Sunday, March 11, 2012

March 11, 2012 - My Lesson In Switching Brokers

One of the most important things when starting to invest is picking which online broker you want to use. Of the many, there are only 5-10 reputable sites, with 5 more up and coming. Of course you have E-trade, TD Ameritrade, ING Sharebuilder, Scottrade, Schwab, Merrill Edge and Fidelity as the big names. They're the ones who advertise on TV and shove it down your throat that they are the best. Then, you have the new age of online brokers like Optionshouse, Thinkorswim, Lightspeed Trading, Optionsexpress, Tradeking, Trademonster, and Interactive Brokers. These guys are the ones who advertise they're asses off online. The big names talk about how their research, tools and customer service is amazing and how they really "care" which is shown by all of their offices around the country. The little guys are all about cheap prices, fast trading and options. This is my lesson on switching brokers.

Over the last year I have been attempting to get options access one of my Scottrade accounts. They don't have great email support, so I finally went into their office nearby to give them an ultimatum. I walked into the office and the 3 people working turned there heads to me and immediately all but the person at the front desk ignored me. I could tell as a college student they did not give me any credit and it automatically put me in an even worse mood. I was going to be nice, but after all this time I was tired of being patient, so I walked up with my options application and said these exact words, "Hi, I would like my options application approved today, and if it doesn't, I would like you to help me fill out my ACAT (Automated Customer Account Transfer) to transfer my funds to Optionshouse."

It was like clockwork. The secretary started stuttering, "uh...uh...(person's name) come here and help this gentleman out." It was pretty obvious he didn't know whether I was just some college schmuck with a couple thousand in my account or some rich dude's kid who had a hundred grand to throw around. So, my first lesson was learned: In order to get past the secretary, act like you're important. Or, at least act like you've been there before.

After getting past the secretary and to someone who actually has access to approving these types of things, I repeated my ultimatum. It's almost hilarious, but kind of sad, at how talking in a confident tone and not saying unprofessional words like "um, uh or yea" can cause such a difference. This person, after dismissing me because I looked like a college student, was more or less drooling over me (I imagine in order to save the account from being lost). I was told after looking at my application for 5 seconds that "I would be a sure thing", "I wouldn't have to worry because I had it in the bag," and "oh your working at big fancy company starting this summer? I would approve you right here." I got pretty excited, until she said that since my home office was not the office I went to, I they would need to fax it to them, or I could change offices and it could probably be approved by the end of the day. Now this was on a Friday so I was really hoping it got approved, or else I thought it might get forgotten over the weekend.

Not having any experience in these interactions with brokers, I eagerly agreed to switch my home office to them and have them "probably" approve it by the end of the day. Well, obviously this wouldn't be a lesson if I got approved that day would it? By the end of the day, I received no call, email and no word on my account page that said I was approved. And, of course they went home for the day by the time I called and lost faith. So I waited until Monday when I got a call that they were still processing it. On Tuesday they asked me to confirm a couple numbers I wrote on the application, and on Wednesday I didn't hear from them at all. Finally I got a call on Thursday that was rather mumbled, but the words "I'm sorry...we could not approve...maybe when you actually start your job...and have more income" were pretty clear. Being really pissed off, I chatted with live help at Optionshouse (one of the great things about the new age brokers) and told them I had enough with Scottrade and I was switching over to them. Within 5 minutes I had submitted my ACAT and the other documents needed and I was on my way, or so I thought.

I assumed it would take a couple of days, so I didn't start thinking about it until the next week. On Monday, I saw that the assets and cash was still in my Scottrade account, so I attempted to do some day trading but was told that I was not authorized to do that anymore. I got a little bit nervous at this point, but didn't think anything of it. The next day was when I shit hit the fan. I had been holding shares of UVXY, a very volatile 2X VIX ETF, and it had increased 16% that day. I went on Scottrade to try and sell it, but again, I got a message saying I wasn't authorized. I then went to Optionshouse and told them I had shares I wanted to sell, but they said that the ACAT was not finalized. After about 10 minutes of back and forth, I finally asked if they would consider my shares "in limbo" if neither broker could help me, to which they replied yes. Now, I got extremely pissed off from hearing this. Not only did I ask about transferring assets and they told me it would be a smooth process, but their was no mention by Optionshouse on how long it would be, and they did not tell me that I would not be able to touch my assets. Now, I did infer that I would be able to control my assets and the transfer would only take a couple of days, but they did not tell me it would take 7-10 days when I asked, and you would think that they would warn you about transferring assets and the loss of control for the 7-10 days of processing.

The rest of the story is pretty easy to figure out. I had to sit and watch as UVXY lost 25% in the next 3 days, and my ACAT finally finished "processing" Friday, after I lost all of the gains from Tuesday and some. By the end of the week, Optionshouse customer service was not as helpful and friendly, telling me to contact a customer service number when asked the same question that I asked earlier in the week.

Yes, Scottrade deceived me and caused me to make a rash decision. Yes, Optionshouse withheld information and encouraged the transfer of all assets without telling me I would lose control of the assets for a week. But ultimately this was my fault for not doing my research and not paying closer attention to the situation. I should have taken more time to submit the ACAT and waited until my account was 100% cash. I learned my lesson, and although it may have cost a couple thousand, I know I will never make this same mistake again.

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