How to Switch Stock Brokers
Brokerage firms widely vary in the quality of their services. Customer service, commissions, transaction speeds and other factors influence a client's satisfaction with a particular firm.
Unhappy investors frequently consider switching brokers. But the process is not standardized and often creates a hassle. According to Felix Davidson, managing director of operations for TD Ameritrade, a large American broker, the account transfer process is one of the most common investor complaints year after year. While it does take some patience, switching brokers without liquidating your portfolio is possible.
Other People Are Reading
Instructions
-
-
1
Apply for a new brokerage account with a new firm. The transfer process when switching brokers will proceed much more easily if the name on the new account matches the name on the account you are closing.
-
2
Cancel any open stock orders you have with the broker you are leaving.
-
-
3
Transfer the cash portion of your assets via a wire transfer from the old broker to the new broker. This is the quickest way to jump start the transfer process. While there are other methods for making a cash transfer, they can prolong the overall time for the switch.
-
4
Initiate an ACAT transfer with the new broker. This involves filling in a form with an attached account statement from the old broker. The form will be sent by the new broker to the old broker for the transfer of stocks to begin. Cash can optionally be included in the ACAT transfer, but will force the process to take longer.
-
5
Wait one to two weeks for the ACAT transfer to complete.
-
1
Tips & Warnings
Brokers often advise clients to simply sell all their stock and then close their accounts. Clients can then take this cash and open a new account and re-purchase the stock.
This process greatly benefits brokers, as they generate another round of income from you through the commissions incurred by the stock sales. Additionally, you have to pay more commission when you re-purchase the stock at the new broker.
This process may also adversely affect tax returns if the stocks have been owned for less than one year. This is the least beneficial method for switching brokers and is not advised.
