Listen, I don’t begrudge the brokerage industry the right to make money. But there are some fees – like pesky bed bugs (ever live in NYC?) – that are so little yet so insidious that it forces you to cry foul. While you may not find these fees front and center on your monthly brokerage statement, they are there, nibbling away at your money — and sanity.
We rooted through 58 fee types across 56 brokerages and came up with a list of 10 fees that we felt most investors would say “seriously?” to if they found them on their monthly statement. After analyzing over $100,000,000 in fees we discovered which brokerages charged these annoying fees the most. Is your brokerage on the list?
A forward about fees in the financial world
The fact is investors have to pay someone something to invest. There are costs involved and no one wants to work for free. So, fees – even though we’d like to avoid them on our way to boosting our investing returns – are really just a way of life. In fact, it’s been getting tougher and tougher for brokers to succeed in the investment world for a variety of reasons:
- Online discount investing: Investors have been able to do more and more of their investing online, which means brokers historically fat commissions have been put on a pretty severe diet.
- Cheaper, more efficient investing products: Low cost ETFs have proven to be huge competition to mutual funds, which has pushed management fees down.
- New tools, added visibility: The added transparency that tools like SigFig have introduced to the industry has also influenced the revenues the industry enjoys.
So no, fees aren’t bad. The people doing the leg work need to make a living (and a majority of them do that work with honesty and integrity). When all is said and done though, there’s still no excuse for those “seriously?” fees which investors often times can’t see, can’t avoid, and more often than not don’t understand. All you have to do is ask Bank of America how consumers felt about their $5 debit card fee.
Top 10 most annoying brokerage fees of 2011
Almost 15% of investors on our platform paid one or more of these irritating fees last year. We’re willing to bet many of these investors don’t even know they paid them. Take a look at the top 10 list below. Did you pay one of these fees last year?
- Reorganization Fee: When a company decides to split its stock, buy back some stock, or undergo a merger and acquisition, it’s considered a form of reorganization. Sometimes an investor has the option to participate, other times not – regardless; most brokerages charge their clients for processing these. One consolation: investors may be able to use this fee to raise their cost basis to help with taxes.
- IRA Account: If you are one of the millions of Americans that holds an individual retirement account (IRA), chances are you may be paying your brokerage a yearly fee just to hold it with the firm. Why should you pay just to park your account with your brokerage? Are they paying a person to physically hold your account?
- Delayed Settlement: This is when a buyer (your broker) doesn’t receive the delivery of the securities he/she bought by the settlement date. A delayed settlement may or may not be by mutual consent of the counterparties to the transaction, meaning you weren’t aware of the delay or didn’t agree to it.
- Not Sufficient Funds (NSF): Make sure when you write a check to your brokerage off of your bank account that you have enough cash to cover it. Otherwise, you’ll be charged an NSF fee.
- Termination – Well, brokerages hit you with fees going and coming and you might get hit by what’s called a termination fee when you decide to close your account. You want your money? You’ve got to pay to get it out.
- Paper Settlement: This is a monthly fee that brokerages charge to print out and mail a paper statement. It’s not just the cost of paper and a stamp — they’re making money off this when they charge smaller accounts (typically, less than $10k) an actual fee to send a monthly mailing.
- Below Minimum Balance: Some brokerage firms set arbitrary ranges for minimum account balances. Drop below this number and they’ll assess a fee. So much for accessibility.
- Statement Reprint: What happens if an older investor misplaces a statement? What if they’re not really savvy enough online to retrieve it from the firm’s website? Well, many brokerages will be happy to resend it — for a fee.
- Secure ID: Online security of brokerage accounts is a serious issue. To help lock down accounts, some firms issue security tokens to ensure it’s only the investor who logs into an account. The brokerage passes the financial burden of the ID to the account holder. Should you really need to pay to ensure your accounts are secure?
- Failed Statement: Sometimes, a brokerage statement doesn’t make it all the way where it was intended to go. If a customer mailing (emails, too!) is returned to a broker, brokers may penalize their account holders. “Don’t blame me, blame the messenger” right?
Which brokerages charged these the most?
The numbers below refers to the total number of fee types each brokerage charges. Bolded brokerages have enacted a fee no one else has. So Etrade for example charges 5 out of the 10 fees listed above and one of those 5 is a fee only they charge.
Out of the 10 fee types above, the following brokerages charged:
- TD Ameritrade – 6 (only brokerage that charges a failed statement fee)
- Etrade – 4 (only brokerage that charges a secure ID fee)
- Merrill Lynch Online – 4
- Merrill Lynch Direct – 4
- Merrill Edge- 4
- Edward Jones – 4
- Ameriprise Financial – 3
- Schwab – 3
- Salomon Smith Barney – 3
- Morgan Stanley Smith Barney – 3
- USAA – 2
- Scottrade – 2
- Morgan Stanley ClientServ – 2
- Pershing – 2
- Fidelity – 2 (only brokerage that charges a late settlement fee)
- Sharebuilder – 2
- Robert W. Baird and Co. – 2
- T. Rowe Price – 1
- TradeMONSTER – 1
- MB Trading – 1
- Northern Trust – 1
- Options House – 1
- Zecco – 1
- Hewitt Financial Services – 1
- RBC Wealth Management – 1
SigFig helps you expose and avoid these fees
Some fees are necessary, but some fees aren’t. We can’t wait to launch SigFig because it will help the every person understand what they’re paying in fees as well as which of those fees are necessary and which aren’t. We believe the best antiseptic for these hidden fees is transparency, something SigFig’s going to help bring to the industry. We’ve even developed an alert system for SigFig that’ll let you know the moment your brokerage charges you a fee we feel you should know about.
For investors on our platform today, we’ve already identified millions in fee saving opportunities. Want to see how much you’re paying in fees? Sign up for SigFig beta access.
This website is not intended as and does not constitute an offer or solicitation to sell any securities. Such an offer or solicitation can only be made by contacting your advisor ro broker directly. No person should rely on any information in this website, but should rely exclusively on the investment management agreement and related materials in considering whether to invest. Consult the adviser’s investment management agreement for complete risk disclosures and other important information.