Recent changes announced by investment firms may have you confused about how youre supposed to manage your nest egg.
TD Ameritrade quickly announced a similar move.
Lower cost means greater access to investing vehicles for consumers who may feel intimidated by confusing fee structures.
But asBloomberg pointed out this week, theres got to be a risk to those consumers.
Otherwise, theres no chance these firms would be giving away trades.
As passive investments like index funds have grown in popularity, the investment industry has gotten more efficient.
As individual investors have gotten more savvy over the years, firms have gotten more competitive.
If one big-name firm lowers its rates, the others are going to follow.
Its a healthy competitive dynamic, Grealish said.
So healthy that were hitting the bottom of the fee barrel.
Schwab just got ahead of it.
Schwab had a major advantage it could capitalize on by jumping into the no-fee waters first.
He cited a few major ways firms can make up for losing those fees.
First, theres the upsell.
Or, the firm could be making money in other ways that dont involve its individual customers.
Or, the brokerage could receive fees for facilitating trade orders for third parties.
A bunch of youpointed this out the last time we discussed then no-fee shift.
So choosing a firm to manage your investments based on trading fees alone is a shortsighted move.
Look at your expense ratio, look at how the fund performs relative to its benchmark, Grealish said.
Weiss recommends considering the question, How are you making money off my relationship?
as you consider a firm to manage your investments.
If someone cant tell you, change your relationship, he said.
