Skip navigation
FINRA Report Finds Some Investors in the Dark on Fees

FINRA Report Finds Some Investors in the Dark on Fees

A new FINRA report analyzed the investment knowledge of more than 2,000 respondents with investments in nonretirement accounts.

A significant percentage of investors with investments in nonretirement accounts may misconstrue the types of fees they pay for trades, account services, mutual funds and investment advice, according to a new report from the FINRA Foundation.

Investors in the United States: A Report of the National Financial Capability Study” analyzed responses from more than 2,000 individuals who held investments in nonretirement accounts (though most invested in retirement accounts, as well). Respondents also submitted answers to a 10-question quiz testing their investment expertise.

According to Gary Mottola, the research director for investor education at FINRA, nearly a third of the investor population either believed they did not pay fees or commissions on their accounts or did not know what they were paying at all. 

“One thing we found somewhat disconcerting is when we asked (investors) how confident they were in understanding fees, 60% said they were confident,” he said. “Generally speaking, investors feel pretty confident on understanding fees, but the data shows something different.”

According to the report, 56% of investors said they paid fees or commissions for trades, and slightly less than half said they pay fees on service accounts, while 60% of investors who frequently talk about their options with a professional reported they did not pay any fees for investment advice. Additionally, only 30% of respondents were able to answer six or more questions correctly on the 10-question quiz, suggesting sparse expertise in investing among the population.

“With financial knowledge in general, people tend to be overconfident,” he said. “When we ask people to rate their knowledge on financial matters, it’s higher than when we objectively measure it.”

The report found that 32% of the country invested in nonretirement accounts, a bump of only 2 percentage points from a similar FINRA survey conducted in 2015. While the number of men with nonretirement investments increased from 35% to 39% during that time, the percentage of women with such investments remained flat at 25%. According to the survey and similar to 2015, those with nonretirement account investments tend to be “male, older, white, college educated and have higher household incomes” than the country as a whole.

Mottola said the report could help advisors learn about how investors operate. He noted that most investors take a mix of approaches in making investment decisions and executing trades. For example, among investors who sometimes had a professional making investment decisions for them, 72% also sometimes made decisions based on their own research, while 51% of investors who trade online sometimes make trades through an advisor. Additionally, investors tend to always assume their investments will overperform, which Mottola said was vital information for advisors when managing client expectations.

“Only 4% of investors believe their portfolio will underperform the market, when we know in reality that percentage is much higher,” he said.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.