Let's say an investor has an IRA account and a taxable investment account with ABC Brokerage, and a 401(k) from a former employer at another brokerage, EZ-Trade. She wants to transfer her 401(k) account from EZ-Trade to ABC Brokerage. In this scenario, EZ-Trade is the delivering firm while ABC is the receiving firm.
1) Find Out About Transfer Fees
It is typical for delivering firms to charge a fee, say $50 - $100, for each account transferred from them. Before making the transfer, ask the receiving firm if they will cover those costs. They often will, if you ask before you do the transfer. Also confirm that there are no fees incurred by the receiving firm.
2) Get Account Data from Delivering Firm before Enacting the Transfer
Relevant data may include old account statements and basis information for securities purchased at the delivering firm. When securities are transferred, the basis information, unfortunately, is not included in the transfer. Depending on the firm, it's easier to get the basis information while the securities are still held at that brokerage.
This basis information may not be necessary for securities in retirement accounts but it is essential for holdings in taxable investment accounts.
3) Confirm that All Securities Will Transfer
Securities that may not transfer include:
- A mutual fund managed and sold by the delivering firm
- A security bought on margin
Also, securities may not transfer if the account value or credit quality does not meet the minimum requirements of receiving firm.
4) Fill Out the Right Form Correctly
Use an account transfer form from the receiving firm. Some firms use the same form for all brokerage transfers. Others have different forms depending on the type of account, such as retirement or taxable. Assuming the investor is just changing brokerage firms and not her underlying investments, she needs to indicate that she wants the securities transferred "in kind" to the new account and that she does not want them liquidated. Normally, the receiving firm asks the investor to provide a recent statement from her account at the delivering firm.
5) Timing
Plan on making no trades in that account during the transfer, which normally takes less than 10 business days. Expect some delays receiving interest and dividend payments for a few months after the transfer. These payments may continue to arrive at the delivering firm after the transfer. The old firm is required to transfer them to the receiving firm within 10 days of receipt.
Bottom line:
Ask questions and plan ahead for an efficient and cost-free transfer.
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