Investment fees are usually charged by brokers and fund managers for either performing transactions on behalf of an investor, for servicing an investor's account or for managing a fund. Some advisors are shifting from a commission-based revenue structure to one based more on flat service fees, which many investors consider more transparent.
Money for something?
Investors generally incur most of their transaction fees on the buy side, which are charged by their securities broker, although they also incur a smaller "SEC fee" when selling that is actually passed on from broker to client. The higher the rate of transaction within an account, the more revenue the broker generates from these fees. Mutual fund fees are separate charges, expressed as a percentage that defines the proportion of an investor's money, that are diverted from an investor's account by the fund manager. These fees, which are intended to cover the fund's internal expenses, can seriously affect performance especially in bear markets.
Investment advisors that are shifting from commissions to charging investors hourly service fees on their accounts often take a broader view of investors' financial needs and adjust their fees accordingly. Investors can usually expect more efficient service from such advisors, as well as and objective advice untainted by outside commission incentives.
- ↑ Impact of Investment Fees. AARP.org.
- ↑ Paying Your Investment Advisor - Fees Or Commissions?. Investopedia - Forbes Digital.