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How do I regain direct ownership of investments currently held in a brokerage account?

I've been an independent individual investor in mutual funds since the mid-1990s. In most cases, I buy no-load funds and open accounts directly with the mutual fund companies. The one exception was some Class A funds bought through an advisor. These were later transferred in-kind into a brokerage account at a different firm.

I don't need a brokerage account, and never did. I do my own research and make the decisions. I rarely trade, just basically buy and hold for many years at a time. The account charges me $100 a year to keep it open. I want to open a personal account and transfer the shares into it, so that I can ditch the broker and manage things myself, but the institution's policy is that only an investment advisor can open an account for me. If I ask the brokerage firm where the shares are held to do this for me, I'm pretty sure they'll attach a substantial transfer out fee.

Is there any way to close out this brokerage account without actually selling the shares?

Investing, Choosing an Advisor, Mutual Funds
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September 2018

There is a way to close out the brokerage account without selling the shares, but you'll need to see if it is available to you. You will need a company to custody your assets (the service the brokerage company provides) so you can't just take ownership of the shares. If you don't want a third-party custodian, like a brokerage company, you will need the mutual fund company to be the custodian of the assets.

In the old days you could get a piece of paper which represented your investment ownership, and you could receive the actual piece of paper. Those days are long gone. There are two options available to you.


To close the account and transfer the investments without selling the shares, you'll need someone to hold the assets (electronically) such as another brokerage firm. When you say you want to open a personal account, the account would be opened with another brokerage firm, most likely a discount broker-dealer or a bank with a broker-dealer sub-company.


On the other hand, you can do what you are currently doing with your other mutual fund investments. Many mutual fund companies allow people to invest directly with them and have their own broker/dealer operations to allow investors to custody their funds with them directly. You can contact the Class A Funds’ mutual fund company and ask if they can offer you this service.


Whether you go the mutual fund company or the discount broker route, you will need to confirm they can do an in-kind transfer of the shares. If neither of them can, you'll have to take the tax hit and sell the shares. While it will hurt to pay the taxes, the good news is it will increase the basis in the investments and allow freedom to reinvest the funds as you want. In fact, if you don't like the portfolio of the Class A Funds, it may be worth it to pay the taxes and reinvest the proceeds in an asset allocation you prefer.


I also want to encourage you to research the difference between a good financial advisor and a bad one when it comes to how they benefit their clients. Look up Vanguard's Advisor Alpha and related academic studies for a good, unbiased, and research-based analysis.

It is very true that many people calling themselves financial advisors don't actually earn their fees, but there are financial advisors who do provide a positive financial benefit to clients even after paying the fees. It sounds like you had a bad experience with a bad advisor in the 1990s and you've decided to educate yourself to be able to better manage your own investments.

Don't let that experience, however, keep you from exploring if a good advisor could be helpful. Researching the benefits of working with an advisor might confirm that your self-education has provided you with all the investment competency you need. Or it could help you see benefits and strategies you hadn't considered before.

Either way, I hope the advice helps so these Class A Funds won't hold you hostage to having to work with someone you don't want to.

September 2018