Change of custody account: How the transfer of securities works

Lower costs, wider range: moving a custody account to a new provider can be worthwhile - under certain conditions. We explain how it works.

There are many reasons for transferring a custody account. According to Roland Aulitzky from Stiftung Warentest, investors who are dissatisfied with their old bank or want to reduce costs should think about it. Anyone looking around the market should make sure that the new bank also corresponds to their personal investment behavior, says Aulitzky. Investors who buy securities in order to hold them for a long time (buy-and-hold strategy) should preferably choose a provider that offers free custody account management. For active investors who frequently rebalance their securities account, order costs are the main consideration.

"In general, you should consider which offers you definitely want before switching," says Aulitzky. This could be, for example, access to several stock exchanges, the possibility of trading on foreign stock exchanges, the range of actively managed funds on offer - preferably with no or a greatly reduced front-end load - or the range of free ETF savings plans.

Once the decision has been made to change custody account, all you have to do is submit the relevant application to your old bank, says Stefanie Heun from the Association of German Banks. For example, there are forms on the Internet that can be printed out and sent in by post or e-mail. "Older people still like to go into a branch. Then the bank employee does it for them."

If the custody account is with a direct bank without branches, the application must be submitted online. "Then you download the opening application from the bank's website, fill it out and have your identity confirmed at a post office using the Postident procedure," says Aulitzky. To do this, you present your identity card there. However, you can often also use the Videoident procedure. "You use the camera on your computer or smartphone to verify your identity at the bank."

Fractions of funds often not transferable

"After that, you don't have to do anything else," says Heun. With the application, the customer instructs the bank to transfer the securities to the new institution. Good to know: "Only the institution where the securities are actually held can dispose of them on behalf of the customer," explains Heun. Sometimes the receiving bank also takes care of the securities account transfer. However, according to Aulitzky, it then only takes on an intermediary role and forwards the application for transfer to the old bank.

Once the application has been submitted, the rest happens automatically. "The old bank initiates the transfer and first contacts the custodian where the securities are stored," explains Heun. If the securities are located abroad, it can take longer.

If the new bank does not have the securities in its portfolio that are already in the custody account, these must be sold, says Heun. This must be indicated accordingly on the transfer form. "It is best to return these securities to the fund company before transferring the custody account," recommends Aulitzky. However, it is usually only fractions of investment funds that cannot be transferred. This is because often only full units can be transferred.

In the vast majority of cases, such a transfer goes smoothly, says Heun. "During the transfer itself, incomplete or incorrect data on the form can cause problems." In the event of a transposed number, for example, no bank can easily find the security. "Then everything is delayed."

Transfer should not take more than three weeks

As a rule, the transfer only takes a few days. In extreme cases, however, it can take a few weeks. However, the Federal Financial Supervisory Authority (Bafin) clarified in 2022 that such a transfer should not take more than three weeks. "If it takes longer, the customer must receive an interim notification with a reason - for example, that the foreign custodian has not yet transferred the securities," says Heun. This is important for customers to know because they cannot sell securities during the transfer process.

By the way: A securities account transfer may not cost anything as long as the transfer takes place within Germany. This is regulated by a ruling of the Federal Court of Justice. However, costs are sometimes incurred for securities stored abroad.

Once the transfer is complete, you can close the old securities account. "To do this, you simply cancel it with the old bank," says Andreas Behn from the Thuringia Consumer Advice Center. If there are still securities on it, these must be sold beforehand.