ACATS: Automated Customer Account Transfer Service

Developed by the National Securities Clearing Corporation (NSCC), the Automated Customer Account Transfer Service, or ACATS, provides a standardized, automated process for transferring customer assets between financial institutions, including brokerage firms and banks.

What is an ACATS Transfer?

Automated Customer Account Transfer Service (ACATS) streamlines the 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 a customer’s assets into a new account. 

ACATS transfers are commonly used by brokerage firms to onboard new clients who are seeking to move taxable accounts such as stock holdings, mutual funds, IRAs and other investments held by another brokerage. For example, when an employee changes jobs and wishes to move their 401(k) from their old employer’s plan to their new employer’s plan, ACATS facilitates the transfer. 

ACATS is primarily used by delivering and receiving institutions along with data aggregation tools to gather and verify account information and reduce manual work.

How Does ACATS Work?

When an individual requests the ability to transfer their account to a new broker, the receiving firm initiates the ACATS request.

During the account opening process, an individual requests the ability to transfer their account to a new broker. A typical customer account transfer takes about six business days to process and follows these steps :

1. The receiving institution initiates the transfer via a Transfer Information (TI) Form. 
2. ACATS assigns a control number to the transfer and informs both the delivering and the receiving member. If an account number or other information is incomplete, ACATs rejects the request and informs the receiving member that initiated the transfer. 
3. The delivering member has one business day to either add the assets that are to be transferred or reject the transfer. 
4. After the assets are added, 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. 
5. Once verified, the funds or assets are assumed by the receiving institution and the transaction is settled. 

Explore ways to streamline the gathering of account data for asset transfers

Benefits of ACATS

The Automated Customer Account Transfer Service (ACATS) helps establish an industry standard in alignment with the rules and regulations of the Depository Trust and Clearing Corporation (DTCC).

 In the past, transferring accounts involved stacks of paperwork to verify the assets and the identity of the individual or individuals who own them. If the information did not fully match up or the wrong account information was received, the institution would reject the transfer. This heavy friction 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 approximately 5-7 business days from the time the transfer is submitted. 

A few key benefits of ACATS include a better user experience, fewer touch points, less potential for error, and faster turnaround times. Additionally, clients’ assets, such as stocks, spend less time off the market. ACATS can also enhance security for transferring assets, reducing the risk of fraud or unauthorized access during the transfer process. The standardized nature of ACATS allows for greater efficiency across financial institutions, leading to potential cost savings that can be passed on to clients.

ACATS Fees  and Tax Implications

ACATS transfers are generally very cost-effective and tax-efficient for investors. In most cases, the fees associated with ACATS transfers are minimal, often ranging from $0 to $75, depending on the financial institutions involved. Some brokers may even offer to cover these fees to attract new clients. 

ACATS transfers are typically not considered taxable events, because assets in-kind are being moved rather than being sold. As a result, they aren’t subject to capital gains taxes, as the cost basis and holding period of investments generally remain unchanged. However, some firms may charge additional fees for partial transfers or for transferring certain types of assets, like proprietary mutual funds. Additionally, if any assets need to be liquidated before transfer, such as fractional shares or non-transferable securities, this could result in taxable events. It's also worth noting that while the transfer itself isn't taxed, any accrued dividends or interest paid during the transfer process may be taxable in the year received.

When to Transfer Assets with ACATS

ACATS transfers occur when a client opens a new bank or brokerage account. Institutions which are members of the NSCC or DTCC can and should participate in ACATS. 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.

ACATS can be used to transfer a wide variety of assets and investment products, including stocks, bonds, exchange-traded funds (ETFs), mutual funds, cash, and some alternative investments. ACATS supports transfers for various account types, such as individual and joint brokerage accounts, individual retirement accounts (IRAs), Roth IRAs, 401(k) rollovers, and other qualified retirement accounts. The system is designed to handle both full and partial account transfers, giving clients flexibility in moving their assets.

However, not all assets and accounts are compatible with ACATS. Assets that generally can’t be transferred through ACATS include physical certificates of stocks or bonds, proprietary products specific to the current firm, certain types of options contracts, and some over-the-counter (OTC) securities. Additionally, ACATS can’t be used for transferring assets held in non-ACATS participating institutions, such as some credit unions or smaller banks. Accounts like 529 college savings plans, annuities, and certain employer-sponsored retirement plans may also require alternative transfer methods. In these cases, investors might need to use different transfer processes or potentially liquidate and re-purchase assets, which could have tax implications.

Accelerate the ACATS process with Envestnet | Yodlee

Financial institutions can streamline the ACATS process by using data aggregation tools to quickly gather the required data instead of having customers do this manually, which can be time consuming.. Envestnet | Yodlee’s Account Aggregation services are designed to help wealth management firms quickly gather the necessary account profile information, connect accounts, verify eligibility, and eliminate data errors that cause lengthy delays in the account transfer process.

Learn more about tools that streamline data gathering for ACATS