Ready to Change Brokers? Four Things to Keep in Mind

April 10, 2018

Are you thinking about moving your accounts to a different broker?

We’ve been hearing from many investors who are thinking about making a change now that their Scottrade accounts have been moved to TD Ameritrade.

TD Ameritrade’s transaction fees are higher than many other brokers, and it’s also the only broker we’re aware of that requires investors to hold no-transaction-fee funds for 180 days to avoid a redemption fee. (Most other brokers have a 60 or 90 day holding periods). So it’s no wonder former Scottrade investors are shopping around.

If you’re a fund investor who is thinking about changing your broker, here are a few things to keep in mind:

1. Open your new brokerage accounts FIRST

Once you’ve chosen a new broker and established your new accounts, your new broker will reach out to your previous broker and transfer your assets.

2. Assets should be moved in-kind (so there won’t be tax consequences)

Your fund shares should be moved in-kind so you don’t have to sell them at one broker and then buy them again at another broker. Beside saving transaction costs, this method avoids triggering taxes.

Occasionally, though not often, you may find a particular fund or share class of a fund that is not accepted by your new broker. In that case you’ll have no choice but to sell the fund prior to transfer. Contact your new broker to ask if each of your funds is carried on their platform.

3. If the broker has a local office, consider opening accounts in person

If you have many accounts that you’re looking to move, it’s probably worth going into the local office and opening the accounts in person, if possible. You’ll need to bring copies of your most recent statements. They’ll be happy to help.

4. Ask about special offers for new accounts

It’s worth asking a prospective broker if there are any deals they can offer you as a new customer. Brokers want your business, and many have special offers. This can help offset the fees that you may face for leaving your current broker.

You also may find that your current broker may be willing to match a discounted offer from a competing broker. One investor told us that he once got $4,000 for moving his accounts to TD Ameritrade (he had to keep his accounts there for six months).

At the end of those six months, he saw that another broker was offering $5,000 to new customers, so he called TD Ameritrade and said he was going to leave. According to the investor, TD Ameritrade offered him more than $5,000 to keep his accounts for another six months.

Want more information on brokers?

You’ll find more broker information in the April 2018 issue of NoLoad FundX. Click here to become a member.

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