If you purchase shares in a company or a bond and elect to close your brokerage account, where do you store the certificates? I imagine most of you would take steps to store them in a safe place, like a safety deposit box. Or, could it be in the bottom of the sock drawer or behind the stack of school albums in the hall closet? And then what happens when you move? Do the certificates remain safe or find themselves forever boxed away and now lost is the land of “I will get to it some day.”
You might be thinking, surely no one would do that. You would be surprised at the number of investors keeping such important documents stored around the house or in a desk. I recognize most brokerage accounts charge inactivity fees today, and thus this might encourage some to keep stock and bond certificates at home. However, the small annual fees are nothing compared to the potential cost of the alternative.
The problem of storing certificates at home is keeping them safe, as well as remembering just where they are. A few years ago, I opened several accounts for a family who had been keeping their certificates at home. Surprisingly, I am still adding newly found certificates to the account! We recently received another call from the client, and they said they had eighteen more certificates which needed to be added to their accounts. The funny thing, this was the third time they had found additional certificates to add to the accounts.
Another client called last week, he received a letter in the mail stating that he had abandoned property and they could assist him in getting it back. They only want 20 percent of its value to do so. This letter did raise some serious questions and need for additional research. We have assisted him in locating the “property” that turned out to be stock certificates he forgot he owned. After three moves of his residence and many years after the initial purchases, he did find the certificates in the bottom of a box.
While this may amuse us, it can become a real problem and expensive in the long run. A single lost certificate can be worth thousands of dollars depending upon the quantity of shares it represents and the value of each share. Should you need to sell the shares, this cannot take place until they are on deposit at a brokerage institution; and if they cannot be found, they cannot be sold. If the shares cannot be sold, you are now without the funds you were expecting and potentially leaving yourself open to losses should the shares start to decline in value.
The potential costs do not stop there. If the certificate cannot be found, you can request a new certificate. The cost of doing so is a lot of paperwork, time, and in many cases a minimum of two percent of the value the shares represent, if you are fortunate. Most investors do not realize there is a fee associated with acquiring replacement certificates; and at a cost of two to four percent of the certificate’s value, can run into the thousands of dollars in additional costs depending upon the value the shares represent.
The best option is to let the brokerage house be responsible for the certificates’ safekeeping. Even if you have to pay $30 to $50 per year for the account, this may in fact be insignificant to the other possibilities and risks. In reality, this is inexpensive insurance.
In the event you have lost track of a bank account, or a brokerage account has gone dormant, or the institution has lost track of you, most states have laws in place requiring the financial institution to turn the account over to the state. The purpose is not for the state to benefit but to keep the institution from writing off the assets and claiming the funds for themselves. All states have funds called “unclaimed properties.” The states continue to hold the account and take steps to encourage the public to check to see if you happen to have an account in the unclaimed properties account. For Tennessee, you can go to www.treasury.state.tn.us/unclaim and enter your last name to search to see if Tennessee happens to be holding your lost fortune.
Proper record keeping is not always exciting, but it can save you money and heartache over time. Then perhaps, you will never have to worry about “where you put that certificate.”
HOW TO REACH THE WRITER
Would you like a response to a financial question? Send your question to Doug Horn, 115 W. Broadway, Maryville, TN 37801. Be sure to mark your envelope Money Matters.
Doug Horn, CFP, is an area financial planner with more than 24 years financial experience and founder of Quality Financial Concepts, located in downtown Maryville on Broadway.
Doug Horn, CFP, Registered Investment Advisor in Tennessee and Texas and Registered Principal, Branch Office of and Securities offered through CUE Financial, Member FINRA, SIPC.