Sometimes, you need to move your portfolio from one brokerage to another. Perhaps your old broker went out of business, or maybe they raised their rates and you want to go somewhere less costly. Or, you've decided to open an account online and trade for yourself, or even allow robo-advisor algorithms to trade on your behalf.
- Investors may decide to change brokers for a number of reasons and there are automated systems that allow for the easy transfer of most types of investments.
- To move stock from one broker to another both brokers must be National Securities Clearing Corporation members.
- The Automated Customer Account Transfer Service (ACATS) allows the automated transfer of stock.
- The broker who will be taking over the portfolio will initiate the transfer by communicating with the current broker.
- Not all types of investments are easily transferred between brokers—such as annuities or proprietary investments by the former broker, which require further steps for transfer.
How Stock Is Moved
Common stock shares are most often transferred from one broker to another by a software-based system known as the Automated Customer Account Transfer Service (ACATS). Prior to ACATS, a manual transfer system was used, which took far longer and was prone to human error.
The National Securities Clearing Corporation (NSCC) developed ACATS, which can transfer stocks, bonds, cash, unit trusts, mutual fund options, and other investment products. However, only NSCC-eligible members and Depository Trust Company member banks can use ACATS.
Both the firm delivering the stock as well as the firm receiving it have individual responsibilities in the ACATS system. For example, if a shareholder wants to transfer his or her share of common stock from Firm A to Firm B, Firm B will initially be responsible for contacting Firm A to request the transfer. Once Firm B has submitted the transfer request with instructions, Firm A must either validate the instructions or respond with an exception within three business days. If there is no exception, Firm A has four days in which to complete the transfer after validating the request.
While the ACATS reduces errors significantly from a manual transfer, it is advisable for investors to maintain their own records and ensure accuracy of the portfolio before and after the transfer.
Validation includes confirming that the customer's name and social security number match the information provided by Firm B. After receiving the transfer request and validation, Firm A must cancel all open orders and cannot accept any new orders on the client's account. Firm A must also return the transfer instructions to Firm B with a list of securities positions and any money balance on the account.
After Moving Brokers
Once the stock is transferred, Firm B is responsible for all reporting to the shareholder. Brokers are required to provide clients with a financial statement at least once every quarter. Experts also recommend that customers maintain proper records and make their own calculations to double-check that all assets are properly transferred and accounted for. Once customer account information is properly matched, and the receiving firm decides to accept the account, the delivering firm will take approximately three days to move the assets to the new firm.
Limitations for Moving Assets
There are several types of securities that cannot go through the ACATS system. Annuities cannot transfer through the system as those funds are held with an insurance company. To transfer the agent of record on an annuity, the client must fill out the correct form to make the change and initiate the process.
Other ineligible securities depend on the regulations of the receiving brokerage firm or bank. Many institutions have proprietary investments, such as mutual funds and alternative investments, that may need to be liquidated and which may not be available for repurchase through the new broker. Also, some firms may not transfer unlisted shares or financial products that trade over the counter (OTC).