This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
Switching custodians means moving your stock trading account from one broker (the custodian of the cash and securities) to another. The process is straightforward for most standard accounts, and the new broker will usually handle the paperwork and the communication with the old broker.
A custodian is the institution that holds the cash and securities in the account. For most retail traders, the custodian is the broker. Changing the custodian means transferring the assets to a different broker, and the transfer can be done in two ways: an in-specie transfer (the securities are moved without being sold) or a cash transfer (the securities are sold and the cash is moved).
The in-specie transfer
An in-specie transfer, also called an ACAT transfer (in the US) or a broker-to-broker transfer, moves the securities and cash from the old account to the new account without triggering a sale and purchase. The securities are moved as they are, and the cost basis is preserved. The transfer is the most efficient way to switch custodians, because the assets remain invested throughout the process.
The new broker initiates the transfer on behalf of the account owner. The account owner fills out a transfer form from the new broker, providing the old broker's name, the account number, and the account holder's details. The new broker sends the form to the old broker, and the old broker transfers the assets.
The transfer usually takes 3-10 business days in most developed markets. During the transfer, the account owner cannot trade the positions being transferred. The old broker may charge a transfer fee (typically $50-$150 in the US, €25-€100 in the EU), and the new broker may reimburse the fee as a promotion.
The cash transfer
If the old broker does not support in-specie transfers, or if the account owner prefers a clean break, the account owner can sell the positions, move the cash to the new broker, and re-buy the positions there. The process is faster (1-3 business days for the cash to arrive), but it triggers a tax event (a disposal of the securities) and exposes the account to market risk during the gap between selling and re-buying.
The cash transfer is the right approach if the account owner wants to change the portfolio composition anyway, or if the account is small enough that the transaction costs are not material. The approach is not ideal for a large, long-held portfolio where the tax consequence of selling is meaningful.
What the new broker needs
The new broker will ask for the same information as for a new account: identification (passport or national ID, proof of address), the old broker's name and account number, and the account owner's signature on the transfer form. Some brokers also ask for a recent statement from the old broker to confirm the positions and the cost basis.
The new broker will also ask the account owner to select the account type (individual, joint, corporate, trust) and the fee structure (standard, premium, active trader). The selection determines the custody terms, so the account owner should check the options before selecting.
What to watch for during the switch
The first risk is the gap in trading access. During the transfer, the positions in transit are frozen, and the account owner cannot trade them. If the market is moving rapidly, the account owner may miss a trading opportunity or be unable to close a position. The fix is to close any time-sensitive positions before initiating the transfer, or to accept the gap.
The second is the partial transfer. Some brokers only transfer the positions that are in the same name and the same currency. If the account holds positions in different currencies or in different names (a joint account), the transfer may take longer or may require multiple forms.
The third is the transfer fee. The old broker may charge a fee for closing the account or for transferring the assets. The account owner should check the old broker's fee schedule and the new broker's reimbursement policy before starting the transfer.
Common questions about switching custodians
Can I switch custodians if I have an open margin loan? Yes, but the process is more complex. The margin loan must be repaid at the time of the transfer, because the new custodian does not have the old broker's margin agreement. The trader may need to sell some positions to repay the loan, or to transfer the collateral and take a new margin loan at the new broker.
Will I lose my cost basis information? The cost basis should be transferred as part of the in-specie transfer, but not all brokers provide it correctly. The trader should keep a copy of all statements and trade confirmations, in case the cost basis needs to be manually entered at the new broker.
Do I need to close my account at the old broker? The old broker will usually close the account once the transfer is complete. If there are no remaining positions or cash, the old broker may close the account automatically. The trader should confirm with the old broker that the account is closed.
Related resources
Where to start
If you are switching custodians, the most useful first step is to check the new broker's transfer policy, the old broker's transfer fee, and the transfer timeline. Our broker comparison lists the custodians in the major jurisdictions and the transfer policies, which together tell you what the switch looks like before you start it.