Switching brokers: process, costs, pitfalls and tax consequences

You always start the request at the receiving broker, never the old one. The new broker knows its own account details, verifies your identity and passes the instruction upstream. From there positions move ISIN by ISIN through the central securities depositories — usually Clearstream or Euroclear in continental Europe, SIX SIS in Switzerland, and the ACATS system between US brokers.

Three consequences of that plumbing matter. First, each line is transferred separately: a portfolio of twenty ISINs is twenty operations, and a single non-transferable holding can stall the rest if you requested a full transfer. Second, positions are in transit and tradeable at neither broker while they move — typically five to six business days between US brokers, and materially longer where European institutions and foreign sub-custodians are involved. You carry full market risk in that window with no ability to act. Third, securities and cash travel separately: your balance often does not follow automatically and has to be transferred as a payment.

Plan accordingly. Do not schedule a transfer across a period when you expect to trade, or immediately before a known event such as earnings for a large single holding.

In Germany the outgoing institution may not charge a fee of its own for the transfer. The Federal Court of Justice struck down such pricing clauses back in 2004, on the reasoning that handing over property that belongs to the customer is not a special service the bank can bill for. Only genuine third-party costs, such as foreign sub-custodian charges, may be passed on. If an invoice arrives anyway, object in writing.

Austria and Switzerland have no equivalent case law, and a per-position charge is common there, sometimes capped and sometimes not. In all three countries, though, the transfer fee rarely decides the question. The running costs you save afterwards do.

The decisive issue on a German-to-German transfer is acquisition data. The outgoing bank is obliged to pass the purchase price and date of each holding to the receiving bank. When that does not happen — and it routinely does not when the position arrives from abroad or came through an inheritance — the substitute tax base under § 43a EStG applies: on a later sale, the new bank treats a flat 30% of the sale proceeds as the taxable gain.

Worked example. You later sell shares for EUR 20,000 that you actually bought for EUR 18,000. The real gain is EUR 2,000 and the tax on it EUR 527.50. If the bank does not know your cost, it assumes a gain of 30% of EUR 20,000, or EUR 6,000, and withholds EUR 1,582.50. You have overpaid by EUR 1,055. The money is not lost — with purchase confirmations you reclaim it through the Anlage KAP — but you have made the tax office an interest-free loan and you need paperwork that may be ten or twenty years old.

The second German issue is the loss pot. Unused losses stay with the old institution and do not travel. To use them at the new broker or in your return, you must ask the old bank for a loss certificate, and the deadline is 15 December of the year. Miss it and the losses remain usable only against gains arising at the old institution. Close the account entirely without a certificate and the pot is effectively worthless.

Your exemption instruction does not move either. Lodge a new one with the new broker and reduce the old one accordingly, so the total across all banks stays within your annual allowance. Current amounts and formalities are published by the Federal Central Tax Office.

Austria treats the removal of securities from a custody account as a disposal by default, under § 27 EStG. Moving between two accounts of the same person at the same domestic bank is fine. But as soon as the custodian changes, and particularly when the destination is abroad, the move counts as a taxable realisation — unless you instruct the outgoing institution to report the required details to the tax office, or consent to your data being passed on.

Worked example. You transfer a EUR 60,000 portfolio holding EUR 15,000 of unrealised gains to a broker outside Austria. With the notification correctly given: no tax, and your acquisition costs carry over. Without it: 27.5% on EUR 15,000, or EUR 4,125 of KESt, triggered by an unticked box on a form. It is the most expensive box in German-speaking custody.

The reverse direction, from an offshore broker into an Austrian bank, creates a different problem. The new bank needs your acquisition costs to compute KESt correctly later. If it cannot obtain them, it has to apply a substitute value and you correct the difference through your tax return. Send the purchase confirmations to the new institution proactively rather than hoping the data arrives by itself.

For Swiss private investors the transfer is the least troublesome case. Capital gains on private assets are exempt anyway, so there is no unrealised gain to crystallise, and changing custodian changes nothing. Securities transfer stamp duty does not apply either, because a pure custody transfer involves no change of ownership.

The cost appears only if you take the detour through selling and rebuying. Executed through a Swiss securities dealer, transfer stamp duty applies — the investor bears half the statutory rate, so 0.075% on Swiss securities and 0.15% on foreign ones, on each side of the manoeuvre.

Worked example. A portfolio of CHF 200,000 in foreign securities is sold and rebuilt identically at the new broker. Stamp duty: 0.15% of 200,000 is CHF 300 on the sale and another CHF 300 on the purchase, CHF 600 in total, plus two rounds of commission and two crossings of the bid-offer spread. An in-kind transfer would have cost none of it.

What Swiss investors should watch instead is paperwork. Reclaiming the 35% withholding tax requires tax statements from both institutions covering the transition year. Request the old bank's statement before you close the relationship for good.

Not every holding survives the move. Expect trouble in these categories:

• Fractional shares. They exist only in a given broker's own books and cannot travel through a central depository. They get sold — with a tax consequence in Germany and Austria.
• CFDs, spread bets and similar contractual derivatives. These are contracts with that specific broker, not securities. Transfer is conceptually impossible; the position must be closed.
• Fund share classes the new broker does not carry. Common with institutional or broker-specific tranches.
• Margin positions and open options strategies. Some brokers move them, many do not, and a partial transfer can turn a hedged package into an unintended naked position.
• Crypto held in broker custody. Almost never transferable.

Check the list holding by holding before you file the request. A full transfer that stalls on three lines costs more time than a deliberately planned partial transfer.

Compare annual bills, not headline commissions. Take a EUR 80,000 portfolio, twelve orders a year of roughly EUR 3,000 each, plus EUR 20,000 of turnover denominated in US dollars.

The saving is EUR 504.80 a year. If the outgoing institution charges EUR 25 per position and you hold ten, the switch costs EUR 250 once and pays for itself in about six months. On an EUR 8,000 portfolio instead of EUR 80,000, the percentage-based saving shrinks to a fraction while the transfer fee stays the same — and the move may take years to justify.

The line most people underestimate is currency conversion. A 1.5% markup on a EUR 5,000 order costs EUR 75; the same order at 0.25% costs EUR 12.50. Anyone buying US-listed securities regularly saves more there than on every commission combined.

1. 1Open and fully activate the new account before touching anything at the old broker.
2. 2Pull a statement and check line by line whether the new broker carries each instrument.
3. 3Save every purchase confirmation — they are your insurance against the substitute tax base.
4. 4In Austria, instruct the notification to the tax office if the destination is abroad.
5. 5In Germany, request the loss certificate from the old institution if you have a loss pot, by 15 December at the latest.
6. 6File the transfer instruction at the new broker with ISIN and quantity per line, and pause any savings plans first.
7. 7When the securities arrive, verify the carried-over acquisition prices and challenge discrepancies immediately.
8. 8Only then move the cash, lodge a new exemption instruction and close the old account — not before.

Switching is not automatically right. Three situations make the cheaper broker the worse one. First, you give up automatic tax handling: a German or Austrian bank withholds the tax, offsets losses and credits foreign withholding tax for you, while an offshore broker does none of it. If your accountant charges more each year than you save in fees, the arithmetic is negative.

Second, you lose features you genuinely use — a free savings plan on precisely your ETF, access to a particular exchange, fractional dealing, a telephone desk. Third, your portfolio is too small for percentage savings to overcome fixed switching costs. In those cases the more honest move is to renegotiate with your current broker, or to open the new account and direct fresh money there while leaving the existing holdings alone.

1. 1Work out your real annual bill — custody, commissions, currency conversion, savings plans — instead of comparing advertised prices.
2. 2Establish up front which holdings cannot be transferred, and decide deliberately whether to sell or keep them.
3. 3Complete the country-specific formality: the notification in Austria, the loss certificate in Germany, the tax statements in Switzerland.
4. 4Archive all purchase confirmations before your access to the old account lapses.
5. 5Schedule the transfer in a quiet market period, not just before year end when deadlines and processing backlogs collide.
6. 6Keep the old account open until dividends, the annual tax certificate and residual cash have arrived, watching for inactivity fees while you wait.

Fee schedules and tax details change constantly. Confirm both brokers' current terms and the current tax position with the institutions and the relevant tax authority before you file the request.

This article is information only. It is not investment, legal or tax advice.