you may want to sell some of your investments, however, including if your new broker doesn’t support them. In general, though, it is better to transfer stocks instead of selling them to avoid penalties and fees.

FAQs

Bottom line

In many cases, transferring stocks from an old account to a new one can be done relatively quickly and with minimal paperwork. However, the process isn’t always smooth, and there could be taxes, penalties, and fees involved. Some types of investments can’t be moved at all, and some may not be available with your new broker.

You should work with your broker to determine the best way to move your investments. If your old broker charges a fee to transfer money, some of the best online brokerage accounts may be willing to cover the fee.