How to cash in your paper stock certificates: Some tips

— -- Q: What are the best options for people trying to cash in paper stock certificates now that many brokers are backing away from them?

A: Paper certificates are fast becoming a remnant of the past. Fewer brokerages want to deal with them. The industry is moving on.

With that said, paper remains one of the top ways that investors maintain and prove their ownership of stock. And it's very common for investors to find themselves in possession of paper certificates and seek a way to sell them.

A few years ago, several brokerages were pretty welcoming when it came to paper certificates. Some would even process certificates and sell them for low fees, hoping that the individual would keep the account open and remain a customer. But sadly, many investors abused these offers, and just used the brokers as the stock equivalent of a check-cashing service.

For instance, TradeKing used to have one of the most accommodative policies toward processing paper certificates at very little cost. Now the brokerage charges $200 per certificate, according to its list of fees. Additionally, stock certificates cannot be used to fund a new account.

Investors who are in possession of a paper stock certificate, should look to start a long-term relationship with an online brokerage. It's best to open your account and fund it with savings first, be a customer for awhile and then talk to the brokerage about services that might be able to convert the paper certificate. Most Americans will need a brokerage account and investments if they want any chance at retiring anyway, so having a brokerage account is probably a good idea.

Once you open the account, you can inquire with the brokerage about handling the paper certificates you have. Most of the brokerages now have unstated rules on paper certificate handling. If you open an account and you're going to have a long-term relationship, most of the larger firms may process the certificates for a nominal fee. If you call the brokerage before opening the account, and explain your intentions, you can see what kind of deal they'll be willing to make.

TD Ameritrade says it charges $70 for a transfer of ownership of a paper certificate. However, for customers of its TD Ameritrade Apex service, that paper fee can be waived four times a year.

Another option is to work through a company's transfer agent. It's their job to help companies process ownership and keep track of shareholders. The largest transfer agent in the U.S. is Computershare, so for most companies, that's the transfer agent you will want to contact. Computershare will provide services to individual investors, including cashing them in, if you follow the correct steps and are willing to do some work yourself.

Most transfer agents will convert paper certificates into a check, if you're willing to do some legwork. First, you'll need to figure out what the correct transfer agent for the stock is. Typically, you can get this information from the company's website or by calling the investor relations department. You might also want to call the transfer agent first and confirm it is the transfer agent for the stock. Most likely, it will be Computershare, but not always. Keep in mind that Computershare recently bought BNY Mellon's transfer agent business, too, so it will handle those accounts.