Consolidating your brokerage accounts isn’t the same thing as “putting all your eggs in one basket”. Rather, it’s about keeping a wide variety of different investments with only a few trustworthy and helpful people so you can keep track of what you’re doing. Putting all your eggs in one basket would be consolidating your whole portfolio into one or two concentrated positions or investments.
In other words, you can be extremely well-diversified and yet maintain very few separate accounts or advisors. Don’t mistake diversification with spreading yourself thin or scattering your investable assets. The key is to work with an advisor who is well-versed enough in different asset classes to get you exposure to all of them specifically, while still maintaining the view from 10,000 feet to oversee the whole portfolio.
With that in mind, there are many ways to begin the brokerage account consolidation process once you have decided that simplicity makes more sense and you are comfortable with who you are working with.
We will discuss one of these consolidation tools below, the ACAT.
What is an ACAT?
ACAT stands for Automated Customer Account Transfer. The ACAT system is run by the National Securities Clearing Corporation (NSCC) and is perhaps the most widely-used tool for brokerages to move client accounts between themselves in a timely manner.
Upon your request, your receiving broker, meaning the firm you want the account transferred to, will send you out a Transfer Request form which is filled out, signed and dated, and then returned to that same broker along with a copy of a recent brokerage statement you’ve received. His or her firm will then process this through the back office in order to “request” the transfer of your account from the other brokerage (which will then be known as the contra- or delivering firm).
With some exceptions (certain “house” mutual funds or proprietary products), most investments can be moved “in-kind” between one brokerage and another, meaning that the positions and quantities held in the original account will be unaffected by the transfer. Any positions that cannot be held by the receiving firm may be designated as “liquidate upon transfer”, meaning they will come over in cash so as not to hold the process up.
Fortunately, cost average information for mutual funds, equities and bonds typically move along with the account these days, so the broker on the receiving end will not have to bother you to go through all your old statements and confirms for the prices you’ve paid for your holdings.
How Long Will it Take to Transfer an Account?
The process used to take up to 10 days upon receipt of transfer request form, but in late 2007, the NSCC declared a rule change to cut the “review period” from 3 days to 1 day on full transfers and 2 days to 1 day on partial transfers. there were also some improvements made regarding the re-registration of mutual funds involved in a transfer to help streamline the process. SIFMA, FINRA and the NSCC recognized that the technology was available and worked together to implement these changes. As a result, the amount of time a typical ACAT takes has been lessened to more like 6 or 7 days, depending on the clearing firms involved. Transfers between two brokerage accounts held at the same clearing firm are considered in-house and are processed even more quickly.
Partial ACAT’s are the same as regular ACAT’s, except the client is able to specify how much of which positions and cash they want to move, as opposed to transferring the whole account.
Once your account is transferred away from the delivering firm, the original account will be empty and in many cases, will become automatically closed by that firm. When your assets arrive at the receiving firm, you should double-check with your broker to be sure that all the cost information has come over as well. Just in case it hasn’t, you should contact the delivering firm to obtain it as soon as possible.
What Else do I Need to Know?
An experienced broker or advisor will know this stuff cold, but here are some inside tips that I believe will be very helpful to anyone attempting to consolidate with an ACAT:
- Make sure that the Title of both accounts you are merging are exactly the same, in some cases down to the middle initial.
- You cannot transfer a Joint account (in both your and your spouse’s names) into an Individual account (in your name only) without a Letter of Authorization (LOA) signed by both parties.
- A corporate account cannot be transferred into your individual account (or vice versa), even if you own the corporation as a sole proprietorship.
- If you have changed your mind during the “review period”, you normally have up to 2 days to fax in a signed and dated “Rescind Letter” to the delivering firm, which will enable them to stop the transfer proceedings. This letter needs to reference the original account number as well as your desire to have account stay put.
Now that you understand the mechanics of transferring and consolidating your brokerage accounts, you should determine which of your current brokers or advisors are really earning their place on your team. If you are feeling that your portfolio could benefit from a little reconciliation, talk to your advisor about an ACAT today.
I am currently accepting new clients on a limited basis. For a confidential analysis of your portfolio, please contact me via email or telephone: Joshua M. Brown’s Contact Page