NASAA Research Shows Investor Confusion Over Brokerage Fees

Most Investors Don’t Know the Cost to Service and Maintain Their Accounts

WASHINGTON, D.C. (April 8, 2015) – New research from the North American Securities Administrators Association (NASAA) finds investors are confused when it comes to the fees charged by brokerage firms to service and maintain their accounts.

“Our research shows that investors are confused and unaware of how much their brokerage firm charges to serve and maintain their investment accounts,” said William Beatty, Washington Securities Director and president of NASAA. “Investors tell us fees are important and they want to see improved disclosure.”

Commissioned by NASAA, the independent research firm ORC International conducted a public opinion poll by surveying 1,072 investors with a brokerage account across the continental United States by telephone from January 8-25, 2015 regarding their awareness of service and maintenance fees charged by brokerages over the lifetime of an account.

The omnibus survey asked investors with brokerage accounts about their awareness of brokerage service and maintenance fees and on different approaches toward improving fee disclosure. Highlights of the findings include:

  • Brokerages routinely charge fees to serve and maintain brokerage accounts, yet nearly one-third (30 percent) of investors mistakenly believe their firm had no such charges and one-quarter (25 percent) indicated they did not know whether they were being charged in addition to investment commissions.
  • Of the investors who know they are being charged, more than half (52 percent) indicated that they did not know the amount they pay in fees to serve and maintain their account.
  • Of all investors surveyed, nearly three-quarters (71 percent) indicated that they did not know the amount of additional service and maintenance fees their brokerage firm charges for services they might need in the future, such as transferring their account to a different brokerage or obtaining documents from their brokerage.
  • Fees matter to investors. Nearly all investors, (81 percent) said the amount of fees they pay for services and account maintenance over the lifetime of their account is important to them.
  • Nearly eight of every 10 investors (79 percent) would like their brokerage firm to provide a separate chart that lists its service and maintenance fees in a format that is simple to read and understand. Roughly two in three investors (65 percent) would prefer a direct link on their brokerage firm’s website to a chart of service and maintenance fees.
  • Nearly nine out of 10 investors (88 percent) would like to see brokerage firms use standardized and uncomplicated terms to describe service and maintenance fees in order to help compare fees between different firms.

The investor survey was conducted following the release last year of a study by NASAA’s Broker-Dealer Section uncovering a wide disparity in how broker-dealers disclose the fees they charge customers and questionable practices regarding broker-dealer fee charges and markups.

“Greater transparency and improved disclosure would allow investors to quickly and easily compare prices, products and firms,” Beatty said. “While broker-dealers may be complying with the technical requirements governing fee disclosures, our research shows that improvements are needed to raise awareness among investors of the costs associated with their brokerage accounts.”

NASAA has convened a working group consisting of state securities regulators and representatives of FINRA, the Securities Industry and Financial Markets Association (SIFMA), the Financial Services Institute (FSI), and representatives of broker-dealer firms to work toward the development of standardized and uncomplicated broker-dealer fee disclosure. “State securities regulators applaud the brokerage firms that have come to the table to work with us and we are hopeful the working group will produce meaningful and voluntary reforms,” Beatty said.

Methodology:
The survey was conducted by phone, including landlines and cell-phones, within the United States by ORC International’s CARAVAN on behalf of NASAA from January 8-25, 2015 among 1,072 investors with brokerage accounts ages 18 and older. The sample included 547 men and 525 women. Survey results are weighted to be nationally representative of the U.S. adult population. The margin of error for the sample of 1,072 is +/- 2.99% at the 95% confidence level.

About NASAA:
The North American Securities Administrators Association, Inc. (NASAA) is the non-profit association of state, provincial, and territorial securities regulators in the United States, Canada, and Mexico. 

About ORC International:
ORC International is a leading global market research firm with offices across the U.S., Europe and Asia Pacific. Founded in 1938, ORC has been the proud partner of CNN on the CNN|ORC International poll since 2006.

For More Information:
Bob Webster | Director of Communications
202-737-0900

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