What is ACATS?
Automated Customer Account Transfer Service, or ACATS, is a system that allows for ease of movement of financial accounts from one broker-dealer to another. By automating the process, ACATS reduces the amount of time it takes to completely transfer securities, cash and other holdings into a new account. The ACATS account transfer service is commonly used by brokerage firms to onboard clients who are seeking transfer of assets from another brokerage.
How Does ACATS Work?
ACATS is overseen by the National Securities Clearing Corporation (NSCC), a part of the Depository Trust and Clearing Corporation (DTCC), which helps reduce risk while offering centralized clearing services. This replaces older methods of clearing which used to take several weeks or even months to complete.
Typically, ACATS is used for taxable accounts such as stock holdings, IRAs and other investment account types held by a brokerage. When an individual requests the ability to transfer their account to a new broker, the receiving firm initiates the ACATS request. In the past, this has involved stacks of paperwork to verify the assets and the identity of the individual or individuals who own them. If, however, the information does not fully match up or the wrong account information is received, the request is rejected. It’s this sort of heavy friction that causes hesitation when consumers think about moving accounts from one brokerage to another. While verification is required with ACATS, the process moves considerably faster — trimming the transfer time from months to two weeks or less.
The process typically goes like this: the receiving institution initiates the transfer via a Transfer Initiation Form. From there, it is assigned a control number. The delivering institution then confirms the request if all information aligns. Once confirmed, the transfer enters a review period where each element is checked and double-checked before the transfer occurs. The consumer is not usually exposed to this portion of the process unless the information provided is incorrect. Once verified, the funds or assets are assumed by the receiving institution and the transaction is settled.
What are The Benefits of Using ACATS?
The Automated Customer Account Transfer Service helps establish an industry standard in alignment with the rules and regulations of DTCC. It also adds speed to a previously time-consuming process, providing a better end user experience with fewer touchpoints and, as mentioned, reduced friction. With ACATS, clients’ assets such as stocks spend less time off the market, which is a major leap forward in FinTech from the consumer standpoint as well as a selling point to those on the fence about making the switch.
Who Can Use ACATS?
Primarily, the end consumer will not be aware of ACATS during the transfer process. It is more of a tool used by the delivering and receiving institutions to accelerate the account transfer process while reducing legwork thanks to financial data aggregation tools that verify account information. The consumer will, however, have a much more frictionless experience than in years past thanks to innovative FinTech processes.
To participate in ACATS, an institution must be a member of DTCC or NSCC. That said, most major broker-dealers and advisors at financial institutions are just that. Those who are not members will have to go through the antiquated manual process of transferring accounts which can take multiple weeks or even months to complete. In some cases, investment firms may use custodians for asset transfer. While these firms cannot directly process ACATS, their affiliation with member firms can serve as a proxy.
Get Started With Envestnet | Yodlee
Envestnet | Yodlee’s tools play a vital role in accelerating the ACATS process by gathering data that would otherwise take consumers a lot of time to compile, as we’ll discuss below. Envestnet | Yodlee’s Account Aggregation makes the ACATS process much simpler, thanks to the ability to streamline the verification. Our approach helps firms quickly gather the necessary account profile information, verify eligibility and eliminate data errors that cause lengthy delays in the account transfer process.
Tools from Envestnet | Yodlee allow firms to layer technology on top of the asset transfer process to enable a faster, easier way to move client assets. Errors are minimized thanks to quick data verification, while user abandonment drops off due to the intuitive ease of the transfer process. These tools are excellent for micro investing, financial planning, portfolio accounting, performance reporting, data enrichment (via our Investment Data Enrichment tools) and creating financial API workflows.
To learn more about Yodlee’s approach to ACATS transfers, view our webinar on the topic.