This is a guest post from Robert Dwyer
You’re familiar with credit card and bank account signup bonuses, but once you’ve signed up for all the cards and wrestled with all the viable banks for signup bonuses you might also want to look into brokerage account bonuses.
Why? Because they can be quite lucrative.
In exchange for opening a new brokerage account and transferring a specified amount of money or securities into a new brokerage account and keeping it there a certain amount of time you can earn a signup bonus.
The amount of the bonus varies depending on the firm and amount transferred. Here’s a site that in my experience maintains an up to date listing of the best deals. A typical bonus would be something in the neighborhood of $300 for $100,000 in assets. Or all the way up to $2,500 for $1M. Deals come and go.
Some brokerage firms have relationships with banks whereby you’ll get banking perks like higher credit card rewards for keeping a certain amount of assets with them. BofA/Merrill is probably the most relevant example. If you have have $100,000 in assets with Merrill you’ll earn 75% more rewards on certain BofA credit cards through their Preferred Rewards program. And banking perks like unlimited fee-free ATM withdrawals. There are benefits in bundling.
Before going much further let’s think about some things that can go wrong with brokerage account signup bonuses, and transferring brokerages in general.
You might miss some important nuance in the signup bonus terms. The brokerage might not post the bonus automatically causing you to waste time hounding. The transfer might get caught up/not occur without hounding. The receiving firm might not be able to manage the specific incoming mutual funds you’re transferring. Somewhere along the line your funds could get liquidated rather than transferred in kind. The cost basis of the funds might get lost. You might have to pay a fee to close and transfer your old account that erodes the value of the signup bonus. The value of your assets might decline below the threshold required to get the bonus. You might be giving up on a trading platform/firm you really enjoy working with for an inferior entity. The time and headache associated with the transfer might not be worth it after all.
Just a few things off the top of my head.
But other than that – great deal!
Fidelity used to have a great program whereby you could get 50,000 airline miles for transferring in $100,000 in assets. But they killed that offer.
When BofA launched their new Premium Rewards card it sparked new interest in their Preferred Rewards program. The signup bonuses for Merrill Edge aren’t as generous currently as they were last year but this is a great opportunity to call and negotiate. If they offered something before they may be able to offer it again. Hint: They can offer it again.
- Invariably when one mentions you can get a 75% kicker on BofA rewards (on certain credit cards) in exchange for transferring $100k into Merrill someone will suggest it’s not worth it due to the interest you’re missing out on. This is nonsense since you’ll be keeping the funds wisely invested while with Merrill, hopefully outpacing the piddly interest you’d be earning in a savings account or similar.
- Another consideration is tax implications. If things go smoothly your transfer will be made such that the assets are never liquidated. This is especially important for non-retirement accounts because you don’t want the transfer to cause a taxable event. The cost basis should transfer to the new brokerage firm. Just make sure the receiving firm is authorized to managed the securities you’re transferring in.
- Call and chat with the receiving firm with any questions. In my experience the first line reps that deal with new accounts are very sharp and helpful.
- There are brokerage account bonuses for retirement accounts as well as non-retirement accounts. Keep that in mind when thinking about whether you have the funds to qualify for signup bonuses.
- And keep that in mind when deciding whether to rollover your 401k to your new employer’s plan when switching jobs. I prefer self-directing in part due to being able to qualify for brokerage signup bonuses. But once you rollover a 401k to a new employer’s plan, you [usually] can’t decide later to self direct it without leaving the company.
- If you and your spouse have enough assets to qualify for a higher threshold, but you have separate accounts, call and ask if they can match the bonus you’d get for the total value of the assets. Say for example the offer is $250 for $100k, or $600 for $200k and you each have $100k. Call and ask if you can get $300 each instead of $250 each.
- Be mindful about trying to merge joint and individual accounts as it complicates transfers.
- Once you’ve met the required hold duration feel free to look around for better offers.
Any tips you’d share for navigating this space? Let us know in the comments.
You can follow Robert on Twitter: @RobertDwyer
Great! very informative and valuable details of the relevant topic!