How to Change Broker and Transfer Your Portfolio| Updated: |
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If you want to invest in the stock market, you will need a broker account. If you do not have the best broker account, you may have to change broker. Changing from one broker to another is not an easy decision but is sometimes necessary. In this article, we see two ways of switching to a new broker and how to transfer your portfolio to the new account.
In 2019, I opened a new broker account at Interactive Brokers. Since DEGIRO does not let me trade in U.S. funds anymore, I decided to stop working with them and move my portfolio to a new broker.
I was disappointed with the way they handled the new regulations. I would only recommend it if you only want to invest in European funds. Currently, Interactive Brokers lets me trade in these U.S. funds. Moreover, I may also save on some fees by using the Tiered pricing of Interactive Brokers.
However, I must transfer my portfolio from my previous broker to Interactive Brokers. I could have kept both. But I also prefer keeping it simple.
In this article, we will see the two main ways to change brokers and transfer your positions from one broker to another. And I discuss how to choose between the two.
If you have ever changed your broker account, I would like to hear about your experience!
The most obvious way to change broker is to transfer your positions. Every broker I know has a feature to import or export shares. In some cases, you can also transfer an entire portfolio. This method work by initiating the transfer from your new broker. Doing so may sound weird, but the transfer should generally be initiated by the new broker (the receiving broker).
The transfer, once initiated, and validated, will take anything from 2 to 10 business days. It may even take more if there are some issues with the transfer. During the transfer, the old account may be frozen to make sure the transfer is accurate.
One problem with this process is that it is not as simple as it ought to be. Indeed, the transfer system will depend on which broker you have. If you transfer from two brokers in the same country, it may be OK because they probably use the same underlying system for the transfer. For instance, in the U.S., the system generally used is the Automated Customer Account Transfer Service (ACATS). If you have brokers in different countries, it may become much more complicated. I am pretty sure it can work out. But you may have to involve the support from both sides in the worst case.
Another problem with this is is that you will pay more fees to change broker. No broker will transfer positions for free. Some will accept incoming transfers for free. But I do not know of any broker who accepts outgoing transfers for free. For instance, at DEGIRO, you pay 10 EUR per position, whether it is incoming or outgoing. For Interactive Brokers, it depends on which transfer system you use. If you use ACATS, you will not pay any fee. If you use Deposit/Withdrawal at Custodian (DWAC), you will have to pay 100 USD per position transferred in any direction.
The advantage of this way to change broker is that you will still have the same amount of shares in the new broker than in the previous one. You do not have to buy back again shares. It is especially good if the market is going up. In that case, you will not lose money on the stock price.
Sell and buyback strategy
The other technique to change broker is more straightforward. You sell all your positions from your current broker. Then, you transfer the money to your new broker. And you buy back all the positions in the new broker.
There is nothing complicated with this technique. You go to your current broker, and you sell all the positions you want to transfer. Then, once the operations have been performed, you initiate the transfer of the money you want to move. If you can, you can directly transfer the funds to your new broker. But this is not possible with every broker. For instance, DEGIRO only allows me to use one bank account. If you cannot, you can transfer the money to your bank account and then initiate a second transfer from your bank account to the new broker. Once the money reached the new broker, you can start buying back the shares you want.
One advantage of this technique is that none of your accounts will be locked for any time. You will still be able to use both accounts during the transfers. Moreover, this will likely be significantly faster than the other technique. It will be as fast as two bank transfers!
Another advantage is that you are likely to pay fewer fees doing that than using a transfer system. If you decide to use this technique, you will pay the standard fees for selling your positions and the standard fees for repurchasing them in your new broker account. You may also pay some fees for the money transfers. But if you smartly do the transfers, this should not be a lot.
If your broker offers some free transactions, you should take advantage of that to move to a new broker! Sell the biggest of your position by using the free transactions. This strategy could save you some money!
The significant disadvantage of this technique is that the price when you sell the securities, and the price when you repurchase them may be different. In some cases, it may not make a big difference. If the market is going up while your transfers are in the way, you may end up losing money. On the other hand, if the markets are going down, you may be a winner. But you will never know which direction it will take. You need to be prepared for this risk. If you have a large portfolio to transfer, this may be expensive.
How to choose a strategy
Now that you know both techniques and their advantages and disadvantages, you still have to choose between both to move your portfolio to a new broker effectively.
There is one thing that is very important to consider: the size of your portfolio. If you have an extensive portfolio, I would advise going with a fully automated transfer of the portfolio by the two brokers. You will pay some fees, but since the fees are generally per position and not per share, it should be reasonable.
When you have an extensive portfolio, you do not want to stay out of the market for a few days. If the market goes up 2% or 3% in the time you are out of it, you will lose a substantial amount of money. Moreover, if you were to sell it all, you may have to pay a lot of fees. And you probably do not want to transfer several hundreds of thousands of dollars from account to account.
If you have a tiny portfolio, like me, it is probably much simpler to simply sell everything, transfer money, and start again in the new broker. The fees will be small to sell and buy the positions. You will save time, as well. Now, there is a definite risk that the market will go up in the meantime. It is up to you if you want to pay the fees or take the risk.
If you are a gambler and predict that the market will go down in the next days, you could use the selling method for a profit. But you cannot predict it! Then, you can sell everything in your old broker and repurchase everything in your new broker a few days later. If your prediction comes trues, you can make a few extra bucks on your portfolio. Once again, I do not recommend this.
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So as you can see, there are two main ways to change broker and transfer your portfolio from the old account to the new one. You can use the automated transfer service that most brokers offer. Or you can sell your portfolio, transfer the money to your new broker, and buy back the shares.
There are advantages and disadvantages to both techniques. In my opinion, a large portfolio should use an automated transfer, and a small portfolio should sell the shares and repurchase them. However, keep in mind that I never did any portfolio transfer, and there may be unexpected issues that I did not see.
When I had to change broker, I decided to use the sell and buyback strategy. I also used some extra cash to transfer my portfolio to Interactive Brokers. I saved on fees this way. However, the transfer of cash between the brokers was longer than I thought. So, it was quite stressful because of the market going up between the transfer.
If I ever have to do it again, I will use the automated transfer method!
If you want to know more about brokers, check out my search for the best broker for Swiss investors.
Have you ever changed your broker? How did it go?
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26 thoughts on “How to Change Broker and Transfer Your Portfolio”
Here is my recent experience moving all my assets automatically from my bank to IB.
I started the process at IB, informing them about all incoming positions (ISIN number + number of shares), current account number and contacts at my bank. I sent the authorization letter to mh bank based on IB template, which included the email address at IB for inter-broker communications. In parallel, IB contacted mh bank for settlement details. My bank asked me to confirm my IB account n. and IB swift. Here is in my opinion the process flaw: apart from my account number I had no visibility on the settlement details and…I had to confirm them! Soluttion: my bank double confirmed with IB that all details were good before proceeding and I confirmed the swift n. via IB customer support. My bank ripped me off for the last time with transfer and custody fees and the same day the positions disappeared from one account, they appeared on the other. Total time for the process: about 1 week. IB did not send me a notification when the transfer was complete, which I would have appreciated. Throughout the process I had a few contacts with IB contact center. Via phone (swiss number), chat and message. I would suggest the chat (on PC better than mobile app) or the phone if you need a quick answer.
Thanks a lot for sharing!
It’s really good that they appear and disappear on the same day, it feels safer.
One week seems reasonable for such transfers.
I agree that a notification from IB would have been welcome.
It’s still a little complicated for my taste. I wish this was automated directly in the interface where you set some shares ready for transfer, you get a special code and then you use that special code on the other broker and it’s done. Just like domain names. But hey, it’s probably asking too much :)
The major disavantage of selling and transfering to the new broker are the taxes, since you will pay taxes from the profit of sales.
That’s a good point. But this will depend on the country you are in. In Switzerland, we do not pay capital gains tax unless it’s a majority of our income.
So for us, this would be safe. But this would be dump for Americans indeed!
Thanks for stopping by!
Thank you for the interesting article. Regarding taxes, I understand swiss stamp duty would have to be paid if selling out of one brokerage and buying back in another. But I guess that would still be due upon eventual sell from the other brokerage.
Another consideration may be the cost to transfer each position… if buying monthly, isn’t each trade in essence a new position and as such set to incur the CHF50-100 transfer fee per position?
That’s a good point. If you sell and buy to transfer your shares, you will have to pay the swiss tamp tax duty twice. That is if you use a Swiss broker. Because this tax is only due for swiss brokers, not foreign brokers.
No, each trader is not a new position. If you buy 10 times 10 shares of an ETF, you only have to do one transfer of 100 shares.
This was really helpful and gave me more insight.
My shares are worth 20K US, but are with Compushare Canada. They offer a DRS number option to make the transfer which Interactive seem to accept.
Unfortunately, Compushare doesn’t have a selling option and the stock was given to me from my company.
I’m trying t find out if there will be fees on the compu side for this type of trade.
Anyway, thanks again. Great article, very well written and easy to follow.
I am glad you found this useful!
I do not know compushare. But it is highly likely that they have fees for the transfer. Is it something for ESPP or RSUs? In that case, it may have no fees. But I am surprised that you have no option for selling :s
To be sure, you should contact them.
Thanks for stopping by!
Interactive Brokers sounds interesting, especially for their professional interfaces and low fees for US stocks.
Regarding the famous Vanguard ETFs everyone writes about in the US community :
In Europe some may not be available, more often they are just called differently and are layed out in Ireland.
Their Total Expense Ratio had been worse compared to US-based ETFs in the past, but nowadays the difference is more or less neglectable. Other providers like ishares or HSBC also have low cost alternative. So no worries if the famous tickers are not allowed in Europe.
The biggest issue regarding an “offshore” broker is the tax situation. It´s not about tax evasion or saving money, but just the work involved.
If I imagine doing this ultra complex tax calculation for each and every dividend collection with different regulations and percentages (sometimes crossover percentages and bilateral double tax recouperation), I would strictly vomit on the table :)
Maybe you can pay a tax advisor for doing this crap, but even then you have to organize and collect each and every income & margin gains/losses from sold stocks during the year.
At least in Germany that would be a complete desaster and may cost you weeks of work.
If you keep silent about it, the risk is high they might get you for tax evasion (famous example: Uli Hoeneß).
Don´t know if it´s worth the hassle. Maybe a visit to the tax advisor can really helpfull.
Hi Senior Crown,
You are right that they also provide alternatives in Europe. And these alternatives have okay TERs. Unfortunately, this is not the biggest issue.
The biggest issue is that the dividends will be taxed by the U.S at 15% for U.S. securities (more than half the world). This is going to eat more than the difference in TER and this is why European ETFs suck.
I am not sure I understand the problem with offshore broker. You mean by taking a broker in the U.S.? At least in Switzerland, there is no issue having a foreign broker.
But having a U.S. broker would be a big deal indeed. And you would need an address in the U.S. and that would probably make you eligible to U.S. Taxes. I would not do that.
Thanks for stopping by!
Wait, but IB is US broker no? Is this wrong for a Swiss resident (from tax perspective)?
Yes, Interactive Brokers is from the U.S. Actually, for Swiss people, you will open an account with IB UK (which belongs to IB US).
But there is nothing wrong to have a broker from the UK when you are in Switzerland.
Thanks for stopping by!
No, you can have a US broker with a Swiss address (for example in the case US companies for their employees worldwide) but you’ll need to fill a W8-BEN form, as there is a tax treaty between Switzerland and the US, so that you’re taxed 15% instead of 30% on your stocks’ dividends.
Which broker are you talking about? IB is an international broker, so you can use it in many places. But many big U.S. brokers only access U.S. residents.
And you should always fill a W8-BEN if you are holding U.S. shares, regardless of where your broker is.
“..should always fill a W8-BEN if you are holding U.S. shares..” even if you’re resident in a country that has no tax treaty with the US?
No, that would indeed only be if you are in one of these countries. Most of what I say mostly applies to Switzerland and we have such a treaty :)
Is there a way to get the 15% withholding tax on dividends back from the US, if you invest in US ETFs?
Would that be with the W8-BEN form?
There is, in your tax declaration. You can read my article about filing taxes, I cover US ETFs :)
Thanks for sharing your experience in changing your broker.
I also recently changed (between Easybank and flatex) via a transfer of fund/shares. The “sell and buy again” approach would not have been economical for me, even worse, it would have triggered hefty tax payments given the appreciation of my stocks/funds. I found the process rather difficult as it was full of uncertainty and took approximately 3 weeks in total.
You can read up on my experience (in German) on: https://meinefinanziellefreiheit.com/2019/02/28/depotwechsel-ii/
Thanks a lot for sharing your experience :) My German is pretty bad, but Google Translate is much better than me :P
The process should really not be that difficult. I am wondering whether they make it more difficult than it should be on purpose.
I started the transfer of my portfolio by selling and buying back. And I completely underestimated the market changes in the time where I sell and get the money back. I should have done automated transfer. But it’s too late :) Once it’s done, I will write a full article on the details.
Thanks for stopping by.
I also use IB and Schwab. I transferred some positions to IB via ACATS. Quite painless – but cost $50.
Hi Money Mongoose,
Thanks for sharing your story :)
I have started transferring my portfolio by selling and buying back. But I am starting to believe already that I should have automated the transfer.
Thanks for stopping by :)
Aside from risk of price movements from buy/sell, I was also concerned with my tax position if I start buying/selling rapidly in a way which could look like ‘trading’.
I understand this risk as well! But I think that this would be understood, or at least could be explained, as a change of broker I think.
Hello and thank you for your very interesting blog.
I’m in Europe and have an IB account and I can’t trade US ETF including VT. This is the message I get :
Financial Instrument is not available for trading:
This product is currently unavailable to clients classified as retail clients. Note: Individual clients and
entities that are not large institutions generally are classified as retail clients. There may be other
products with similar economic characteristics that are available for you to trade. See:
Can you please confirm me that you can trade VT (not just receiving quotes or looking at the charts but really placing orders) and that you’re not considered as a large institution ?
The only difference from you is that my account is a margin one.
That is weird!
Yes, I am still able to buy VT and I have bought VT last month.
The difference is that I am in Switzerland which is not yet under the PRIIPS regulations. But it will be under effect next year. I am afraid that this will mean the end of my abilities to buy good funds next year :(
I do not think margin and cash accounts make a difference here.
I am sorry I cannot help you more.