You might want to transfer your brokerage account if you find one with lower fees, more investment options or better research tools. If so, you can easily transfer brokerage accounts in a few steps.
Here’s how to transfer a brokerage account and what you need to consider before you make the switch.
Two main options exist to transfer brokerage accounts, but one may trigger a taxable event.
You can sell all your assets in your current brokerage account and transfer the proceeds into your new account. However, selling assets from a taxable brokerage account will trigger capital gains taxes if you profit from the sale.
Using the Automated Customer Account Transfer Service (ACATS) system, an in-kind transfer allows you to move your assets directly from one brokerage account to another without selling any securities, as long as your new broker accepts the assets you want to transfer. An in-kind transfer is preferable to a cash transfer since it doesn’t require you to sell assets and, therefore, doesn’t trigger a taxable event.
Take the following steps to transfer your brokerage account:
Your current broker will likely charge an outgoing account transfer fee ranging from $50 to $100 — most charge this type of fee. Verify by checking the broker’s fee schedule. Still, your new broker may reimburse your transfer fee or provide you with cash or trade bonuses for switching.
If you cash out your current brokerage account and then deposit the proceeds in your new account, you may incur capital gain taxes or losses. You can avoid this through an in-kind transfer, which moves your assets across accounts without the selling of securities. You should also switch to the same account type — i.e. taxable brokerage account to taxable brokerage account, traditional IRA to traditional IRA and Roth IRA to Roth IRA to avoid certain tax implications.
Here are some points to consider when deciding whether to switch brokers.
Many firms offer brokerage account transfer bonuses to entice new customers. For instance, SoFi Invest offers up to $5,000 when you transfer investments from another brokerage firm, while Public offers up to $10,000 in cash when you transfer your account.
To make the most of your account transfer, consider a broker that reimburses your old broker’s transfer fee and offers a transfer bonus for making the switch.
You can’t transfer stocks directly from a brokerage account to a traditional or Roth IRA, because you must contribute to these retirement plans in cash. So, you’d have to sell your stocks and deposit the proceeds into your traditional or Roth IRA, which could trigger capital gains taxes or losses.
You can request a transfer of stocks from your IRA to a taxable brokerage account, but it comes with tax implications. Even though you’re not liquidating your assets, you still have to pay taxes on the transfer amount since it’s considered a distribution.
A brokerage account transfer is simple, and you can complete the entire process online in minutes. You may consider transferring your brokerage account if other brokers offer lower fees, more investment options or better tech features. Check out the best brokerage accounts to see how the competition stacks up and if you should make the switch.
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