Brokerage transfer bonuses: smart strategy or misguided gimmick?

If you have a great customer experience and one of your main problems is awareness, transfer bonuses can be very effective in boosting assets through incoming transfers. However, they're easy to get wrong, so proceed with caution.

Grant Ackerman


July 8, 2024



min read

The rise of account transfer incentives

In recent years, a growing trend among brokerages is to offer cash bonuses for switching. The bonus amount is typically related to the amount of assets you transfer. To qualify for the bonus, you'll usually need to maintain the deposited funds in your account for a specified period, usually 3, 6, or 12 months. We've compiled a list of current promotions available as of the date of this blog post.

* If you deposit $50 into an ETRADE account, you can get $100, a 200% return.

In this table, we've converted the dollar amounts to percentages and annualized them for a more apples-to-apples comparison. Why? Because Webull and Robinhood, the two brokerages offering the best percentages, require you to keep your funds parked for a whopping 5 years to get the full match.

At the end of the day, these promotions are more alike than different. That little bit extra you can earn from depositing at one brokerage vs. another probably won't be a game-changer for most folks.

Do these promotions work?

The short answer: it depends. A successful incentive program hinges on three factors:

  1. The size of the bonus payout
  2. The brokerage's annual revenue per client
  3. How long clients keep their money with the brokerage

Let's look at an example. Let’s say Schwab pays a $300 bonus on a $50,000 account transfer (0.6%) and is able to make $25 (0.05%) during the 2-month lock-up period. Right when the lock-up ends, the client decides to transfer out, so Schwab loses $275 (0.55%) on that account before counting other costs. Multiply that by thousands of clients, and we're talking serious cash.

Of course, if a promotion starts to backfire, brokerages can pull the plug and cut their losses.

On the other end of the spectrum, consider Robinhood's 3% promotion. They tweeted some impressive results earlier this year, growing retirement assets on their platform from $1.5 billion to $6 billion in just a few months. This stunning growth suggests that while people may not have initially associated Robinhood with retirement accounts, the promotion encouraged them to give the platform a try. And once they experienced it, many likely realized it was a pretty good fit for their needs. Of course, the 5-year lock-up period to earn the full bonus doesn't hurt either.

It's worth noting that if the experience was truly subpar, people could still leave before the 5 years are up and forfeit the bonus. So, while a juicy promotion can get people in the door, the key to truly successful long-term growth is delivering a superior client experience that keeps them around for the long haul.

The secret to long-term client retention

Getting clients to leave their money with a brokerage for the long haul is simple: deliver a superior experience that clients never want to leave. A great experience begins with the first impression – the account transfer process. If the transfer is a breeze, clients will be more likely to stick around and explore what else the brokerage has to offer. But if it's a headache-inducing ordeal, they might just take their bonus and run.

You see, the account transfer process is like the first date of the brokerage world. If it's a total PITA (not like the delicious bread featured in our cover photo), there probably won't be a second date. And unfortunately, many brokerages don't seem to realize this. They'll make you jump through hoops, fill out endless paperwork, and spend hours on the phone just to move your account over. It's enough to make you wonder if they even want your business at all.

Don't just take our word for it. Here's what some frustrated clients have said about their account transfer experiences using some of these promotions.

The bottom line

If you're a brokerage looking to attract new clients, you need to focus on offering a great product, starting with a seamless account transfer process. You can’t just rely on flashy bonuses to lure people in – that's like using a pickup line at a bar. It might work in the short term, but it's not going to lead to a meaningful relationship.

The most successful brokerages will be those that view incentives as a tool to showcase their superior offering, not as a band-aid for a lackluster experience. If you have a great offering that's not getting the attention it deserves, promotions can be effective an effective way to get it in front of more people. It you decide to use them, use them with caution. Offer them for a limited time to gauge their impact and establish a lock-up window to prevent clients from taking the bonus and running. Finally, consider longer lock-up periods like Robinhood and Webull so you can offer higher rates and discourage bonus hunters.

How we can help

While we can't assist with crafting promotions, if you're a clearing firm concerned about a PITA account transfer process, we'd be happy to discuss how we can help streamline your workflow and improve client satisfaction.