Monday, January 7, 2008

Don't Hold Stocks in Certificate Form

Boston Gal recently blogged about some stock certificates her dad had forgotten he had. I work for a financial services firm ( I am NOT a broker) and we always recommend that clients hold their stocks at the firm and not in certificate form. Here are some reasons:

-If you own multiple stocks, holding them in firm name will allow you to receive just one annual tax form instead of a separate tax form from each stock company.
-Stocks held at the firm are easier to pass on to heirs. You will only need one set of paperwork for your entire account, no matter how many different stocks you own. If you held them in certificate form, your heirs would need to contact each company separately to get their paperwork.
-If you hold stocks in certificate form, they could be lost. Getting a replacement certificate often costs two to five percent of the value of the stock.
-Most firms will maintain the cost basis information for you and update it automatically when any change happens at the stock company. Ask your tax advisor how much he/she loves this!
-Firm will let you know of mergers, tender offers, etc. and handle them as you direct.
-Stock splits, spin-offs, etc. will be handled by your firm and will be updated on your next statement, making it easier to stay updated on how much you own of each stock company and the value of your shares.
-Holding stocks at your firm means fewer phone calls to make when you change your address (not to mention how easy it is for a stock company to lose track of you over the years if you forget to update your address!).
-Have you read any of the news stories about stock certificates found in desks bought at rummage sales, etc? It's a lot easier to forget about a certificate than it is a stock that's held at a firm who sends you monthly or quarterly statements about your account!

BostonGal's dad's situation is a little different, but if the stocks had been held at a firm with his address listed and he was getting statements from them, he at least would probably have known within a few months that the stocks had been sold from underneath him. As it was, he didn't find out until years later. According to BostonGal, he took it pretty well. I think I would have been furious :)

Please read the disclaimer at the bottom of this page and note that I am not a financial advisor. Please speak to your financial advisor before making any decisions regarding your money!

1 comment:

Mrs. Micah said...

Yeah, I would want to hold them in a place which managed it in case of splits or if I wanted to sell things.