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 kind” means – transfer “in cash” will be covered in another post.
In kind transfer
If you transfer your investments “in kind” that means that you transfer your specific investments over to the new company without selling and buying. An example would be if you own 100 shares of IBM stock at Zecco online brokerage. You’ve decided to go with TradeKing brokerage because you like the name better so you tell TradeKing to complete the transfer “in kind” because you don’t want to sell the IBM shares (which will trigger tax consequences in a non-tax sheltered account).
You can only do an “in kind” transfer if the investment you own is available at both financial institutions. Most stocks for example would be available at all brokerages whereas as a certificate of deposit purchased at a particular bank wouldn’t be offered anywhere else.
Why do an in kind transfer?
The main benefits for an in-kind transfer are:
- No tax consequences resulting from selling your existing investments.
- Easier – you don’t have to do any trades.
- Cheaper – some securities such as stocks cost money to buy and sell.
I recommend signing up for a free Morningstar membership, which will allow you to research more about every type of investment.