How to Transfer Stocks From One Brokerage Account to Another

Unsatisfied with your online broker? Feel free to shop around for a better one. The right brokerage account earns you the most on your investments. Once you're ready to switch, you can transfer stocks between brokers so that you still have your previous investments.

Transferring stocks isn't hard, but if you don't do it correctly, you could end up paying extra. To avoid that, move stocks from one account to the other the right way.

How to transfer stock between brokers

The best and most common way to transfer stock between brokers is by direct transfer. Most brokers use the Automated Customer Account Transfer Service (ACATS) to directly transfer investments.

Here's how a direct transfer works:

1. You start the process by filling out a transfer initiation form. This form should be available on your new broker's website, but you can call them if you need help.
2. Your new broker communicates with your old broker. They set up the transfer.
3. Your old broker must confirm, reject, or change your transfer information within three business days.
4. Assuming your old broker confirms the transfer and there are no issues, the transfer should be completed within six business days.

Your old brokerage firm may charge a transfer fee. Fortunately, the best online brokers frequently pay these for you (they want your business). Before you move your investments, check if there will be a transfer fee and if your new brokerage firm will cover it.

Note that some brokers sell proprietary investments (like mutual funds) that they forbid you to transfer to a new broker. Your new broker will notify you of any investments it can't transfer.

Even small mismatches can delay the process when you move stock between brokers. For example, if your new broker has your full middle name on file and your old broker only has your middle initial, it can take additional time to validate the transfer. Your old broker will also need to resolve any outstanding margin loans if you have a margin account.

Despite the time it takes to transfer stock between brokers, it's by far the most cost-effective option. Technically you could just sell your investments and repurchase them, but that can be very expensive -- we'll go over why.

Why you shouldn't sell your investments

For convenience's sake, it's tempting to just sell all of your investments and withdraw the proceeds from your brokerage account. Then, you can take that money, deposit it into your new brokerage account, and purchase the same investments.

That strategy may be simple, but it comes with a big drawback: investing taxes. If you're transferring a standard taxable brokerage account (as opposed to a retirement account like an IRA) and you sell off your assets, you'll pay taxes on any profits you've earned.

Your brokerages may charge you trading fees for shuffling investments around. This is less likely now that so many popular brokers offer zero-commission trading, but it's something to watch out for.

Some brokers actually pay you to transfer them your investments. But take care to read the fine print on these deals -- typically, you must roll over thousands of dollars to qualify.

If you're unhappy with your broker, it doesn't make sense to stay in a bad financial relationship. Better to transfer stocks between brokers, so you can use an account you like.

READ MORE: Explore how a brokerage account can best meet your needs.