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PSA: BROKERED CD'S cannot be transferred in-kind to Fidelity
Old 02-23-2024, 09:01 AM   #1
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PSA: BROKERED CD'S cannot be transferred in-kind to Fidelity

PSA: BROKERED CD'S cannot be transferred in-kind to Fidelity. Not sure about other places.

Just a FYI/PSA. I have been thinking of consolidating IRA's to be exclusively Fidelity. It looks like they cannot transfer brokered CD's into fidelity "in-kind". As a result, my plan to consolidate a tIRA from Ameritrade (soon to be Schwab) to Fidelity is on-hold until the last CD matures in early 2028. While I can sell them early (secondary), I don't really want to give up a 4+ year @ 5% remaining CD.

Oh well.
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Old 02-23-2024, 09:12 AM   #2
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This is the first I've heard of this. I do not believe this is generally the case as I've moved very large accounts containing lots of brokered CDs from Etrade into Fidelity, in IRA accounts, and in normal cash accounts. When I last did a transfer, there was one brokered CD which did not transfer for one reason or another, and Fidelity back office worked with Etrade back office to do it. If I remember correctly, it may have been maturing within a month or two and that caused some issue. But that was one out of something between 100 and 150 CDs.

Did someone at Fidelity tell you this, or is it something you read somewhere that leads you to believe this is the case?
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Old 02-23-2024, 09:56 AM   #3
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Originally Posted by njhowie View Post
This is the first I've heard of this. I do not believe this is generally the case as I've moved very large accounts containing lots of brokered CDs from Etrade into Fidelity, in IRA accounts, and in normal cash accounts. When I last did a transfer, there was one brokered CD which did not transfer for one reason or another, and Fidelity back office worked with Etrade back office to do it. If I remember correctly, it may have been maturing within a month or two and that caused some issue. But that was one out of something between 100 and 150 CDs.

Did someone at Fidelity tell you this, or is it something you read somewhere that leads you to believe this is the case?
Phone call with Fidelity Fixed Income group after I asked active trader specialist about transferring brokered CD's. The regular rep couldn't answer so they transferred me to the fixed income group.

If someone else would like to call to confirm/correct, that would be great additional information! I really would like to consolidate this IRA into Fido.
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Old 02-23-2024, 10:15 AM   #4
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Having done some searches, I see a post on the Fidelity reddit where the Fidelity representative says exactly that - that brokered CDs cannot be transferred. This is from 11 months ago. This is definitely something which has been instituted fairly recently, as I did transfer many brokered CDs in.

It makes little sense...it's a security, has a CUSIP, and Fidelity makes a market for them.

In any case, it is what it is.
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Old 02-23-2024, 10:27 AM   #5
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Probably Fidelity figuring they will be able to make some $$ selling a replacement CD.

I'd just let Ameritrade go to Schwab (thought they all had done this by now). For all the things that cannot be moved to Fidelity.

Then in a few years or as each CD matures, just transfer the $$ from the Schwab IRA to Fidelity.
There are unlimited transfers allowed from Trustee to Trustee.
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Old 02-23-2024, 10:32 AM   #6
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Probably Fidelity figuring they will be able to make some $$ selling a replacement CD.

I'd just let Ameritrade go to Schwab (thought they all had done this by now). For all the things that cannot be moved to Fidelity.

Then in a few years or as each CD matures, just transfer the $$ from the Schwab IRA to Fidelity.
There are unlimited transfers allowed from Trustee to Trustee.
I am in the last batch. I also have Schwab account(s), so not a big deal. It is more in the vein of trying to simplify my finances little by little for my heirs. Having four tIra's is not "simplified".
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Old 02-23-2024, 12:05 PM   #7
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Originally Posted by njhowie View Post
... It makes little sense...it's a security, has a CUSIP, and Fidelity makes a market for them.

In any case, it is what it is.
+1 It's a security and I would think that they probably deal in that CUSIP. I wonder why they disallow such in-kind transfers.

OP, when do these brokered CDs mature?
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Old 02-23-2024, 12:09 PM   #8
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I think itís weird as a blanket policy because in many cases the same CDs are distributed by all the major firms. I could see it if they excluded products from certain issuers that they did not want to represent. Itís to their detriment.
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Old 02-23-2024, 03:44 PM   #9
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+1 It's a security and I would think that they probably deal in that CUSIP. I wonder why they disallow such in-kind transfers.

OP, when do these brokered CDs mature?
December 2025 and March 2028.
But we (in my phone call) didn't even get to the point of discussing individual CUSIP's. It was simply they couldn't transfer brokered CD's in-kind.
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Old 02-23-2024, 04:02 PM   #10
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Since the brokerage acts as middlemen man for tracking who owns the CD and for distributing the interest payments plus final principal I can see how it would be complex to switch to another broker.
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Old 02-23-2024, 04:58 PM   #11
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How does liquidating a brokered CD work? Doesn’t the price you’d sell it for reflect the future interest payment? I understand that you’re giving up the 5% rate embedded in the CD, but rates aren’t that far off 5% right now. Seems like selling them and repurchasing some different CD’s shouldn’t be too difficult or costly. But, maybe I’m missing something.
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Old 02-25-2024, 08:05 AM   #12
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How does liquidating a brokered CD work? Doesnít the price youíd sell it for reflect the future interest payment? I understand that youíre giving up the 5% rate embedded in the CD, but rates arenít that far off 5% right now. Seems like selling them and repurchasing some different CDís shouldnít be too difficult or costly. But, maybe Iím missing something.
Here is my understanding:
1) It is sold in the secondary market, so bid/ask.
2) Yes, you will get accrued interest (in addition to what bid you hit)
3) Best rate on a non-callable 4+ year (early 2028) CD at Fidelity is 4.3%. So 0.7% or 14% less interest from now till maturity. However, offsetting this (somewhat) is that I can sell the 5% CD at a premium. So yes, I might do the calculations to see if I net close/even/better by selling it and buying a current non-callable 4+ year CD (once the transfer was done). There is some driftage risk in this strategy as I would need to sell, do the transfer of the account and then buy once the transfer to the new account was complete.
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Follow Up - Not so fast on the PSA!
Old 03-05-2024, 05:25 PM   #13
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Follow Up - Not so fast on the PSA!

So I had an unrelated call with Fidelity today (with their fixed income group). After the conversation, the rep asked me if there was anything else to discuss - and I brought up the previous conversation (transfer of brokered CD's).

She asked me for the CUSIP's (which I provided) and then after a few minutes on hold came back to tell me that they COULD be transferred in-kind. Well, OK then. It appears it may be CUSIP specific and not a uniform "no".
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