If you have your investments with a financial institution and you want to transfer it to another financial institution then you need to ask the new institution to transfer your investments from the old company to the new company. An example of this is moving from one online brokerage to another online brokerage that has lower trading fees.
One of the questions you will have to answer is will you be doing the transfer “in kind” or “in cash“? This post will help you understand what transfer “in cash” means – transfer “in kind” will be covered in another post.
In cash transfer
Moving your investment “in cash” means that you will sell the investments at the current brokerage and the resulting cash will be transferred to the new broker where you will then buy new investments. This also referred to as a “cash liquidation” transfer.
Why do an ‘in cash’ transfer
Typically you would do an “in cash” transfer if your current investments are in-house investment products that are not sold at the new institution. An example might be a certificate of deposit or a mutual fund. For example you might own 3 mutual funds at fund company ABC – you decide you would rather invest with fund company XYZ so you would do an “in cash” transfer – sell the ABC funds, move the cash, then buy your new funds at XYZ.
It’s possible that you could sell an investment at one brokerage and then rebuy that same investment at your new broker but it’s important to know about the wash rule which applies to taxable account – if you are planning to rebuy the same investment (ie a company stock) then do an “in kind” transfer. Selling an investment in a non-taxable account will trigger tax consequences such as capital gains or capital losses.