You may decide that you want to transfer your mutual fund holdings to a new custodian bank because you plan to move or because you have found a new investment broker who can better serve your needs. If you sell and repurchase mutual funds, you have to contend with purchase and redemption fees known as loads. You can avoid selling your funds or paying any fees if you instead arrange an account transfer.
In the United States, the National Securities Clearing Corporation facilitates the transfer of investment holdings between banks and brokerage firms. The NSCC runs the Automated Customer Account Transfer Service, which operates similarly to the clearing houses that facilitate the transfer of cash and checks between banks. You can move various types of securities including stocks, bonds and mutual fund shares between brokers through ACATS. You first establish a brokerage holding account at a new bank or investment firm and then complete a transfer initiation form. The TIF contains details of your holdings and your consent for your current broker to send your securities to the new firm.
The firm currently holding your assets has to conduct a verification process before releasing your shares to the new firm. This may involve contacting you to ensure that you requested the transfer. The verification process usually takes about three days to complete. After completing the verification process, the broker sends the securities to the new firm and this transfer usually occurs within three days, meaning the entire process should take less than a week. However, brokerage firms often have minimum account requirements, so your new broker could refuse to accept the transfer if you do not have sufficient assets to meet the minimum account guidelines. Brokers can also refuse transfers involving certain types of securities, such as stocks and shares bought on margin.
When you buy mutual funds, you can either hold the funds inside a brokerage account or you can buy the funds directly from the fund company. If you involve a broker in the purchase of a direct share purchase, the broker receives a commission for the purchase and appears in the fund company's records as your investment agent. You can change the listed agent or brokerage firm on fund direct purchases simply by contacting the mutual fund and providing the fund with the name and contact information of the new broker. The broker typically does not have to complete any paperwork when this occurs. The new broker receives a commission on any subsequent share purchases.
The brokerage divisions of some banks operate so-called proprietary mutual funds. The brokerage firm owns and operates these funds. Fee structures on proprietary funds are often lower than on other kinds of funds because you effectively eliminate the middle man or broker and deal directly with the company that operates the fund. You cannot transfer proprietary funds to a new broker since these are in-house accounts that you cannot buy through other brokers. Therefore, you can only transfer assets that you hold in the form of proprietary funds if you sell those shares and transfer the cash to a new broker using an ACATS form.
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