How to Ditch Your Broker
Ron Lieber
Sep 23, 2006
Ready to switch brokerage firms? Yanking your money may take longer than you think.
A week ago, the National Association of Securities Dealers issued a report on the high level of dissatisfaction that investors have with the process that most firms use to move accounts from one company to another. Turns out it's used quite often -- more than 17,000 times each day -- when people switch brokers on their own, move with their adviser from one firm to another, or for countless other reasons.
The process doesn't always go smoothly. Disappointed customers have made more than 700 formal complaints to the NASD in the past two years, while brokerage firms have received more than 6,000. Of those daily transfers, around 2,000 on average go awry, for both legitimate and somewhat silly reasons.
The NASD task force reported that a number of things can go wrong along the way. But there are tactics you can take to keep them from happening to you.
Even under the best circumstances, moving your assets usually takes six to 10 business days. That's because the account owner must fill out a special form, and then the firms on either end need to be doubly sure that they're moving the right accounts, and taking on investments they can support. If you have an individual retirement account, margin loans or proprietary investment vehicles, it could take longer than two weeks to unwind it all. There may be a small fee too.
Here's the first big problem: While your new broker gets a notice from the old one if your transfer request has been rejected or sent back for clarification, you may not right away. So as with applying for a mortgage, it may be wise to pester your new firm for updates and confirmation that your paperwork is complete. Don't count on anyone to call you; your new firm may be drowning in hundreds of account transfers at once.
One of the most common account-transfer problems would seem to be one of the simplest: The account numbers that investors put on their transfer-request forms don't match the actual ones at the old firm. But there's a good explanation for that. Some account-number confusion results from mergers among the firms themselves -- when account numbers often change.
Moreover, some companies have an annoying practice of using internal account designators different than those that appear on customer statements. The resulting mismatch leads to a rejected transfer request. The NASD has asked firms to stop this nonsense. Until they do, call your old firm before your move and ask if its internal account numbers match the one you think you're supposed to put on your transfer request.
Finally, triple-check everything before you file your form. Even one digit out of place on, say, your social security number, will force you to restart the entire process. "You really do want to dot your I's and cross your T's," says Chip Walker , who runs the financial-adviser integration process at Wachovia Securities.
Still having problems? Threaten to complain to the NASD if the process drags on. The firms would prefer that no more task forces need to meet to help them fix their problems.
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