I recently totaled the number of brokerage accounts my wife and I have. Between retirement accounts at previous jobs, IRAs, and after-tax accounts, we have 15. This doesn’t include checking or savings accounts. While several of the accounts are housed under one brokerage – meaning I can take advantage of one login and combined statements – I’ve been looking for an excuse to consolidate.
Reasons to look for a new online broker
If you’re unlike me, though, and have only one broker with just a few accounts, here are some reasons you too might choose to research alternatives.
High fees/commissions. When fintech apps like Robinhood first appeared on the scene, one of the easiest ways to build a customer base was to offer low or no fees. These companies were some of the first to do away with any commissions on trades, and similarly reduced or eliminated other fees. To be competitive, online brokers have been forced to offer no-commission trades. Some have backtracked recently, especially with over-the-counter trades (often $6.95 or more). If you discover trades you normally make are now costing you money, finding an alternative could save money in the long run.
Lacking leading-edge tech. One of my kids recently told me they are changing their savings account because the app is such a pain. If you rely on your broker’s app for trading and find it’s becoming more and more difficult to manage, it could be time to look at another company.
What’s behind the curtain? Some online brokerages were created for people who make multiple trades throughout the day. They may have best-in-class research and ordering tech, but lack in basic educational information. Other sites may be too simplistic, providing the very basics but not meeting you where you need to be. If you need a level of continuing education (and most of us do), research the site’s offerings before you sign up.
Hello??? Underwhelming customer service. Online brokers offer a toll-free number you can call if you have questions. Others may offer chat, or even an online contact system where you can send secure messages. How do you want to communicate with your broker? And when you contact them, how responsive are they? One reason I have wanted to leave one of my brokers is the lack of a secure message system. They had it, then they shut it down. I really don’t enjoy sitting on hold to talk to an often uninformed phone rep.
Fewer investment options. Is trading or owning cryptocurrency important to you? Do you want to be able to buy and sell international shares? Are there mutual funds or exchange traded funds you’re interested in that your broker doesn’t offer? These could be reasons to move on.
A gift for moving your account. While this shouldn’t be a reason you move your account, many online brokers will offer a cash incentive or even shares of stock if you open a new account or move your current account to them. Research the latest offers – if you don’t, you’re just leaving money on the table.
How to transfer your accounts
After you’ve researched brokerages and picked the right one for you, it’s time to transfer your accounts over. Like I said, I had thought about doing this for a while, but it seemed like a headache best saved for another time. I’ve discovered that the company you transfer into will do everything they can to make it easy (and get your money). I wish I could say the same for the company I transferred out of…
Simple but potentially costly – cash transfer
If you have an after-tax account with a broker and sell all your investments, you can easily move the money into a new account. Instead of implementing a transfer (and having to pay the transfer fee), you can have the broker send you a check and then simply invest it in the new brokerage.
Beware though – investments you sell at a gain will result in a tax bill. If your stocks were still underwater from the recent bear market, you may be able to sell with no tax consequence. Make sure you fully understand the tax ramifications of selling your shares.
In-kind transfer
An in-kind transfer allows you to transfer your current holdings from one company to another. In most instances, this means you don’t need to sell investments. Some brokerages may sell off partial shares; others that don’t allow certain investments obviously would have to sell that investment if you owned it in the prior account. Below are some steps you should take to complete an in-kind transfer.
Log into your current brokerage. Before you start the transfer process with your new broker, log into your current broker to:
Download all recent statements: Not only will you want to double-check the account when the transfer is completed, but many brokers require a recent statement be included as part of the transfer request.
Check on transfer fees: Your current broker may charge you a fee to move your account. This fee can range from $25 to $75 or more for a full account or less for a partial account. This is a ridiculous fee given the fact that most transfers take place using the Automated Customer Account Transfer Service; it’s merely to keep you from transferring.
Open an account with the new broker. Make sure the account you open matches the account you’re moving. If you’re moving a Roth IRA, you need to open a Roth IRA at the new broker. Sometimes you have to open the account before starting the transfer process. Other times, you can open the account as part of that process. If you don’t have any account with the new broker, you will have to open one account so you can start the transfer.
Start the transfer. When I moved my accounts from the former brokerage, I split them between two brokers. Both companies had an online process that was easy to complete. One asked for me to upload a statement, the other simply requested the account number. Usually within a day or two, you will receive an email stating the target date when your transfer will be completed.
Monitor the transfer. During the process, I logged into both my old account and the new broker daily, especially after I received a cryptic email from the old broker that I was to have limited accessibility on the account. They also – for whatever reason – changed my password and didn’t bother to tell me about it.
Check your balances. Once the transfer is complete, open the new accounts and make sure the investments transferred and that the number of shares remained the same. If you find any issues, call the respective customer service departments to let them know.
Change automatic deposits or withdrawals. If you have any type of automatic deposit set up, make sure you redirect it to your new account.
If you have problems, write down who you talk to
My old online broker was purchased by a larger company which was going to transfer my accounts into their trading system. As part of that, I could opt-out and wouldn’t have to pay any transfer fees to move my accounts. I called them on two different occasions to make sure they had my opt-out request, yet I was still charged a $75 fee on each account. Fortunately, I have the names of the people I spoke with and the times of the calls. If you have any issues, take lots of notes.
Other than the fee surprise, I was happy with the ease at which the different accounts transferred. All were either on-time or completed before the estimated date.
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