What You Need To Know About Switching Online Brokers

There are several questions that might arise when you feel that it is time to switch online brokers for whatever reason. In most cases, people might want to know what to do with their stock or the amount of fees or taxes that they must pay in order to do so.

When it comes to the stocks that you own, there are usually two options that you might have, and these are the “in kind” or “in cash” transfer. This transaction is usually called an ACAT transfer. The first option simply means transferring your stocks to your new broker while the latter will mean selling your assets and transferring the cash to the new online broker.

Why the first option is preferred over the second is because you’ll have to pay capital gains taxes if you do sell. Alternatively, you can also transfer some shares to your new broker as well.

When it comes to fees, some brokers may charge exit fees so it is a good idea to check with your current broker about the ACAT fees before you make an ACAT transfer. Of course, there are no charges for incoming ACAT transfers but for outgoing transfers. Some brokers don’t charge for partial transfers yet there are a few that will definitely charge exit fees if you want to close your account.

Experts suggest that if you want to avoid exit fees, ACH transfers or partial transfers leaving one share behind are ways to avoid exit fees.  Again this depends on whether or not your current broker charges for partial fees.