This text description is mine, not from the article. The article linked goes into much more detail.
This is an anti-scam/anti-fraud protection measure. This is apparently a method folks are getting their accounts cleaned out by thieves. They get your SSN, name, and account number from one of the many data breaches that happen today, they open an another account at another brokerage in your name, then transfer your funds out to the new brokerage they control. The system used to do this is called ACATS which is designed to easily let customers transfer funds from other accounts, but it is apparently easy to abuse.
Fidelity makes turning on the block crazy easy just by logging into your account and setting the “Money Transfer Lock” to “on”. If you ever do want to use the ACATS to legitimately move your money to another broker, you just need to go back in here and set it to “off”, complete your transfer, and turn it back “on” if you still have funds remaining.
Vanguard has this feature too, but its super sketchy to get it turned on. You have to call the vanguard agent, pass an OTP code, try to get them to understand what you’re asking for as the agent I talked to did, get transferred around again a few times, do another OTP to a different department and finally they enable it. However they say it takes 5-7 days to take effect. Better than nothing I suppose.
Currently Schwab doesn’t have a feature to block ACATS transfers at all in any capacity.
I’m still salty that I have schwaub, only because they bought the brokerage I was using…dick holes.
On the plus side, ACATS is the feature/technology that makes moving brokerages so easy. I’ve got an account move in flight right now, and it took all of about 10 minutes to initiate. If you want out of Schwab you can probably ditch them if you like. If you’re holding securities (stocks, bonds, etc), as long as they are transferable you can do an in-kind transfer (so the security never get sold to cash) and therefore there’s no taxable event during the transfer.