You need to find a stockbroker,or change brokers…but how do you know if your getting a good deal?.Sure… the salesman said it’s a great deal and you would get 10 free trades…but what’s the catch?.
The salesman is paid to sign up new accounts not to help you.I can tell you from personal experience…they “bend the truth”as much as any used car salesman,and so much more money is involved !!.
It pays to make sure you understand what you are getting into.you can save yourself from a horror show later.There is no such thing as a free lunch… so they must make up the money they don’t get on 7$ trades somewhere else.
Many rules buried in the fine print are as convoluted and devious as the worst cell phone plan…and can cost you just as much!.But how can changing stock brokers can be hazardous to you financial health ?.l
earn the pitfalls
do you know what to look for?
help has arrived
Changing stock brokers can be hazardous to your financial health ; learn the pitfalls .
If you are a trader or hold option positions,be very careful before you move accounts that you know all the terms before you move.while it may seem that if you get into a bad deal with a broker you can just relocate to a new broker with the click of a mouse;in practice there is more to it.
The system for transferring open stock or option positions is called “ACAT”.This is sometimes represented by salespeople as taking”a few days”.This seems to be like when the garage says your car will be done by noon..plan on 6;30 or maybe tomorrow.
In my experience the quickest completion is 10 days.but this will vary by the number of positions in the account,and the brokers back office or “clearing broker”(some sub this work out..some have their own)they come into the new broker in dribbles and drabs over the time period,and the new broker must reconcile the balances /positions with the new broker.
During this time period YOU WILL BE UNABLE TO BUY OR SELL ANY OPEN POSITIONS.
They are in a kind of limbo where they cannot be traded by you at either firm.Is this very dangerous?
you bet you life..what if market drops 100 points?ever heard of Murphys law?.what if stock goes up 10 points but you can’t sell,then goes back down the day before position are cleared to new broker?
.well anyway.. you had time to practice kicking yourself!!
What if the positions arrive from the prior broker and when the margin department at the new broker calculates you account balances they issue a margin call because they have a different margin policy.
Oh, you were told that all brokers have the same policy?..wrong!(more about that later).
this nightmare case would have you making forced liquidations as your freshman trade,further delaying access to your account.”welcome to &^$# trade!!”.
How do I know this?.
you guessed it it happened to me and it cost me $100,000 in losses,in that 12 day period.
Sure you can sue..but my advice?….as much as you hate to pay the commissions… or face the tax consequences.
liquidate all open positions at the broker you are leaving,and either wire the cash or express mail the check to the new broker.
You also save the service fees that many brokers charge for acat transfers by leaving with cash.and starting with cash.
If you have spare funds in the bank and are concerned about a position in the old account moving for/against you ,you could open an offsetting position by setting up the new account in advance of your move, and opening the offsetting position BEFORE liquidating the old account .
Do it with cash and you will have one less headache!
“A man’s got to know his limitations”
You 70’s movie buffs will know where that line came from!.
What’s that got to do with stockbrokers?.
The first step in selecting a broker you will be happy with is to be realistic about what your plan on doing in the account .This is because the brokers do vary as to the commisions,margin policies,and fees they charge.
By thoughtfully,and REALISTICALLY thinking about what type of activity will occur in the account you can find a broker who will suit your investment activity.
Don’t go with a broker with minimum activity levels if you are really a buy and hold customer..the fees will add up.If you tend to run margin balances,shop for the lowest margin loan rate..they vary a lot!
If you trade options be very careful of the fine print when comparing commissions(more on this later)
Most brokers would rather you did not know this stuff,and they have a huge incentive not to tell you,why?because there mean?No ,the brokerage business is intensely competitive.
I saw where bank of America is offering free trades.Humanitarians?,you know there is a catch!
Aparently the competition to loss lead $12 or $10 or $7 or $4 stock trades for promotion has made the industry decide to get the money the back way through hidden fees and negative (for the customer)terms,that hopefully will not be noticed.
I believe they frequently are not noticed for two main reasons.One people are intimidated by financial jargon,or are bored by it.
Two;brokers have every incentive to…let’s just say accentuate the positive and forget to mention the not so good stuff
Not to worry,the detective is here to help point you to the trouble spots!!!.please stick around and visit page two ,where some of the places where the bones are buried lurk.
I will show you where to look