What is the process for moving common stock from one broker to another?

When investors need to move their investment portfolios, including stocks, from one broker to another, various reasons might prompt the transfer. This could be due to the current broker going out of business, hiking fees, or investors seeking better trading platforms and automated tools like robo-advisors for trading guidance.

How Stock Is Moved

The transfer of common stock shares between brokers is typically facilitated through the Automated Customer Account Transfer Service (ACATS), a software-based system developed by the National Securities Clearing Corporation (NSCC). ACATS enables the seamless transfer of a variety of investment products, reducing the time and errors associated with manual transfers.

NSCC-member brokers and Depository Trust Company banks can utilize ACATS to transfer not only stocks but also other assets like bonds, cash, unit trusts, mutual funds, and options.

In the ACATS system, both the delivering and receiving firms have specific roles. The receiving firm initiates the transfer by contacting the delivering firm, which then validates or processes the transfer request within a specified timeframe for the transfer to be completed smoothly.

While ACATS streamlines the transfer process, it is advisable for investors to keep their own records to ensure the accuracy of their portfolios post-transfer.

After Moving Brokers

Following the transfer, the new broker assumes responsibility for shareholder reporting, issuing financial statements regularly, and finalizing the transfer of assets. It is recommended for customers to verify the accuracy of transferred assets and maintain their own records for reference.

Limitations for Moving Assets

Certain securities, like annuities from insurance companies, cannot be transferred through ACATS and must be processed through alternative methods, such as a 1035 exchange. Brokerage firms may also have restrictions on transferring proprietary investments or unlisted assets.

The movement of annuities, especially in employer-sponsored plans, has been made easier due to legislative changes like the SECURE Act, which enhances portability for annuities held in retirement accounts.

Some securities may not be transferable between brokers due to regulatory or firm-specific limitations, necessitating the liquidation of certain investments. Additionally, unlisted shares and over-the-counter financial products may pose transfer challenges.

What Is the Difference Between ACATS Transfers and Non-ACATS Transfers?

The key distinction lies in the speed and accuracy of transfers. ACATS transfers are quicker, typically settling within three to six business days, and are less susceptible to human errors compared to manual transfers.

Is There a Fee for Transferring Stock From One Broker to Another?

Fees for transferring stock vary among brokers. While some may charge fees to discourage transfers, others may guide clients through the process or even cover the associated fees.

Can I Have More Than One Broker?

Having multiple brokers is possible but may complicate asset management. It is advisable to segregate long-term and short-term investments across different brokers for strategic portfolio management.

The Bottom Line

Investors transfer stocks between brokers for various reasons, leveraging tools like ACATS for seamless transfers. While most investments can be transferred, certain securities, like annuities, require specific transfer methods. Understanding these limitations and procedures is crucial for a smooth transition between brokers.