What to Expect When Transferring Financial Accounts Between Firms
If you aren’t used to moving money around, transferring your financial accounts can be a little nerve-wracking. The process itself is relatively straightforward process—but it helps to understand the steps involved.
There can be several ways that transfers can be implemented depending on the account, the custodian, and the titling. At Gilbert Wealth, I help my clients through every step of the way.
The Basic Transfer Process
When you transfer an account from one financial firm to another, the process is typically managed behind the scenes by the institutions involved. In most cases, once you’ve signed the paperwork, the firm handles the process for you.
However, the type of account transfer and the investments you hold can affect the process.
The transfer typically falls into one of four categories:
ACAT Transfer (Automated Customer Account Transfer)
This is the most common, easiest, and fastest way brokerage accounts are transferred between firms. The Automated Customer Account Transfer System (ACATS) is used by most major brokerage firms and allows for a seamless transition of assets, often without requiring liquidation.
Examples
- Charles Schwab
- Fidelity
- Vanguard
- Merrill Lynch
Non-ACAT Transfers
Some financial firms, especially those dealing with banks, credit unions, or insurance companies, do not use the ACAT system. These transfers may require more manual processing, such as sending paperwork back and forth, which can take longer.
Additionally, these have different signature processes from ACAT transfers making them more cumbersome.
Examples
- Mutual Funds held directly with the Mutual Fund Company like American Funds
- Money Market Accounts with banks
Rollovers
If you are moving a retirement account, such as an IRA rollover from an employer 401(k) to an IRA at a brokerage, you may need to decide whether to do a direct rollover (funds go directly to the new institution) or an indirect rollover (you receive the funds and must deposit them within 60 days to avoid taxes and penalties).
Many 401k’s will send a check to the participant to deposit to their investment account.
Examples
- Consolidating a 401k to an IRA
ACH Transfer (Automated Clearing House)
If you’re transferring cash between accounts (such as from a checking account to a brokerage), you might use an Automated Clearing House (ACH) transfer, which is a common method for moving money electronically.
Examples
- Moving money from a bank account to an investment account.
What Happens to Your Investments
In many cases, particularly with ACAT and non-ACAT transfers, your investments can transfer as-is. This means that you will remain invested during the transfer process and any investments you held with your old investment firm will be held in your new investment firm.
As-Is transfer has several advantages but the two primary ones are that you stay invested and tax implications are minimized.
However, this is not always the case. Some investments may not be transfer eligible.
What Can Transfer Without Selling?
- Stocks, bonds, ETFs, and mutual funds that are available at both the current and new firm.
- Cash balances.
What Might Need to Be Liquidated?
- Certain proprietary mutual funds (funds specific to your old brokerage firm). Many money markets fall into this.
- Some annuities and insurance products.
- Alternative investments (such as private equity or hedge funds) that are not available at the new firm.
- It may be beneficial to liquidate an investment prior to transfer depending on fees charged by the receiving firm to sell the investment down the line. For example, a Fidelity mutual fund may be eligible for transfer to Schwab. However, selling the fund at Fidelity could be free whereas selling the fund at Schwab could cost money. Depending on the size of the position, it may be better to sell first then transfer. For example, if the position size is $500 and it would cost $35 to sell at the receiving firm, that’s a 7% charge!
If liquidation is required, you should consider tax implications before proceeding (more on that below). In some cases, the transferring firm will require you to sell assets before initiating the transfer.
How Long Does It Take?
Timelines for transfers depend on the type of account and the investments involved:
- ACAT Transfers – Typically take 5–7 business days if all paperwork is in order.
- Non-ACAT Transfers – May take two weeks or more due to manual processing.
- IRA Rollovers – If a direct rollover is done, the process is usually completed within 5–10 business days. If you receive a check (indirect rollover), you have 60 days to deposit it into the new account.
- ACH Transfers – Usually take 1–3 business days for cash movements.
If delays occur, it is often due to incomplete paperwork, restrictions on certain investments, or processing requirements from the firm holding your current account.
Tax Implications
While simply transferring like accounts (Traditional IRA to Traditional IRA, Taxable Account to Taxable Account) from one firm to another (without liquidating investments) does not trigger taxes, selling certain investments before the transfer might.
- Non-Retirement Accounts – If assets need to be sold, you may have capital gains taxes on any profits.
- Retirement Accounts – If you do a direct rollover between tax-advantaged accounts (like a 401(k) to an IRA), no taxes are owed. However, if you take a distribution and do not reinvest it within 60 days, it will be taxed as income—and may be subject to penalties if you’re under 59½.
- Cash vs. In-Kind Transfers – If investments move in-kind (without being sold), there are no immediate tax consequences.
- Conversions or Distributions: If you are dealing with retirement accounts and you are moving to an account with different tax treatments, you may have tax implications for any transfer. For example, moving from a 401k with 100% pre-tax contributions to a Roth IRA is effectively a Roth Conversion and will be fully taxable.
Frequently Asked Questions
Do you need to contact your prior advisor?
Generally, no. The transfer will occur without your prior advisor’s involvement. Whether you choose to notify them or not is up to you.
Are there fees for transferring your account?
Most likely there will be transfer fees. These vary by firm. The receiving firm generally will not charge fees but the sending firm will typically charge account closure fees ranging from $75 to $150. While some firms charge this on the final account, some firms will charge these on every single account closed.
What happens if dividends or interest are credited to my old account?
After you process a transfer, it is coded with an automatic sweep feature that will periodically sweep any dividends or interest from the old account to the new account. Firms have different timelines on the sweep process but it generally happens weekly or bi-weekly.
What happens to cost basis?
For taxable accounts (non-IRA’s), you account likely has cost basis associated with the positions. These cost basis records will transfer as well but it may take a few extra days for the receiving firm to apply those to your account.
The hyper-vigilant observer...
If you watch your accounts very closely (daily, hourly, or by the minute), you may see a brief period of time where your account at the old firm is zero and the account at the new firm is zero. Do not worry! It can take a day or two for the receiving firm to reconcile what it received and apply it to your accounts.