Transferring Investments: Fidelity's Brokerage Process Simplified

Transferring investments from one broker to another is a straightforward process, and it can be done without selling your holdings. The most common way of moving securities between brokers is through the Automated Customer Account Transfer Service (ACATS). This process typically takes three to six business days to complete, but it's important to note that there may be transfer fees involved, which can range from $50 to $100. To initiate the transfer, you will need to fill out a transfer initiation form, which can usually be found on the new broker's website. It is also recommended to download a digital statement from your current firm to refer to important account information during the transfer process.

Understand the types of accounts you can transfer

When transferring investments from one broker to another, it's important to understand the types of accounts involved. Here are some common types of accounts that can be transferred:

Investment or Retirement Accounts

You can transfer investment accounts, such as stocks, bonds, mutual funds, and other security types, to another broker without needing to sell your holdings. This is often done through an Automated Customer Account Transfer (ACAT) Service, which allows for the automated transfer of various investment products, including stocks, bonds, cash, mutual funds, and options.

Workplace Retirement Accounts

Workplace retirement accounts, such as 401(k) or 403(b) plans, can also be transferred to another broker. This is typically done through a rollover IRA, which allows you to move funds from your former employer-sponsored plan to an IRA while maintaining their tax-deferred status.

Cash Accounts

You can also transfer cash from a checking or savings account to a brokerage account. This is usually done through an electronic funds transfer (EFT), which digitally moves money between bank accounts.

Health Savings Accounts (HSAs)

HSAs are eligible for transfer between providers. However, it's important to note that an HSA may consist of a bank account holding your cash balance and a brokerage account holding your investments. Therefore, separate transfer requests may be required for each type of account.

Individual or Joint Accounts

Individual or joint accounts can be transferred as long as one of the joint account owners is also the owner of the individual account.

It's important to note that not all types of accounts and investments are easily transferable. For example, annuities, proprietary investments, and certain types of securities may not be supported by the new broker and may need to be liquidated or transferred separately. Additionally, transferring between different types of accounts, such as from a traditional IRA to a Roth IRA, may not be compatible and could require additional steps.

When transferring accounts, it's crucial to carefully review the types of accounts involved and consult with the receiving broker to ensure a smooth and efficient transfer process.

Compare fees and commissions

When comparing fees and commissions, it's important to consider the different types of accounts involved in the transfer, as well as the specific investments being transferred. Here are some key points to keep in mind:

Fidelity Fees

Fidelity offers commission-free trades for online US stock, ETF, and option trades. There is no per-trade fee for ETFs, and options trades have a fee of $0.65 per contract. Additionally, there are no account fees or minimums to open a retail brokerage account, including IRAs. Fidelity also offers a range of low-cost mutual funds with no transaction fees. However, certain funds may have a transaction fee of up to $100. It's important to review the specific fees associated with the funds you plan to transfer.

Current Broker Fees

When transferring investments from one broker to Fidelity, it's important to consider the fees that your current broker may charge. There is typically a fee for transferring out of your account, which can range from $50 to $100. Your current broker may also have specific requirements or restrictions on transferring certain types of investments, such as proprietary mutual funds. Be sure to review the terms and conditions of your current broker to understand any potential fees or limitations.

Tax Implications

If you are transferring a retirement account, such as an IRA, to a similar account at Fidelity, you generally will not incur taxes. However, if you are transferring a standard taxable brokerage account, selling your investments before transferring could result in taxes on any profits. It's important to consider the tax implications of transferring different types of accounts and investments.

Reimbursement of Transfer Fees

Some brokers may reimburse you for any transfer fees charged by your current broker. This could be in the form of a formal program that reimburses transfer fees or through new customer incentives or bonuses. It's worth checking with Fidelity to see if they offer any reimbursement options.

Timing and Convenience

While fees and commissions are important, it's also crucial to consider the convenience and timing of the transfer process. A direct transfer using the Automated Customer Account Transfer Service (ACATS) is typically the most cost-effective and efficient method. This process usually takes around three to six business days and avoids the need to sell and repurchase your investments. However, it's important to allow for potential delays due to mismatches in account information or other issues.

Open an account with the new broker

Opening an account with a new broker is a straightforward process and can usually be done online. However, you will need to have certain information to hand, such as your name, address, income, birth date, Social Security number, and driver's license number.

It is important to remember that the type of account you open with the new broker should match the type of account you are transferring from. For example, an IRA account should be transferred to another IRA account, and a taxable account should be transferred to another taxable account.

If you are transferring a margin account, you will need to open a similar account with your new broker. It is not possible to transfer assets from a leveraged account into a cash account.

If you are transferring a retirement account, the source and destination accounts must match.

Fidelity will help you open any new account types that you may need as part of the online transfer process.

Transfer your securities

The most common way to transfer investments between brokers is through the Automated Customer Account Transfer Service (ACATS). This is an automated process that allows you to transfer your investments as they are, without having to sell them and transfer the cash proceeds.

To initiate the transfer of securities from one broker-dealer to another, you’ll need to complete the Transfer Initiation Form (TIF) and send it to your new broker. Your new broker can provide this form. Once your new broker (the receiving firm) receives your TIF, it initiates the process by establishing communication with your current broker via ACATS.

Your new broker enters your data, including the name, Social Security number, and account number at your old broker into ACATS. An automated function will then allow your broker to see that a request has been made to transfer the account.

To prevent any unauthorized transfers, your broker will reject transfer requests where some information provided by your new broker doesn’t match what it holds in its records. The transfer request is validated once the customer account information matches. You can expect the validation process to take 3 business days from when your new broker enters your request into ACATS.

After validating the transfer request, your broker will send a list of the assets you hold to the receiving firm through ACATS. Your new broker will then review this list of assets and choose whether to accept the transfer. If the receiving broker accepts the account, the delivering broker will take about 3 business days to move your assets. According to FINRA, the entire validation and delivery process typically requires 6 days to complete.

It’s always a good idea to discuss, review, and understand any specific policies, restrictions, or constraints that may impact the transfer. For instance, if you hold a margin account, you need to ascertain that your new broker accepts margin accounts. If it does, check for any minimum requirements.

You must also remember that trading securities during the account transfer process will often complicate and derail the transfer. Some brokers will freeze an account that’s in the process of being transferred — no trades are allowed until the transfer is complete.

How to transfer securities from one broker to another:

• Get your most recent statement from your existing account. Your new broker will need the information on this statement, such as your account number, account type, and current investments.
• Open an account at the new broker. Most accounts at most brokers can be opened online. Be sure to have some information handy — the broker is likely to ask for your name, address, income, birth date, Social Security number, and driver’s license number. The account you open should match the account you’re transferring — in other words, an IRA account should be transferred to an IRA, a taxable account should be transferred to a taxable account.
• Initiate the funding process through the new broker. Generally, you’ll be walked through a step-by-step process online that includes filling out a transfer form or ACAT form. Most accounts can be transferred through an automated process called the Automated Customer Account Transfer (ACAT) Service. Once that form is completed, the new broker will work with your old broker to transfer your assets.
• Watch and wait. The broker you’re transferring to will review the assets in your account and determine whether they can be transferred in-kind. And then reach out to your old broker to facilitate the transfer process on your behalf.
• Enjoy your new account. In most cases, the transfer is complete in three to six business days. Your broker may be able to give you a more specific time frame. Some even have online trackers so you can follow the money.

Check for restrictions

When transferring investments from one broker to another, there are several restrictions to be aware of. These restrictions can depend on the type of investment, the type of account, and the policies of the brokers involved. Here are some key points to consider:

Investment Types:

Not all types of investments can be easily transferred between brokers. While stocks, bonds, options, exchange-traded funds, and mutual funds are generally transferable, there are some exceptions. For example, annuities purchased through insurance companies cannot be transferred through the standard Automated Customer Account Transfer Service (ACATS) system. Instead, a separate process, such as a 1035 exchange, may be required. Additionally, some brokers may have proprietary investments, such as mutual funds, that cannot be transferred to another broker. It is important to review the policies of both the transferring and receiving brokers to understand any restrictions on specific types of investments.

Broker Membership:

To facilitate a smooth transfer of stocks and other investments, both brokers involved in the transaction must be members of the National Securities Clearing Corporation (NSCC). The NSCC operates the ACATS system, which enables the automated transfer of stocks, bonds, cash, mutual funds, and other investment products. If one or both brokers are not members of the NSCC, alternative transfer methods may need to be explored, which could introduce additional delays and complexities.

Account Types:

When transferring investments, it is essential to match the account types between the transferring and receiving brokers. For example, transferring a taxable brokerage account to another taxable brokerage account is typically a straightforward process. However, transferring to an account of a different type, such as a retirement account like an IRA, may introduce delays and require additional documentation. It is important to ensure that the account types are compatible to avoid any unnecessary complications during the transfer process.

Transfer Fees:

Some brokers may charge transfer fees when moving investments to another broker. These fees can vary and may be imposed by either the transferring or receiving broker. It is important to review the fee schedules and policies of both brokers to understand any potential costs associated with the transfer. In some cases, the receiving broker may offer incentives or promotions to offset these fees, so it is worth exploring these options before initiating the transfer.

Tax Implications:

Transferring investments between brokers can have tax implications, especially if the transfer involves the sale of securities or retirement accounts. Selling securities may trigger capital gains taxes, and special rules apply when transferring retirement accounts to avoid early distribution taxes and penalties. It is crucial to consult with a tax professional and carefully review the tax implications before initiating any transfers to understand the potential tax consequences.

Frequently asked questions