I have two shares of a Vanguard index fund. The value of both is around $240 as of this writing. After listening to the episode of Freakonomics, The Stupidest Thing You Can Do With Your Money, which features a decent run down of what index funds are and an explanation of how firms take advantage of investors by charging fees for their services. Sure enough, E*TRADE charges me a few bucks for the purchase of each of those shares. And due to the long term goals of those meager investments, it’d take a couple of years to re-coup of fees imposed on the purchase of those investments. I find out that those Vanguard funds can be purchased from Vanguard itself at no cost. Therefore, I decide to move my two shares from E*TRADE.

Vanguard’s system has an automatic process for transferring those assets from an external account and was nice and straight forward. The process did take a few days to finalize, but I had a mysterious -$72.93 on my Vanguard cash balance. I gave it a couple days to clear, figuring that it was some sort of transactional artifact, but it remained. I wrote to Vanguard to inquire. The response:

The referenced amount is a transfer fee that was assessed by ETrade. The amount will remain as a pending debit until funds are added to your settlement fund to cover the fee.

Hm. I wrote to E*TRADE to verify if this was accurate, since their page of fees didn’t list, anywhere that I could see, this fee. Their response:

There is a full account transfer fee of $75, and $25 for a partial transfer out. These fees are standard among most brokerages and pays for the utilization of the ACAT system. It is the same fee regardless of the size of the transfer, and this fee is listed on the link you provided under Special Request Fees, Account transfers (outgoing).

Then I took a few minutes to figure out what “ACAT” is. From Investopedia’s entry on ACAT:

The Automated Customer Account Transfer Service (ACATS) is a system that facilitates the transfer of securities from one trading account to another at a different brokerage firm or bank. The National Securities Clearing Corporation (NSCC) developed the ACATS system, replacing the previous manual asset transfer system with a fully automated and standardized one.

I also found out while reading about ACATS is that an estimated $2 billion moves through that system daily. ValuePenguin’s site reports that $65 seems to be the standard rate for whole account transfers.

So, let’s recap:

  1. I wanted to avoid E*TRADE (or anyone’s) transaction fees.
  2. Figured out a way to purchase additional assets without incurring those fees.
  3. Decided to consolidate my assets.
  4. Incurred far more fees by doing so.

Pro tip: If you’re looking to move assets from one firm to another, if it’s a small value asset, you should probably just sell them (incurring the transaction fees), transferring the money to your bank, then transferring the money to the new firm, and re-purchasing those same shares.