Hidden Brokerage and Investing Fees

by Kevin Mulligan

Getting your retirement savings kicked off is a fantastic move and one you should be excited about. But just because you’ve made a great decision doesn’t mean you should rush into a poor one by opening a brokerage account with a broker that is going to surprise you with a lot of hidden and expensive investing fees. There are only four things you need to worry about with investing: consistently saving, asset allocation, investing expenses, and taxes. You are probably familiar with the other three, but investing expenses are one of those hidden things that can eat away at your retirement nest egg.

6 Hidden Fees That Brokers Try to Surprise You With

how to avoid investing fees

Avoid these investing fees whenever possible!

Here are six different investing fees you need to check with any brokerage about before you open an account.

Account Fees

The first to watch for is an account fee or minimum balance fee. You should avoid most brokers that charge this fee unless the minimum balance requirement is really low (between $100 and $500). Sometimes just getting started can be tough with retirement investing, so why make it harder by agreeing to pay a fee if your investment selections go down in value?

Annual Fees

Some brokers will charge an annual fee for holding a certain type of account like a Traditional IRA or Roth IRA. Unless the broker has some other amazing benefit that makes this fee worthwhile, skip out. There are too many choices available in the brokerage field to pay this unnecessary fee. The only time you may wish to pay an annual account fee is if you have special investments which require more paperwork or legal documentation. This can be common for certain investments such as individual retirement accounts (above a certain portfolio value), trusts, or other specialized investments. Many of these investments won’t apply to the average investor.

Account Closing

Most brokerage firms will charge you a fee to close your account or to close an IRA. For the most part this fee is unavoidable. There are costs involved with closing your account, sending out your final statements, and so forth. This is more of an industry standard, unfortunately. You can expect fees around $50 to $75 to close an account with most brokers.

Transfer Out Fees

Likewise if you want to transfer your entire account to another brokerage firm, a transfer out fee will often apply. These are often referred to as ACAT fees, or Automated Customer Account Transfer. Under normal circumstances you won’t pay both an account closing fee and a transfer out fee. The account closure fee is more if you got a check sent directly to you than having another broker close your account to transfer the funds. Thankfully most brokers that you would transfer your account to will agree to pay part of all of the fee, depending on what your broker charges. (Just make sure to read the fine print before you officially open the account.)

Paper Statement and Trade Confirmation Fees

Here’s a sneaky one: I once had an online-only brokerage firm that would send out paper trade confirmations and paper statements for a $2 fee each. This was the default setting. You had to go deep into your profile to change the setting to being electronic confirmations. I got dinged with a few fees before I figured it out.

Final Thoughts

The bottom line is make sure you get a full fee disclosure from the brokerage firm before you open your account. You need to know exactly what they can charge you for and see which items you can get turned off (like the statement fees mentioned above). All of these fees may seem like a few bucks here and there, but they can drastically alter your retirement nest egg if you let them be charged to you unchecked for years.

Published or updated May 12, 2015.
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