How to Move Your USAA Investments to Schwab

Linking Your Schwab Account Back to USAA

This section assumes that you have already set up a Schwab account. If you have not, please scroll down further for instructions on how to do so.

Steps to take to link your Schwab account back to USAA:

1. Click on the button to link your Schwab accounts to USAA.
2. If you have never linked external accounts before, agree to USAA terms.
3. Type Schwab into the search box.
4. Click on Charles Schwab, https://www.schwab.com.
5. Enter in your Schwab login details.
6. After connecting is complete, go to your Schwab account.
7. Go to the Third Party Apps Access page.
8. Under OFX, click on Enable Third Party Access.
9. In your Schwab account, click on Set Up External Account Money Transfers.
10. Choose USAA in the list of institutions.
11. Provide login credentials.
12. Select accounts.
13. Once trial deposits appear, verify trial deposits.

If you got to the Transition Hub on USAA, amongst the list of steps you need to take, you will see a button to link your Schwab accounts to USAA.

I would have expected to click on that button and have a one-step process to link the accounts.

No siree.

First, since I’ve never linked an external account, I had to agree to their standard agreement.

Then, I went to a page where I had to select an institution.

I thought that the button told me that it was going to link my Schwab accounts, but, instead, I get this.

Note that Schwab isn’t even a popular account in this listing!

So, I typed in Schwab, and got this list of institutions.

After scrolling, I found the one that sounded right.

I was asked for login details, which, after entering, led me to a connecting screen.

Finally, I had confirmation that I had chosen the correct Schwab in the previous list.

While USAA approved of my actions, Schwab did not!

So, off to Schwab I went to change the appropriate setting, which USAA failed to mention in all of their communications.

However, I still had the question of how to move money from one institution to the other, which, again, you would think that someone would have taken care of. It’s in Schwab’s best interests to get USAA members to send them money to invest, so you’d think that Schwab would have been proactive about making that transfer quick and easy. They were not.

Next, I moved on to setting up transfers between the two institutions.

Fortunately, USAA is a popular institution with Schwab, so I didn’t have to hunt for it.

The Schwab account linking page is reasonably simple to navigate.

Within a few seconds, I was connected, awaiting verification of trial deposits.

However, attempting to initiate money transfers between accounts from USAA proved to be impossible.

So, until USAA makes this process easier, I will have to initiate all transfers from Schwab rather than from USAA.May 5, 2020 update: USAA sent an e-mail today covering trading blackout dates:

Wednesday, May 20, 2020	Last day to trade equity, ETF, and fixed income securities. All open orders in these securities will be cancelled after the market closes.
Thursday, May 21, 2020	Last day to trade mutual funds (with limited exceptions) and options. All open orders in these securities will be canceled after the market closes.
Friday, May 22, 2020	You will not be able to trade in your account. However, you will be permitted to close out option positions by phone.
Tuesday, May 26, 2020	Once the market opens you will be able to trade in your new Schwab account. At that time, you can reestablish any previously cancelled orders. However, if you have non-sweep money market fund shares that will be exchanged to corresponding Schwab money market funds, you should expect that you will not have access to these shares until Wednesday, May 27, 2020.

If you’re an active trader, you can expect to not be able to trade for at least two trading days (May 25, 2020 is Memorial Day, on which markets are closed).

Note: As of 8:30 AM EDT on Tuesday, May 26, I was able to see my accounts at Schwab and place an order.

As you’ll be warned on the website or USAA app, if you have good until cancelled orders (buys, sells, stop losses, trailing stops) for equity, those will be canceled at the 3 PM on May 20, and for options, 3 PM on May 21.. Good luck if the market has volatile days on the 21st and 22nd.

It will also look like your investments have disappeared from USAA, but you still will only have the “transition hub” login at Schwab. I’m assuming your money has not disappeared, but you won’t really know until Tuesday, May 26. Cue panicked investors, and yet another misstep in this transition.

Additionally, if you trade options, like we did in reaction to the COVID-19 pandemic, you’re going to have to apply to trade options with Schwab within 45 days of the transition. The e-mail is unclear whether or not that’s the last day of USAA custody or the first day of Schwab custody, so I am assuming the former, which means that you need to reapply by July 7, 2020 to be able to continue to trade options.

Setting Up Options Account Access at Schwab

If you traded options at USAA, once you have verified that your account did migrate properly to USAA (which, frighteningly, my wife’s did not, as she suddenly had access to a foundation’s investments), then you will need to reapply for options trading at Schwab.

You’ll see what your options trading level at USAA was, as it relates to Schwab’s levels of options trading.

From there, you will find a questionnaire similar to the one that you filled out for options trading at USAA, asking about assets, income, experience, etc.

Once you fill that out, Schwab generates a pre-filled form that you need to print, sign, and then upload to the secure message center.

According to customer service, they should respond within 24 hours.

I have found that I was able to put in orders in the interim, so, since I completed the application before the deadline, I should have no issues.

Still, though, this should have and could have been automated.

Again, I feel like all of this could and should have been handled programmatically, furthering my belief that the brokerage services were the red-headed stepchild of USAA, and completely alien to the usual level of service that I’ve experienced with USAA.

May 1, 2020 update: USAA sent an e-mail last night informing brokerage clients that “New future-dated or automatic recurring transfers into or out of your investment accounts using the Funds Transfer Tool will no longer be accepted.”

So, if you want to set up a recurring investment or transfer between May 1 and May 26, you should set a calendar reminder for May 26, because USAA is not accepting new transfers. This is new information as of April 30, 2020.

A bend in the road is not the end of the road…unless you fail to make the turn.
–Helen Keller

For years, I voiced my displeasure at the fees that USAA Investment Management charged on their mutual funds and on their brokerage. I went to a blogger’s conference back in 2013 and raised that issue as my number one concern about USAA.

Simply put, they were not competitive with Vanguard.

That’s not surprising. Vanguard has WAY more money under management than USAA does, so they can be a lower-cost provider.

USAA has taken a couple of steps to address that issue.

First, back in 2019, they announced $0 commissions on most trades.

This allowed us, when we rebalanced our portfolio at the beginning of the year to move into Vanguard ETFs from our USAA funds.

That move right there was probably worth 0.5% improvement in our performance.

Then, USAA announced that their investment management service had been purchased by Charles Schwab.

The benefits for those of us who are do-it-yourselfers are pretty minimal now. We’ll still have $0 commissions, as Charles Schwab offers $0 commissions. I’m not going to suddenly stop investing in Vanguard. Schwab might be cheap, but Vanguard is cheaper.

However, for people who want active wealth management and want to see their advisor, the move to Schwab makes it easier to do so, as the FAQs from USAA explain:

Schwab will provide:

• Face-to-face interactions with wealth management advisors in locations across the country.

Note: If you want to find out if you need someone to manage your money, please read my article “Are There Cases Where It’s Appropriate to Have Someone Else Manage Your Money?”

Finally, today, on March 31, I saw a notification from USAA about taking action to facilitate the transition. The message may have been there for a while, but I’m not an active trader, so I had no reason to check.

Fortunately, I do not have any immediate to-dos, but this may not be the case for everyone.

Actions to Take Now to Prepare for the Transition From USAA Investment Management to Schwab

• Establish a new power of attorney. If you have a power of attorney with USAA, you will need to establish the same power of attorney with Schwab.
• Change your automatic transfers. You will need to establish new automatic transfers with Schwab once you have set up your account.
• Be prepared to set up new open orders. We do have a couple of trailing stops, for example, which would need to be reestablished at Schwab.
• Capture account settings to create the same settings with your new Schwab account. If you have a watch list or dividend reinvestments, you will need to reestablish those with Schwab.
• Capture your required minimum distribution (RMD). You will need to establish the same distributions at Schwab.

To me, this doesn’t seem like an onerous list, but it’s also one that could have easily been ported over with a few automated scripts written by a semi-competent programmer. I expect that there will be a lot of older USAA investment management members who find out that they are now at Schwab and haven’t had their RMDs executed. There will also be a lot of once-a-year investors who just invest and rebalance who will find that they have a half year’s worth of dividends sitting in cash instead of being redistributed. This would have been very for Schwab and USAA to set up, and they failed to do so.

Actions to Take Later to Prepare for the Transition From USAA Investment Management to Schwab

For now, these items are greyed out for me because USAA and Schwab are not ready for me to take those steps.

However, in mid-May, these will become active, and we will need to complete them. The actions are:

• Set up a logon at Schwab. Again, why this is not done automatically is a mystery.On May 12, 2020, as I logged in to USAA to pay a bill, I received notification that there were a couple more steps that were available to me.
• So, I clicked on to the link to go to the Schwab website to set up my account. This part was easy.
• However, I was very disappointed to learn that I’d have to come back on May 26 to do more things. Again, this is creating unnecessary hassle on the part of the customer, and it all should have been automated.
• More disappointment and further evidence that USAA is washing its hands of all of its members’ investment experiences.
• Review the account information at Schwab. This should include address, SSN, contact information, and the like. You don’t want your dividend distribution checks going to some random person!
• Set up account details at Schwab. You’ll have to reenter all of the same preferences that you had at USAA with Schwab.
• Link your accounts to your USAA profile. USAA has the ability to show external accounts (a la mint.com, so, if you have been using USAA as your source of record for your accounts, you’ll have to manually add your Schwab account. Yet again, why this is not automated is baffling.

Important Dates for the USAA Investment Management to Schwab Transition

Note: On April 14, 2020, USAA sent an e-mail to brokerage members stating that, while they are currently planning on holding to the dates listed below, they may change due to the COVID-19 pandemic.

Specifically, they said:

Given the recent uncertainty in the overall markets and the challenges facing our members at this time, we are considering alternative options for the conversion date for USAA brokerage and managed portfolio accounts to transition to Schwab. We continue to stay committed to a May 26, 2020, transition, but we will keep you informed of any changes to the transition date and will communicate those decisions immediately.

For now, the dates below still hold.

USAA Investment Management Transition to Schwab Timeline

Here are the important dates for the USAA Investment Management transition to Schwab, based on the e-mail from USAA on April 30, 2020. The May 11 date appears to be unchanged based on the information in the USAA Schwab Transition Center, but it was unaddressed in the e-mail from USAA.

May 1Changes to New Automatic Recurring Transfers or Investments

	New future-dated or automatic recurring transfers into or out of your investment accounts using the Funds Transfer Tool will no longer be accepted.
May 11	First day to set up your Schwab logon.
May 15	Changes to Electronic Money Transfers
	All future dated and automatic recurring transfers into accounts scheduled to occur after this date will be canceled.
	Deposit @ Mobile capability for investment accounts will be removed.
	Last day to transfer money into or out of your investment account using the Funds Transfer Tool on usaa.com or the USAA Mobile App.
May 20	Trading Black Out for Certain Securities Begins at Market Close
	Last day to trade equity, ETF, and fixed income securities. All open orders in these securities will be canceled after the market closes.
May 21	Trading Black Out for Mutual Funds and Options Begins at Market Close
	Last day to trade mutual funds (with only limited exceptions) and options. All open orders in these securities will be canceled after the market closes.
May 22	Changes to Money Transfers by Phone and All Trading Restricted
	Last day to withdraw available cash by phone for brokerage accounts. Requests for withdrawal must be received by 12 p.m. CT on Friday, May 22, 2020. Please call 800-832-3708 for support.
	Last day to deposit money by phone for brokerage accounts. Requests for deposits must be received by 12 p.m. CT on Friday, May 22, 2020. Please call 800-832-3708 for support.
	Last day physical checks will be accepted. All checks received after 12 p.m. CT on Friday, May 22, 2020 will be rejected and returned.
	You will not be able to trade in your account. However, you will be permitted to close out option positions by phone. Note: There is no clarification on whether or not commissions will be higher because of a phone-based trade. I recommend asking for a waiver of the commission if you need to execute a trade by phone.
May 26	Account Available at Schwab
	Over the weekend of May 22-25, your account will be transitioning to Schwab. On Tuesday, May 26, 2020 at market open, your brokerage account will have transitioned to Schwab. Once the market opens, you will be able to trade in your new Schwab account. At that time, you can reestablish any previously canceled orders.

Recharacterizing 2020 IRA Contributions

Apparently, when USAA gave Schwab all of the money, they failed to give them any information.

So, when my wife and I decided to recharacterize our contributions in order to optimize our AGI for ACA tax credits as well as prepare ourselves for future Roth IRA conversions, I thought it would be as simple as making a request.

I was wrong.

I had to go track down when we made our 2020 contributions as well as the account balances before and after the contribution so that Schwab could figure out how much those contributions had grown.

When you recharacterize an IRA, it is not as simple as saying, for example, take the $6,000 I contributed and move it to the other account.

If you contributed early in the year, the contributions may have grown or shrunk in value. Therefore, the brokerage needs to calculate the current value of your contributions.

Schwab has none of that historical information. USAA does and failed to provide anything to Schwab.

As a result, our requests took a lot more digging and a lot more back and forth on the phone with Schwab to get the paperwork properly sorted.

I have no idea whose fault this was. I blame both parties.

USAA should have provided historical information.

Schwab should have asked for it.

So, be prepared to go through your old USAA statements if you made your IRA contributions early in the year before the handoff (or fumble) to Schwab.

If you’re concerned about doing your taxes correctly, I’ve used

TurboTax Online for several years, and, despite the complicated status of our taxes, have had no problems filing my taxes, saving us almost $1,000 compared to what we were paying our accountant when he prepared our taxes.

The bottom line

Normally, I am a huge fan of USAA and their service offerings. My biggest beef was with their investment management, and this transition just underscores how unlike the rest of USAA their investment management arm is. It seems as if the acquisition by Schwab was just a money grab and, as soon as the paperwork was signed, USAA threw their hands up and abrogated responsibility, making it the responsibility of each member to make sure the transition goes smoothly.

I do not see this going well, given that USAA serves a wide variety of audiences, from the forward-deployed who don’t have access to the Internet, much less the time to manage their schedules to deal with this transition, to senior citizens who may not be Internet savvy enough to manage this transition.

It would have been very simple to automate the transition to make it a seamless process for USAA members.

Instead, they have put the burden of making the transition into the hands of each member, which is exceptionally disappointing and completely unaligned with the customer focus that the rest of USAA has.