There are times when an investor would require to switch from one broker to another. Transferring an investment portfolio is decided by multiple factors. Typically, the transfer between brokers relies on an increase in prices for their services. Other times, an investor might want to shift because one broker is offering better service than the other.
A shift also happens if a service provider is out of business. Transferring stocks can benefit you in terms of providing an improved trading platform with better algorithms to facilitate trade. Here are some tips to help you to transfer stocks easily:
Do Your Research
Whatever your reason is for transparent stocks, you cannot make the shift from one broker to another lightly. Doing research on the type of services they provide is important in deciding whether you want to spend your money on it. Look up this website for the type of services offered and also look for the facilities of the trading platform. You are better off while comparing multiple options so that you can weigh the pros and cons together.
Know the Rules
While completing your research, you should also be aware of some requirements that need to be fulfilled. For instance, if you are transferring stocks, both the brokers involved have to be active members of the National Securities Clearing Corporation. Also, understand the role of the Automated Customer Account Transfer Service, which will be facilitating the entire relocation of stock. There are some exceptions to investment transfers as well. For example, annuities and proprietary investments do not fall under the movable investment type from one broker to another.
Be Vigilant
Just because the entire process is happening via an automated system does not mean that the investor should not be vigilant about the process. You have to understand that while the automated system was better than the manual one, it is still likely to make certain mistakes. As the investor, you should note down all the details of the investment and check the accuracy of the portfolio before and after the transfer. The records maintained by the investor help fix any mistake as soon as possible.
Know How Stocks are Moved
The software system ACATS (Automated Customer Account Transfer Service) is most commonly responsible for the shift of common stock shares. This automated system is far more efficient than the manual system which was used before. It also reduces the chances of mistakes during the stock relocation.
However, the software can only be used by the member banks of the Depository Trust Company and NSCC eligible members. When stocks are to be transferred, both the parties involved are equally responsible for making the process a success. The firm which requests the transfer is the one that will be receiving the stocks after the move is completed.
The firm which currently deals with customer brokerage is supposed to answer the request within three business days. They can reject the request or validate it with certain instructions initiating the move. If there are no issues with the request, the transfer can be completed in 6 business days overall.
The firm that currently holds the stocks is responsible for validating the request after confirming the investor’s social security number. The information validation is important so that the portfolio is transferred only after the adequate confirmation. After the request for relocation is validated, the previous brokerage firm will close the investor’s account and will not entertain any requests. Along with request validation, the details of the investors’ balance money will also be shared with the new firm.
Understand the Limitations
When you are moving stocks and other assets, there are certain limitations to the entire process. For instance, the biggest limitation is that the annuities from insurance companies cannot be transferred between brokers. The transfer process for an annuity will have to be separate from that of stocks.
The investor will have to file a separate form with all the correct details and initiate the process separately when they decide to move between different brokers. The required Internal Revenue Service (IRS) provision needs to be followed, and surrender charges are also included to facilitate the move. Apart from investors, there are other energy bills securities for which the receiving brokerage firm cannot initiate a request.
Proprietary investments like mutual funds are required to be liquidated before shifting from one firm to another. These alternative investments might not be available for re-purchase by the new broker. Unlisted shares are also difficult to shift because the process depends on the policies of the new brokerage firm. Any over the counter (OTC) financial products are also ineligible in certain respects depending on the transfer policy of the brokerage firm.
Know What to Expect
After the relocation process is completed, the new form is responsible for managing all the details related to the stock. Typically, a broker is mandated to offer financial statements to their clients at least thrice a year. Reporting important information to the shareholder is important while maintaining proper financial records.
Finance experts recommend that investors make some records of their own to know the details of the assets. The new broker will have to accept the account after sending the request to the previous form and having it validated. It will take at most three business days for all the assets to be transferred between the brokers.
The Takeaway
We hope that after reading the tips mentioned in this article, you will be able to initiate the transfer process with much ease. As an investor, you need to understand all the details when shifting brokerage firms. Do not hesitate to do adequate research and understand all the regulations to avoid making mistakes.
Knowing the basic process of how stocks are moved will also help you out in estimating the time for the relocation. Do not forget to maintain your records and know that there might be certain limitations you will have to face.
