As the popularity of investment opportunity grows, so does the number of abandoned investment accounts and unclaimed money. By raising awareness of this issue, we can help people get their rightful money back and prevent future abandoned investment accounts.
April 19, 2022
~11 min read
But with great opportunity comes great risk. And when it comes to the stock market, there’s no greater risk than investing your money in something you don’t understand. That’s why it’s so important for new investors to do their homework before investing anything. Unfortunately, many new investors are jumping into the stock market without doing their research, and as a result, they’re ending up with abandoned investment accounts.
The problem of abandoned investment accounts and unclaimed money is only going to get worse as the popularity of cryptocurrency and “meme stocks” continues to grow. By raising awareness of these issues, we can help people get their rightful money back and prevent future abandoned investment accounts. Let’s take a closer look at the rise and causes of abandoned investment accounts so you can understand how to avoid and/or resolve this issue.
What are abandoned investment accounts?
An abandoned investment account is any investment account that has been inactive for a certain period of time – usually around six months. During this time, if the account holder does not make any withdrawals, deposits, or transactions, the account can be classified as being abandoned. While there’s no official number on how many accounts are classified as “abandoned”, industry experts estimate that the number is in the millions.
How long does it take for an investment account to be considered “abandoned”?
There is no definitive answer to this question, as it can vary. In the United States, an account can be classified as abandoned if it has been inactive for more than 180 days. In fact, the Securities and Exchange Commission (SEC) requires brokerage firms to report any account that has been inactive for more than 180 days.
However, the time frame may be different for different countries, account types, account holdings, presiding regulatory agencies, and recent changes to the relevant codes and requirements. It’s important to check laws and regulations to find out how long an investment account must be inactive before it’s considered abandoned.
What happens to abandoned investment accounts?
Once an account has been classified as being “abandoned”, the financial institution holding the account is required to report it to the appropriate government agency. At this point, they will begin trying to notify the account’s owner of record.
If they are unsuccessful in their efforts for a specified period of time, the account’s assets are then submitted to the government, where it becomes part of the unclaimed property system. The rightful owner then has to go through the legal process of making an unclaimed property claim in order to reclaim their assets.
Why are investment accounts abandoned?
There are many underlying causes for the recent rise in the number of investment accounts being abandoned, but the majority of contributing factors fit into one of three primary explanations.
Record numbers of new investors
Between the growing popularity of trending “meme stocks” like GameStop, the cult-like frenzy over Dogecoin and other cryptocurrencies, and the prevalence of on-the-go trading via brokerage apps, it’s easy to see that the investment landscape has changed a lot in recent years. With such high enthusiasm and such low barriers to entry, more people than ever, from every age group, are getting into the market. These changes have led to a record number of first-time investors.
Anytime new investors are entering the market, there are new opportunities for abandoned investment accounts, so this influx of new investors has led to an increase in abandoned investment accounts simply because there are more investment accounts to be abandoned.
But the account abandonment rate is also higher. In other words, a larger percentage of new investors are abandoning their investment account now than ever before. This is likely because many new investors are not familiar with the market nor how it works – they jump in without knowing what they’re doing.
Record numbers of uninformed trades
It’s clear that the craze surrounding meme stocks has drawn record numbers of new investors, but even experienced investors have been lured into the collective. However, many investors don’t realize the level of risk involved with the asset they’re investing in. No matter what their level of experience is, any investor can be uninformed, leading to a greater risk that their expectations may not be in line with reality.
The recent GameStop short squeeze is a perfect example of this. A vocal group banded together online to drive up the price of GameStop shares. A record number of trades were made, many by amateur investors who were new to the stock market, but many were made by experienced investors. Regardless of the success of the short squeeze, this behavior highlights the risks that all investors face when they’re uninformed or misinformed.
When people invest in a meme stock, they’re following a group with the hope of making a profit. They’re following investment fads and social media hype to buy whatever is trending, hoping for fast and easy payoffs. When they don’t see the results they were expecting or hoping for, they look at it as a failed venture and move on to something else, trying to forget about their losses and abandoning their account in the process.
The situation is similar to the recent surge in interest in cryptocurrencies. Aside from the A-list cryptos like Bitcoin, Ethereum, Litecoin, and yes, even Dogecoin, there are thousands of small independent cryptocurrencies trying to get off the ground. Thanks mostly to social media, people are aware of more cryptocurrencies than ever before. And many of these people are investing their money in cryptocurrencies without fully understanding them. As a result, they’re often quick to abandon their investment when the prices start to drop.
Of course, the stock and crypto markets are becoming more complex every day. With new financial products hitting the market all the time, it’s becoming increasingly difficult for investors to stay informed, even when trying.
The market has always been somewhat volatile, and there’s always been a certain level of risk, but recent levels of risk and market volatility have become too much for some investors to keep up with. This has led to a lot of confusion among investors, many of whom are giving up on their investment accounts in disgust, outrage, or simply because they don’t know what to do with them anymore.
And finally, another common cause of abandoned investment accounts is the fault of human memory. Haven’t you ever found a $20 bill in your pocket that you completely forgot you put there?
It’s not uncommon for people to forget about their investment accounts altogether because they aren’t actively using them. They may have opened the account to invest a specific amount of money, or maybe they intended to make recurring contributions to the account, and then they simply forgot about it completely.
How many abandoned investment accounts are there?
Unfortunately, there’s no official number on how many investment accounts are classified as “abandoned” at any given time, nor do we have a good estimate of how much money is in abandoned investment accounts (although industry experts have speculated that the estimate is likely in the millions).
However, we can get a sense of approximately how big the problem is by looking at some data from the government. According to the unclaimed property statistics in the United States, there’s over $175 billion worth of unclaimed property. This figure includes ALL unclaimed assets, such as unclaimed bank accounts, unclaimed savings bonds, unclaimed life insurance benefits, and more – but it also includes unclaimed investments. So, it’s safe to say that the number of abandoned investment accounts and the amount of unclaimed money from those accounts is huge.
If you have an abandoned investment account, don’t panic – there’s a good chance that you can get your money back.
What can be done?
The good news is that there are things we can all do to address this problem. The first step is to raise awareness of abandoned investment accounts and unclaimed money. This will help by letting people know how to avoid having their investment accounts deemed “abandoned” in the first place, as well as informing them of how to claim their abandoned investment accounts once it’s gotten to that point.
We can also encourage people to do their research before investing. There are a number of free resources provided by reputable sources that are available online to help new investors learn about investing. For example, the SEC’s website is a great place to learn about the stock market, as it offers a wealth of information on all aspects of trading stocks, from investing basics to more advanced topics. By educating new investors about the risks involved, we can help them make more informed decisions and avoid losing money in the future.
Additionally, we should take advantage of any opportunities we’re given to help our government create a better system for returning unclaimed property to its rightful owners. At the moment, the process for claiming unclaimed property is very complicated and time-consuming, but there are lawmakers and government officials who are open to more streamlined solutions. If it becomes easier for people to claim their money, everybody wins!
How to avoid or resolve an abandoned investment account
In the end, the key is education. Whether you’re looking to prevent your investment account from abandonment, trying to reactivate an investment account that’s been deemed “abandoned,” or about to begin the process of claiming unclaimed money, being informed and aware is the best and most helpful thing you can do in all three situations. With a little bit of knowledge, you can avoid being another owner of an abandoned investment account.
How to prevent your investment account from being classified as “abandoned”
The most important thing you can do to prevent yourself from inadvertently abandoning your investment account is to do your homework before investing anything! All new investors should do this – it’s important to learn about the stock market and how it works before choosing investments, planning a financial future, and deciding how much money to invest.
Furthermore, make sure you do your research on the specific investments you’re considering, such as cryptocurrency or other stocks and investments, to understand the risks involved. This way, you’ll have a better understanding of what you’re getting yourself into. And if you’re not comfortable doing that on your own, you should seek out professional help from a financial advisor or planner.
Once you do create an investment account, inform yourself of your brokerage’s rules and regulations regarding abandoned accounts, so you’ll know exactly what things can trigger them to flag your account as abandoned. In general, there’s no surefire answer for how to prevent your investment account from being classified as abandoned, but here are a few things you can do to increase the chances that your account will stay active:
- If you have an investment account that you haven’t been using, make sure to check the status of that account regularly. You may not be actively using it, but that doesn’t mean someone else can’t claim it as their own. Scams and fraud are prevalent with investment accounts.
- Watch for notifications and notices about your account that you may receive via mail, email, or as a digital notification within the app or dashboard of your online account.
- Keep track of your account activity and avoid going long periods of time without any deposits, withdrawals, or transactions.
- Contact your brokerage firm if you’re going to be away from the market for an extended period of time, which may prevent them from classifying it as abandoned for a longer period of time, or allow them to send you additional reminders or notifications.
It is important for new investors to be aware of this problem and take measures to prevent their investment accounts from becoming unclaimed money. By being mindful of this possibility, investors can save themselves a lot of hassle and stress down the road.
How to reactivate an abandoned investment account
If you think you may have an abandoned investment account, there are a few things you can do:
- Check with all of your financial institutions to see if any of them have any records of an abandoned account belonging to you.
- Review your banking records from the time period that you believe you may have transferred funds into an investment account. Ideally, you’ll be able to see the name of the brokerage on your banking statement so you will have an institution you can call to begin a search.
- Once you’re able to track down the company or institution where your investment was held, reach out to them and ask for help reactivating your account. In some cases, you may be asked to submit a form or documentation that proves your identity as the owner of the account.
If you’re not able to find the financial institution with your missing account, then it’s likely that the assets of this account are now considered unclaimed money, and you will have to go through the process of legally claiming it.
How to claim unclaimed money from an unclaimed investment account
Check with the National Association of Unclaimed Property Administrators (NAUPA) to see if they have any records of an abandoned account belonging to you.
If you have an investment account that has been classified as unclaimed, you’ll need to go through a legal process in order to claim your unclaimed account. The first step is to review any information put out by the agency that is responsible for regulating the unclaimed investment assets in question. For most stock-based investments in the United States, this agency is the Securities and Exchange Commission (SEC), but you may find more information on Investor.gov, which is the SEC’s site for individual investors.
Once you’ve located the proper agency and followed the instructions on their site, you’ll need to fill out a claim form and submit it along with any supporting documentation. The claim form and supporting documentation will be reviewed by the agency, and if everything is in order, you should receive your money within a few weeks.
If the investment account belonged to someone who is now deceased, the unclaimed property may be in the name of the deceased person, or it may be listed as part of an estate or trust. You can click here to learn more about how to claim the unclaimed property of deceased family members.
How EstateCo can help
The process of reclaiming unclaimed money may seem like a daunting task, but with the help of professionals, it can be a lot easier than expected.
If you’re having trouble claiming your unclaimed funds, or just want the convenience of having professionals handle it for you, our team of specialists can assist by managing the whole process from beginning to end. We have experience with the complex red tape surrounding unclaimed money claims and we’re here to assist you in obtaining what is rightfully yours.