Pressure from discounters could be keeping the lid on commission hikes at full-service firms, and pushing some brokers to discount more.
According to a Securities Industry Association report, firms' commission rates held steady in 1998 (see chart below). Most respondent firms also reported that the amount of discounting either remained the same from 1997 or had increased.
The 47 participants in the survey included most of the major full-service firms.
Fifty-eight percent of the firms said the amount of discounting going on at their firms had remained the same since 1997, while 38% said they were doing more discounting.
The most typical discounts were 20%, 25% or 30% (these amounts were cited by a total of 57% of the firms). The maximum amount a rep can discount without permission ranged from 0% to 100%, with a midpoint of 39%. According to Steve Carlson, SIA director of surveys, a "large number" of firms said they allowed reps to go as high as a 50% discount without prior approval.
The survey also covered fee and account pricing. The SIA did not summarize the fees charged on wrap accounts since each firm is unique in its fee breakpoints and other factors, Carlson says. The survey did find that two-thirds of the firms offer wrap accounts, with 87% varying the fee based on asset size or type of asset. The firms used a variety of asset management structures within their fee programs.
Annual fees charged for central asset accounts ranged from free to $100, with a midpoint of $65.--D.J.