How to Break Up with Your Brokerage
Why stick with a brokerage firm that ignores you or isn't otherwise meeting your investing needs? An automated account transfer process makes switching firms easier than you might think.
Once you decide which firm you want to move to, the new broker--the "receiving firm," in industry parlance--will send you a form from the Automated Customer Account Transfer Service, a system run by the National Securities Clearing Corp. that all NYSE and NASD member firms are required to use. The form asks for details about the brokerage account you're planning to move. Once you have completed the form and sent it back to the receiving firm, the new broker will open an account in your name and send a request to your current brokerage--the "carrying firm"--to transfer the account.
The carrying firm has three business days to approve the transfer, according to the ACATS system. The carrying firm should rubber-stamp the transfer unless your account is in arrears or it discovers an error in the paperwork. Once the carrying firm approves, the receiving firm has one day to review the transaction, making sure it meets in-house standards. Some brokerages won't accept non-stock securities, such as commodities or options. If your account carries outstanding fees or balances, the receiving firm will likely reject the transaction. Provided your account passes the receiving firm's final review, the assets are automatically transferred after two days. You may be charged a transfer fee of as much as $75; the receiving firm also may charge a like fee.
Proprietary funds offered exclusively by a particular brokerage can't be transferred. If you have Merrill Lynch (MER ) or Prudential mutual funds (PRU ), you'll have to keep them at those respective firms. There's no way around that, short of cashing them in. That could have investment and tax implications, so don't sell just for convenience.
Closing your account is even easier than transferring it: Just call your broker and say you want to do so. Your broker will sell the stocks and cut you a check, or else send out stock certificates if you request them. For a fee of around $50 per certificate, of course.
|Corrections and Clarifications "How to break up with your brokerage" (BusinessWeek Investor, Feb. 18) should have clarified that Merrill Lynch & Co. has several portability agreements, allowing investors to keep their Merrill Lynch funds even if they transfer to other certain or selected brokerage firms.|
By Brian Hindo