Chapter 2: Your Broker’s Hand in your Pocket

Do You Know What Broker’s Fees Are?

What are the total fees your broker charged you or may charge you in 2025? These fees are in addition to the expenses we already talked about in chapter one of this “book.” (And this isn’t the end of the things that gnaw at your investment balance.)

Brokers can charge various fees to their clients based on the services they provide and the nature of the transactions. The fees include commissions on trades, management fees, account maintenance fees, load fees (discussed in the previous chapter), transaction fees for options trades, inactivity fees, withdrawal fees, and margin fees. Some also charge extra for research and data.

Most don’t even want to explore these, but some of these fees can cause significant degradation to your investment growth.

Here’s a breakdown of the common fees associated with brokerage accounts:

Acceptable Fees

Some fees and costs are entirely understandable and reasonable. For example, when I trade options, both covered call options and cash covered put options, I pay two possible fees. There is a “commission” which is $0.65 for a single option contract of 100 shares. Sometimes there is also an additional regulatory “fee” that is $0.02 per contract. So I can expect to pay $0.67 when I do an options trade. (As the number of contracts increases the commission and fee increase as well.)

For example, my total commissions and fees for trading options in 2025 now total $3,407. However, bear in mind that those fees also generated income of $183,432 as a result of doing the options trades. That means the cost of those trades was 1.8%. I’m willing to accept that cost because it is a small fraction of the total value of the increased income.

There are fees I don’t want to pay. I do not pay “Account Maintenance Fees” or “Account Management Fees.” Those fees are often difficult to spot. Your broker would prefer that you ignore them and not know the total impact of those fees.

Unacceptable Fees

It makes me sad that a broker will charge a fee for account inactivity. In the age of computers. I’ve seen situations where a bank account was drained by a bank due to “inactivity.” I won’t do business with Wells Fargo for that very reason. “Research and Data Fees” are not common, but I certainly would not pay for that.

Of course I do pay for my Seeking Alpha subscription, but Seeking Alpha provides a ton of resources for a very nominal cost. One right decision or avoiding even one wrong decision more than covers the cost of the subscription.

Finally, just about any fee for a “Withdrawal” is just predatory. I’ve seen those types of fees just for closing an account or moving an account to a different broker. Fidelity Investments, by the way, often reimburses new clients when they are gouged by their former broker. There are two costly fees that bear special attention.

Costly Fee Number One: Account Maintenance Fee

One fee that I find particularly obnoxious is the “Account Maintenance Fee.” In this day of computerized and online trading, charging a fee to maintain your account is ludicrous. However, most customers don’t think about these fees and probably don’t even notice them on their monthly statements. Part of the problem is that most people don’t even review their statements.  The maintenance fee may be charged monthly, where it doesn’t seem like much unless you pay it for twenty years. If it is charged annually you might not see it if you don’t scan your December statement (or January statement.)

The Monthly Maintenance Fee can vary from $5 to $25 per month. Banks are often guilty of grabbing money from their clients. The Annual Maintenance Fee can vary from $50 to $200 per year. Lest you think this is unusual, I can tell you that I have seen these types of charges on more than one broker’s statements.

Brokerage Companies with High Account Maintenance Fees

Using AI, I asked which brokerage companies have high account maintenance fees. It isn’t surprising that the “full service” brokers tack this on in addition to other charges they apply to their customer’s accounts. The charges can vary based on the client’s account size and the services they receive.

  • Merrill Lynch (Bank of America) charges up to $250 annually.
  • Morgan Stanley charges $100 to $300 annually  
  • Edward Jones can charge around $50 to $150 annually.
  • Wells Fargo Advisors charges up to $150 annually.
  • UBS Wealth Management charges from $100 to $500 annually.

Costly Fee Number Two: Management Fees

This one is generally even more onerous than the account maintenance fee. Because I have helped several individuals with accounts at Edward Jones and RBC Wealth Management, I have seen these fees many times. Sadly, the fee is usually at least $5,000 every year if the investor has an account balance of $500,000. That is an annual 1% drain on the total account balances. I speak from experience in reviewing various statements.

Think about $5,000 that disappears from your account balance over ten years. The problem is greater than the $50,000 removed from your account balance. This is due to the fact that you also lost the power of compounding.

I asked AI the following question: “What is the total cost of an account maintenance fee if $5,000 is charged every year for ten years and the investor does not get the 10% gain from those dollars?” The answer was: “If the investor does not pay the fee and invests the money instead, after ten years at a 10% annual gain, it would grow to approximately $79,687.”

What you really lose is not just $50K but almost $80K. Raise your hand if you think that is acceptable for a $500K account? What would the total fees and lost opportunities look like after thirty years? Also ask yourself, did my broker give me $5,000 of good advice during each of the ten-to-thirty years? Did their advice change? Did they succeed in giving me better returns than a low-cost index mutual fund or ETF?

Example One: Edward Jones Annual Management Fee

Edward Jones charges a fee based on a percentage of assets under management (AUM). This generally ranges from 0.5% to 2% annually, depending on the size of the account and the services provided. While they probably wouldn’t charge 2% for a $1M customer, even 0.5% is a bit steep. Remember: the work they are don’t for thousands of clients is often very much the same for each one of them. They aren’t necessarily doing something unique for each unique individual.

Example Two: RBC Wealth Management Fees Annual Management Fee

RBC typically charges an annual management fee based on a percentage of assets under management (AUM). This fee often ranges from 0.5% to 2%, depending on the total account value and service level.

If you don’t care about fees, then you can ignore this chapter. If you do care about them, then I suggest the following action items.

Actionable Items

  1. Look at your monthly statements, especially if you have a high-cost broker like Edward Jones or RBC Wealth Management. Even if you use Fidelity Investments or Charles Schwab you might be paying too much. You may have to scrutinize the statement, as they don’t want you to quickly see the charges.
  2. Add them up. What are the “account maintenance fees” and the “account management fees?” If you tell your broker that you want him/her to manage your investment accounts for them, then you will be paying for that service.
  3. If you have been paying an “account management fee” and the core investments in your retirement accounts have not changed in any material way, why not consider telling your broker that you no longer want or need their “help?” Let’s face it, most of the good investments should not change year-after-year. If you have a sizable investment in good quality (and low cost) mutual funds and ETFs, you won’t want to sell them. Therefore, the broker doesn’t really have to “manage” the account as proactively as you might think.
  4. Add the costs from Chapter One with the costs I discussed in this chapter. If you like the total, you will be the exception to the norm.

Conclusion to Chapter Two

The bottom line when it comes to fees is that they reduce your bottom line. They reduce your potential total income. Some might argue that the advice they receive is necessary  because they believe they don’t know enough or cannot easily know enough to make investment decisions on their own.

Investing is not the same as brain surgery or rocket science. While a little work is needed, it isn’t something that has to eat away at your time every week. You need to understand some basic concepts and then apply them in the decisions you make.

Footnotes and Definitions: you need to think about the big picture of the costs of your investments.

  • Commissions: Charges for executing buy or sell orders. This can be a flat fee or a percentage of the trade amount.
  • Management Fees: Ongoing fees charged for managing investment portfolios, often calculated as a percentage of assets under management (AUM).
  • Account Maintenance Fees: Regular fees for maintaining the brokerage account, sometimes waived if minimum balance requirements are met.
  • Load Fees: Fees associated with mutual funds, usually taken from the investment amount upfront (front-end load) or at sale (back-end load).
  • Transaction Fees: Charges for specific transactions, such as options trades or international trades.
  • Inactivity Fees: Fees for accounts that remain inactive for a set period.
  • Withdrawal Fees: Charges for withdrawing funds from the account, particularly for wire transfers or checks.
  • Margin Fees: Interest charges on borrowed funds used for margin trading, usually calculated daily. Avoid using margin for your investing. Don’t sign margin agreements under any circumstances.
  • Research and Data Fees: Costs for accessing premium research, market data, and analytical tools. Some brokers offer free resources, while others charge for advanced information.

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