Fees. If you’ve done any investing or trading, you’ve dealt with fees. Brokerage fees. Commissions. Transactions, custodial and management fees. If you know about these fees, you sometimes wonder if you’re only making enough in your account to cover the fees!
Then the commission-free investing and mobile stock trading apps came along. First one, then others, even big-name brokerages, have tried to keep up. But it hasn’t been problem free.
A Cheat Code
In an article on Zero Hedge, written by Tyler Durden, he writes about a “cheat code” for unlimited money. Now empowered, the individual investor can put themselves into a seven-figure margin call overnight. They write options on a brokerage app with a cheat code for unlimited money.
Says Durden, “It looks as though the world of high fee money management could be coming to an unceremonious – and permanent – end.”
He continued, “Over the past 18 months, hedge fund, brokerage and ETF fees have all been plunging. That trend of demand for lower fees isn’t going to stop anytime soon.”
Asset Managers To Reduce Fees
Bloomberg says half of all asset managers will reduce fees next year. They attribute this to investors rotating out of actively managed funds into passive funds.
Other reasons have played into this free fall on fees charged. But Durden sums it up nicely when he wrote, “Earlier in the summer, we noted that the Robinhood-inspired shift to zero fees affected not only hedge funds – but the entire industry.”
Even the big-name brokerages are feeling the pinch. In a series of Tweets, Bloomberg’s Morgan Barna, CFA, showed over the last five years, Schwab has seen its revenue per trade collapse. This has happened as they have tried to keep pace and sometimes lead the charge for lower commissions, hoping to bring in new clients.
Low Fees, But Problems
On December 17, 2020, Robinhood agreed to pay a $65 million fine to settle U.S. Securities and Exchange Commission (SEC) charges that it misled customers. Yahoo Finance reported, “The company neither admitted nor denied guilt while paying the penalty.”
Although Robinhood and others have appealed to a younger investing group, they’ve had many problems. Everything from lack of customer service to network outages, the startup didn’t seem to deliver all that’s expected.
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