Do you have a Transfer on Death Plan for Your Brokerage Assets?

By Chelsea Healey

Estate planning can be difficult for many people simply because it requires a person to contemplate their own mortality. When people begin the estate planning process, they mainly create wills or trusts, name their life insurance beneficiaries, and sign advanced medical directives. As such, individual brokerage account assets are often overlooked in the estate planning process.

One way to make sure your brokerage account assets transfer to the beneficiaries of your choice is to create a Transfer on Death (“TOD”) plan with your brokerage firm. A TOD plan is a legal designation that allows brokerage assets remaining in your investment account to pass directly to your named beneficiaries at the time of death. Most states have adopted the Uniform TOD Security Registration Act, which gives TOD plans their legal authority.

During your lifetime, you will have full control of you brokerage assets with a TOD plan. After you die, the ownership of your assets simply passes to the named beneficiaries. Additionally, you will have the ability to change your named beneficiaries as many times as you want during your lifetime. Furthermore, the biggest benefit that comes with creating a TOD plan is that your brokerage account assets will most likely entirely avoid probate, which can be costly and time-consuming.

Although there are several benefits to creating a TOD plan, it is important to understand that it can only be used for individual brokerage accounts and non-retirement accounts. As such, you should contact your brokerage firm to confirm which of your investment accounts are eligible for TOD plans. Additionally, the plan becomes final upon death, and the beneficiaries you designated in your plan will go into effect and cannot be revoked. It is also imperative to understand that the TOD plan supersedes a will or trust. For example, if your will designates your son and daughter as the beneficiaries of your brokerage assets, but you designated your daughter as the sole beneficiary in your TOD plan, your daughter alone will receive your brokerage assets.

If you are interested in creating a TOD plan, contact your brokerage firm so they can assist you with creating a plan that is tailored to your individual brokerage accounts. If you have already created a TOD plan, confirm who is recorded as the beneficiary of your brokerage account and make any necessary changes. Additionally, if you decide to transfer your brokerage accounts to a new firm, confirm that your TOD plan also transfers with your account assets.

On June 17, 2015, FINRA published an Investor Alert specifically discussing this topic. If you have any questions regarding a TOD plan or any general questions regarding the transfer of brokerage account assets on death, please visit

The New Pump-and-Dump: Same Scam, Different Technology

By Dillon McColgan

On September 2, 2015, the Financial Industry Regulatory Authority (FINRA) issued an Investor Alert to warn investors of the new approach fraudsters are using to conduct a classic market manipulation scam — the pump-and-dump. Essentially, a pump-and-dump scam involves the relentless promotion of a particular stock to create an artificial interest, which in turn increases or “pumps” the value of the share price. Then, once the fraudsters believe the price has peaked, they sell or “dump” their positions at this artificially high price, while leaving conned investors with worthless or near worthless stocks.

As demonstrated by the real “Wolf of Wall Street,” Jordan Belfort, pump-and-dump schemes have the potential to generate millions of dollars for fraudsters. Typically, these scams utilize low-value microcap or penny stocks because they are not traded on an open exchange, are more easily manipulated, and draw less attention. Over the years, scammers have used telemarketers, spam emails, online chatrooms, and social media sites to defraud investors. Now FINRA warns that fraudsters have embraced a new technology to conduct these pump-and-dump scams.

FINRA indicates this new approach has fraudsters targeting investors through popular messaging apps, such as WhatsApp. Scammers are using these messaging apps to transmit spam messages that promote cheap penny stocks. FINRA reported that in recent weeks, WhatsApp users were “flooded” with messages touting the over-the-counter stock Avra, Inc. (OTC: AVRN). The messages appeared to be sent from individuals from well-known brokerage firms and promote AVRN. For example, this message from “ed at goldmansachs” states that AVRN is going up to a dollar and “u shud” buy it now. Similar messages claimed ARVN was “going to double in the next few days” or that it was “going up 300% next week.”

Although most people easily avoid these scams, some investors were undoubtedly conned by these WhatsApp spam messages. CNBC reported that AVRN saw an “incredible” rise and fall in a span of less than two hours on August 21, 2015. The share price at 10:20 a.m. was 17 cents. Then by 11 a.m. the price spiked to 94 cents before plummeting back down to 30 cents at 11:20 a.m. It is assumed that once the fraudsters “dumped” their positions shortly after 11 a.m., the share price simply collapsed.

FINRA recommends that users of messaging apps should treat these spam messages with “extreme caution.” To avoid falling victim to similar pump-and-dump scams, Gerri Walsh, FINRA’s Senior Vice President for Investor Education, provides this simple and effective advice: “Scammers keep up with the times. If you are using a messaging app and receive a tout claiming that a stock is poised for explosive growth, don’t respond—just delete.”