Falling for fees

Commission-based trades have long been the norm in the brokerage account biz. But the crisis in investor confidence over the past year may change that. More and more clients are trading in their pay-per-trade accounts for fee- or asset-based accounts with annual fees.

Why the shift? Both recent market volatility and concerns about ethics and potential conflicts of interest are driving the trend, asserts Ken Evason, president and CEO of Milwaukee-based Jacobus Wealth Management, adding that tying fees to assets under management rather than the number of trades more closely aligns the interests of the client and his or her broker. "Clients are saying, 'We want somebody who is objective and doesn't have a stake in a particular judgment of recommendation,'" he explains.

Making the switch from a transaction-based to a fee-based account may necessitate changing brokers. While large brokerages, such as Merrill Lynch and Morgan Stanley Dean Witter, offer both options, may boutique brokerages offer only one or the other. But before you make the move, advises Evason, be sure it's right for you. Fees typically range between .75 and 2.25 percent of assets, with larger accounts winning lower rates. "Most firms tailor fees to the level of assets under management and the services the client wants," says Evason. "To really benefit, an investor would need a portfolio of $1 million or more."

COPYRIGHT 2002 Entrepreneur Media, Inc.
COPYRIGHT 2008 Gale, Cengage Learning