I’ll get into the reasons why I am transferring out of Betterment and why I put money there in the first place in another post (UPDATE: here it is.)
But right now I want to share my experience transferring out of Betterment as I haven’t found it fully explained on the internet.
Tl;dr, it took 14 days for my taxable account shares to show up at my new provider from the day I mailed my forms in. And a total of 35 days for my cost basis information to show up. Everything but the fractional shares was able to be transferred-in kind (i.e., if I had 45.34 shares of VTI at Betterment, 45 shares transferred in-kind and 0.34 shares remained at Betterment). I needed to liquidate the remainder in order to transfer it out.
It took 27 days for my Roth IRA account to transfer from the date I mailed in the forms. But only 12 days from the day Betterment had told me they initiated the Roth IRA transfer. Betterment liquidates the entire Roth IRA for the transfer and sends a check to your new provider. My Roth IRA was divested from market for only that 12 day period.
Steps for Transferring Out of Betterment
In order to initiate the transfer, I had to answer some questions online on the website of the provider to which I am transferring and then print out forms that I needed to sign. I requested that all the money be transferred “in-kind.”
I needed to do this twice: once for the taxable account and once for the Roth IRA account that I have at Betterment. If I had traditional IRA money at Betterment, I would have needed to print out a third set of forms.
Since I already had a taxable account at my new provider, I did not need to create an account for the transfer. If I did not have one, I would have had to create an account. I could have also created a new account even though I already had one.
I did not have a Roth IRA account at my new provider, so I had to create one in order to initiate the transfer.
I then printed out my latest Betterment account statement. In my case, it was the one for December 31, 2017.
I had to take the statement from Betterment and the transfer forms to a physical branch of the institution where I have a checking account in order to get a medallion guarantee signature. A medallion guarantee is a form of “super notary” signature that is required for certain securities transfers. You can usually get one from one of the officers at your local bank. (Remember to bring the Betterment statement. The officer who signed my forms said most people forget to bring the statement of the account they are transferring out of and then get frustrated because they have to come back).
Timeline for Transferring Out of Betterment
I finally mailed the forms into the firm I’m transferring to on Wednesday, January 3, 2018 (Day 0).
By Monday, January 8 (Day 5), that company’s website reflected that they had received the paperwork from me.
On Tuesday, January 9 (Day 6), I received an e-mail from Betterment saying they received my transfer request. This was a couple of hours after I received my e-mail from Betterment congratulating me for being with Betterment for 3 years. Aaawkwaaard.
That e-mail informed me that taxable account transfers typically take 10 days from the date of the e-mail to complete, while IRA transfer typically take 12-15 days. It also informed me that for IRA accounts, Betterment processes the transfer by liquidating the account and sending a check to the new provider.
At this point, when I logged on to Betterment’s website there is a pop-up screen saying that my account is temporarily suspended during the duration of the transfer.
On Friday, January 12, 2018 (Day 9), I received an e-mail from Betterment saying that my outgoing transfer for my taxable account had been initiated.
The e-mail stated: “We will submit the request to transfer your shares to your new provider tonight, and it should be effective tomorrow … Please note that this process will only transfer full shares. In instances where you are holding partial shares per tax lot, we are not able to transfer them. These partial shares will remain fully invested in your existing account … Additionally, once the transfer is complete, we will supply you with the tax basis information for each lot so you can provide that to your new provider.”
I was worried for a few days that this meant a lot of my shares would not be transferred (because I thought “per tax lot” meant only the full shares in each individual purchase of shares of a given ETF would be able to be transferred; the way Betterment purchases ETF shares for you, a large portion on each purchase are fractional shares). However, it ended up meaning only a small portion of the shares I owned wouldn’t be able to be transferred. For example if you owned 451.85 shares of a given ETF, 451 shares would be able to be transferred, while 0.85 shares would be left behind.
On Wednesday, January 17, 2018 (Day 14): My online account at my new provider showed the ETFs from my taxable account had been transferred from Betterment. The online account showed the new shares, but did not show the cost basis of those shares. (I didn’t receive a notification, I just happened to check online).
Later that day I did receive an e-mail confirming the incoming transfer from my new provider for the taxable account. Betterment’s website still says that the money is at Betterment. The online transaction history says the transfer took place on January 16. January 15 was MLK day.
Even later that day I received an e-mail from Betterment indicating that my outgoing transfer for my taxable account was complete. It instructed me how I could download the cost basis information for the shares that had been transferred from Betterment’s website. It further instructed that I should print and e-mail that information to my new provider to give them that information. On my examination of Betterment’s website, I could not find the document they referred to and the website still showed the shares in my taxable account as being at Betterment (as of now Personal Capital thinks I’m much more wealthy than I am).
On Thursday, January 18, 2018 (Day 15), my Betterment account now reflected the transfer on my taxable accounts having taken place. I have around $800 left at Betterment from the fractional shares that couldn’t be transferred. I believe that the shares remaining in Betterment were the most recently purchased fractions of shares. On reflection, perhaps I should have contacted Betterment to see if I could make a small deposit and have their computers figure out how to “top off” all of my shares to be exactly full share amounts.
The documents with cost basis information also were now on the website. There were two: one for each “goal” I had with Betterment in taxable accounts. The two documents appeared to have identical information.
I sent a secure message through my new provider’s website that attached the cost basis document and asked in what form they would like that information.
I received an e-mail from Betterment informing me my Roth IRA transfer had just initiated and would take approximately two weeks to process.
The Betterment account showed the ETFs in my Roth account being sold on January 18. It also showed the prorated portion of my Roth IRA “advisory fee” being withdrawn from my Roth IRA funds.
On Friday, January 19, 2018 (Day 16), I called my new provider and asked them if I needed to mail in the cost basis information. The representative told me that they most likely received that information directly from Betterment.
On Sunday, January 21, 2018 (Day 18), I requested to withdraw all of the remaining funds out of my Betterment account.
On Monday, January 22, 2018 (Day 19), I received an e-mail from Betterment indicating that the withdrawal had been initiated. A few hours later the Betterment website reflected that the sale of my remaining shares had executed. I did not confirm, but again it looked like the remaining shares that were sold were those purchased most recently. There was also a transaction for the prorated “advisory fee” for my taxable Betterment account.
On Thursday, January 25, 2018 (Day 22), the remaining funds from fractional shares that I withdrew from Betterment appeared in my checking account.
I received a secure message from my new provider indicating that, due to IRS regulations, they could not accept the cost basis information from me and that it must come directly from Betterment.
On Tuesday, January 30, 2018 (Day 27), I received two e-mails from my new provider informing me that my Roth IRA transfer had completed. And, that I should allow 48 hours for the funds to show up in my account. (I logged in and my Roth Account was still at “$0” but “track your transfer” was no longer an option).
Later that day I logged in and although my Roth IRA said it had “$0” in it, the entire Roth amount was available to trade when I clicked on the account. I was able to purchase securities in my Roth account this day.
On Wednesday, February 7, 2018 (Day 35), I logged in to my Vanguard account in the AM and some of my cost basis information was there.
I logged in again later this day, and all of the cost basis information was there.