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Moving IRAs Involves Some Tricky Details

Banks and brokers have become more alike, particularly since the repeal of the Glass-Steagall Act.

But one way they continue to differ involves signature guarantees.

You find out when you try to move Individual Retirement Accounts around.

Traditionally, brokers and mutual funds have required signature guarantees on transfer requests dealing with stocks and bonds.

(Oddly enough, this was originally because transfer agents, typically bank corporate trust departments, wanted them.)

The guarantee takes the form of an ink-stamped “SIGNATURE GUARANTEED” placed near your signature, signed by an authorized employee of another financial institution.

It’s the guarantor’s warranty that your signature is genuine.

Sometimes it must be a “Medallion Guarantee” (indicating participation in a special signature guarantee program).

Where the transfer is small, however, it may be waived.

Unlike brokers, banks (outside their trust operations), dealing in cash, have traditionally not required signature guarantees on withdrawal requests, relying instead on signature cards in their records.

This means you may need a signature guarantee to request money transfers from a broker or mutual fund IRA to a bank IRA but not to request money transfers from a bank IRA to a broker or fund IRA.

When you transfer IRA assets, the receiving institution must countersign your request. So, when it’s a bank, you usually ask it to provide the signature guarantee.

And that’s where the problem starts.

Unfortunately, because banks don’t require signature guarantees to move cash, branch employees are sometimes clueless about them.

You can be confronted by the following questions:

“What’s a signature guarantee?” (You explain, citing this post.)

“Does our bank provide signature guarantees?” (You say most banks do.)

“Where do we keep this stamp thing?” (You say you don’t know, but suggest the vault be checked.)

“What do we charge?” (You say that, because you’re an important customer, there’s no fee.)

After extended consultations, including calls to bank headquarters, you leave, your signature duly guaranteed and your wallet (hopefully) intact.

More frustrating, sometimes you have problems going the other way – transferring IRA money from a bank to a broker or mutual fund.

Recently, Vanguard bounced a transfer request I asked it to countersign and mail to ING Direct because the document didn’t have a signature guarantee.

“ING” requires it, Vanguard insisted.

I suggested it had confused “ING Direct” (the bank) with “ING Sharebuilder” (the broker). It had.

Nothing like educating the “experts.”

Maybe we should just bring Glass-Steagall back.

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