How to change broker and transfer your portfolio

Categories Investing
How to change broker and transfer your portfolio

Recently, I have 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 change broker. I still like the DEGIRO broker. But I would only recommend it if you only want to invest in European funds. Currently, Interactive Brokers lets me trade in these funds. Moreover, I may also save on some fees by using the Tiered pricing of Interactive Brokers.

However, that means that I currently have two broker accounts. I plan to only finance the Interactive Brokers account. For me, there is no current advantage in having several broker accounts. Therefore, at some point, I will have to transfer my existing portfolio from one broker to the other.

In this post, we are going to see the two main ways to change broker and transfer your positions from one broker to another. And I am going to discuss how to choose between the two.

If you have ever changed broker account, I would really like to hear about your experience!

Transfer Positions

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 works by initiating the transfer from your new broker. This 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 of the transfer. During the transfer, it is quite possible that the old account is 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 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 of changing broker is that you will still have exactly 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 are not going to lose money on the stock price.

Sell and buy back

The other technique to change broker is actually more simple. 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 difficult for 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 money 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 own 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 with 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. This 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 buying them back in your new broker account. You may also pay some fees for the money transfers. But if you do the transfers in a smart way, this should not be a lot.

If your broker offers some free transactions, you should definitely take advantage of that to change broker! Sell the biggest of your position by using the free transactions, this could save you a lot of money!

The big disadvantage of this technique is that the price when you sell the securities and the price when you buy them back 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

Now that you know both techniques and their advantages and disadvantages, you still have to choose between both to effectively change broker.

There is one thing that is very important to consider. It is the size of your portfolio. If you have a very large 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 a large 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 are going to 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 very small 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.

If you are a gambler and predicts that the market will go down in the next days. By the way, you cannot predict it! Then, you can sell everything in your old broker and buy everything back 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.

Conclusion

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 all your shares and buy them back. However, keep in mind that I never did any portfolio transfer and there may be unexpected issues that I did not see.

As I said, I currently have two broker accounts. I will need to transfer my existing portfolio from DEGIRO to Interactive Brokers. Since my portfolio is very small (around 50K), I will sell all my positions, transfer the money and buys them back. My current plan is to first try with the transfer of one ETF only and see how much time it takes. I still have free transactions for the VT ETF. So once I will sell it, I will save money on my biggest position! I will keep you up to date on how this goes.

Have you ever changed broker? How did it go?

8 thoughts on “How to change broker and transfer your portfolio”

  1. 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:
    https://kb.clientam.com/article/3203

    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.

    Best regards

    1. Hello Pascal,

      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.

    1. 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 :)

  2. Hi,
    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/
    Cheers,
    MFF

    1. Hi MFF,

      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.

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