Retail investors usually have no idea how much their brokers charge them in fees other than commissions, because brokerage firms do a poor job of telling them, according to a survey released this week.
The North American Securities Administrators Association commissioned a survey of 1,072 Americans who said they had brokerage accounts. It found that 30 percent of investors thought their brokerage firms didn't charge annual service and maintenance fees, although almost all of them do.
It found that 52 percent of investors were aware of such fees, but didn't know how much they were.
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And, it found that a large majority of investors want fees disclosed on their brokers' websites in a way that's "simple to read and understand," and that lets them compare fees among and between various firms.
A random review of more than a dozen broker-dealers' websites by BenefitsPro found none that disclosed service and maintenance fees, although some list their sales commissions and fees for specific services.
"That goes to show what investors are saying," said NASAA spokesman Bob Webster. "They want this information to be easily found on a broker's website."
Neither the Securities and Exchange Commission nor the Financial Industry Regulatory Authority, which jointly regulate the brokerage industry, requires broker-dealer firms to disclose maintenance and service fees to prospective clients. They are required to disclose them in quarterly account statements.
NASAA, FINRA, the Financial Services Institute and other industry players have formed a task force "to come up with a model for fee disclosure," Webster said. "We hope to have something to show by … September."
A spokeswoman for the Securities Industry and Financial Markets Association, which represents the brokerage industry, declined to comment on the NASAA survey. SIFMA has a representative on the fee disclosure task force.
As a rule, the bigger the brokerage firm, the higher the fees. Some charge 1 percent or more of a customer's account balance each year to manage the account. Discount brokers tend to charge lower service and maintenance fees or none at all.
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