As the trend continues away from commission-based investing, toward fee-based accounts, the number of brokerages that have transitioned to offer fee-based services has jumped dramatically in the past two years, from 98 firms to 171, according to a recent study. Caught in the middle of this development are investors who, despite not being active participants, could possibly end up paying more for the maintenance of their accounts than if they were paying by trade.
The survey by
The survey, which covered 341 retail brokerage firms, said an investor with an account balance of $100,000, may be charged an average annual fee of 1.5%. This means that an investor paying a full-service commission of $100 per trade would need to make a minimum of 15 trades per year in order to save money by switching to a fee-based account. Moreover, the same investor paying an online commission of $14.95 per trade would need to make a minimum of 100 trades per year to make a fee-based account worthwhile.
Examples of fees at several retail brokers included the following:
- Morgan Stanley Dean Witter Choice
$100,000 account fee: $2,250 or 2.25%
$1 million account fee: $16,250 or 1.63%
- Merrill Lynch Unlimited Advantage
$100,000 account fee: $1,500 or 1.50%
$1 million account fee: $15,000 or 1.50%
- E*Trade
$100,000 account fee: $1,500 or 1.50%
$1 million account fee: $15,000 or 1.50%
- UBS PaineWebber Insight I
$100,000 account fee: $1,250 or 1.25%
$1 million account fee: $7,500 or 0.75%
- Prudential Advisor
$100,000 account fee: $1,000 or 1.00%
$1 million account fee: $3,250 or 0.33%
