Brokers commonly buy stocks, secure insurance plans or help procure mortgage loans, and depending on the industry, brokers can do even more. Whether you currently use a broker or are contemplating the use of one in the future, it’s important to understand the fees associated with their services.
What are brokerage fees?
A brokerage fee is a cost charged to a buyer for any action a broker takes to facilitate your purchases. A brokerage fee is not limited to charging on the direct action of helping you make a purchase. Though brokers provide knowledge, speed and convenience during the buying process, that’s not all that will cost you.
Flat trading fee
A flat trading fee occurs when a broker earns a set rate on each unit purchased by the buyer. For example, if you want to purchase stocks from a company, a broker could charge you $5 for each stock purchased, or 1% of the cost of each stock. Whether you’re buying 10 or 10,000 stocks, the fee amount will not change. If you’re going to use an online broker for trading stocks, there are great options for as low as $2 to $5, which will help minimize your flat trading fee.
Just like when you purchase items on Amazon, your account will track what you’ve bought. The actions the broker takes in maintaining this account are account fees.
If your trade requires specific research and information from the broker, the charge can be anywhere from $1 to $30. The management and upkeep it takes a broker to maintain your portfolio can cost you around $50 to $75, charged annually. If your broker has access to certain trading platforms, you could be shelling out anywhere from $50 to $200. (The cost usually depends on the rigor of the platform.) However, with a bit of research and careful selection, you can find certain brokerages that offer these services for free.
If you have an open account with a broker, along with paying for services it provides, you could be pay for not utilizing them, too. Depending on the broker in use, you can be charged a fee for going a certain amount of time without making a purchase or dropping below an account balance. These fees tend to be charged by the quarter and can end up costing you $40 to $200 per year. This is not a universal fee for all brokerages, but should you plan to keep your account open and make less frequent purchases, keep this charge in mind.
Paper statement fees
Whether you think you’ve gone paperless by using an online brokerage or haven’t gotten around to checking the mail recently, you might be getting charged without knowing it. You’ll be charged a paper statement fee when you’re sent a physical copy of your purchase statement in the mail. This cost is typically low, about $1 to $2 per statement, but this monthly fee could total up to $48 per year. Depending on your broker, you can specify whether you want a paper statement or an online statement.
Account closing or transfer fees
Certain brokerages charge account closing or transfer fees for closing your account/switching to a different brokerage. This type of fee is less common, so there’s a chance your brokerage won’t charge you for this. If they do, you could be out $10 to $125.
A broker’s services extend past the direct action of making your purchase. Yes, your broker is the middleman between you and the seller, but the broker also maintain your account, which can end up costing you. Before you jump in and create an account, continue your research to find which broker’s services and fees best align with your financial goals.
|Brokerage||Flat Trading Fee||Research Fee||Annual Fee||Trading Platform Fee||Inactivity Fee||Paper Statement Fees||Account Closing or Transfer Fee|
|Ally||$4.95/stock with no account minimum||$0||$0||$0||$0||$2/statement||$50 transfer|
|E-Trade||$6.95/stock||$0||$0||Pro trading platform only available to individuals making 30+ trades/ day with minimum account balance of $250,000||$0||$2/ statement with option for free electronic statement||$75 transfer, with $25 for partial transfer|
|TD Ameritrade||$6.95/stock||$0||$0||$0||$0||$2/ statement with option for free electronic statement||$75 transfer|