Lock-in is real, and it’s one of the most expensive hidden costs in financial products - priced into everything you buy, listed on no fee schedule. The wealth question nobody asks is not how your money is invested. It’s whether it can leave. Mobility is leverage: assets that can walk get better treatment everywhere they stop.
The bank discount. Banks want your assets on their platform badly enough to pay for them in rate. Bring a real relationship over and the mortgage desk will knock 50bps or more off your borrowing rate. Do the math: 50bps on a $2M 30-year mortgage is about $650 a month, roughly $234,000 over the life of the loan. Earned not by investing better, but by being able to show up somewhere else.
The matching bounty. Brokers pay around 1% of transferred assets to capture mobile money. Do the math: a 1% match on $1M is $10k, and run that play once a decade for 30 years and it compounds to roughly $220,000 - about a tenth of a percent of extra annual return, paid for with paperwork. And in tax-advantaged accounts the transfer is free of tax consequence entirely: no taxable event. Mobility there costs nothing and buys everything.
The exit-cost trap. Any product that can’t leave without pain has taken your leverage hostage. An advisor relationship with surrender charges, tax-aware funds like AQR whose exit unwinds years of deferral (link to the AQR piece), a robo platform that only holds proprietary funds - each makes staying the default and leaving the punishment. The providers are Hotel California: you can check out any time you like, but you can never leave. The fee you see is small. The option you gave up is not.
The modern mechanics. ACATS has made moving positions technically easier than ever - assets transfer in kind, no selling required. But the tripwires are real: transfer fees, forced liquidation of proprietary funds, and the tax bill if anything has to be sold to move. Liquidate a $1M portfolio carrying $500k of embedded gains and the combined federal-plus-California tax bill runs around $185,000. The ease is technical. The punishment is contractual.
The one question. Before any product, advisor, or platform: what does it cost me to leave? If the answer is painful, that pain is already priced into what you’re getting. Exit terms are the true fee schedule.
Assumptions
Mobility has value only after transfer costs, product conditions and any taxes. These are the assumptions behind the dollar examples.
- Mortgage discount: 50 basis points means 0.50 percentage point. For a $2 million, 30-year fully amortizing loan, payment = principal x monthly rate / (1 - (1 + monthly rate)^-360). The difference requires both quoted rates, points, fees and loan terms. The original roughly $650 monthly figure does not include those rates. $650 x 360 = $234,000 is undiscounted payment savings over a full 30 years, not present value or guaranteed savings after sale/refinancing.
- Transfer bonuses: 1% x $1 million = $10,000. Three once-a-decade transfers over 30 years need exact transfer dates, bonus-eligible balances, growth, holding requirements, taxes and fees. The roughly $220,000 compounded figure cannot be reproduced from 1% and $1 million alone; the return and bonus-scaling assumptions are not published here. The quoted 0.1% annual-return equivalence is a model claim, not a result established by the stated inputs.
- Liquidation tax: $500,000 of embedded gains x illustrative 37% = $185,000 on a $1 million portfolio. The combined rate depends on year, gain character, state, income, NIIT and offsets. An in-kind transfer and a sale are different events.
- Account moves: The tax-advantaged-transfer comparison assumes a qualifying direct transfer that preserves account type, not a withdrawal or a Roth conversion. ACATS does not make every asset transferable or every transfer free. Bonus terms, account closure/transfer charges, liquidation of unsupported assets and required holding periods belong in the net calculation.
- Exit costs: For tax-aware strategies, an exit-tax bill can offset part of accumulated benefits; manager changes or in-kind transfers need not trigger full liquidation. The AQR appendix distinguishes those paths. Mobility remains a useful question, not proof every provider has identical exit terms.
Have better inputs, a missing cost or evidence that changes the result? Share it . We will update our assumptions and conclusions to reflect the most accurate representation.