Large brokerage firms have millions of clients, and several account holders may have the exact same first and last name. To avoid confusion and speed up the process of identifying individual clients, each account holder is assigned an account number. In some brokerage houses, the account number consists of only numbers, while other firms use a combination of numbers and letters.
Having a user name makes the process of accessing your account significantly easier. When you call the customer service line, for instance, providing a combination of numbers is far quicker than spelling your first and last name, which still may not be enough if there happens to be another customer by the same name.
In addition, the account number also helps avoid mistakes. When you send a check or money order, for example, the brokerage firm instructs you to write your account number on the check. This provides an additional safeguard because both the name on the check and the account number must match before the funds are transferred. If the clerk makes an error while entering either the name or the account number into the system, the transfer will not be completed.
Another function of brokerage account numbers is to distinguish between different accounts belonging to the same investor. In many cases, an investor may have an investment account and a retirement account with the same brokerage firm. Therefore, the investor is assigned different account numbers for each of these accounts. This helps to avoid transferring funds from or into the wrong account and violating SEC restrictions by performing restricted trades in retirement accounts instead of investment accounts, which carry far fewer legal restrictions.
Not a Tax ID
The account numbers assigned to investors by the brokerage firms are not tax IDs. In other words, when your brokerage reports your stock investment gains to the IRS, it will use either your Social Security Number or, if you do not have one, a taxpayer ID number. The account numbers are only used for correspondence between you and the brokerage firm and internally by the broker.