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What Does My Broker-Dealer Affiliation Really Cost Me?

What Does My Broker-Dealer Affiliation Really Cost Me?

Fees are back in the news again as Fidelity recently announced it was upping its quarterly platform fees for smaller RIAs. This comes on the back of a FINRA announcement that it was filing a recruitment compensation proposal with the SEC in their stated effort to increase transparency to investors.

With these news items still fresh in the headlines, I thought it might be helpful to review the various fees you may be assessed by the multitude of broker-dealers knocking on your door this recruiting season. While not every firm charges all the fees discussed below, this laundry list will help you determine the miscellaneous fees and hidden charges that might impact your (and your clients’) bottom line.

If you are not sure what fees are charged or passed through to your or clients, be sure to ask. Nobody wants to be smacked in the face by an assortment of hidden fees after you affiliate with another broker-dealer, so make certain to take the time to inquire before committing to anything.


Ticket Charges

Probably the single biggest cost an independent rep or advisor deals with are the ticket charges assessed when executing trades on behalf of clients. For advisors, a lower ticket charge means that you are able to retain more assets in the account. 

For a commission-based broker or hybrid advisor, lower ticket charges provide a number of benefits. First, it allows more active managers to contain costs because the ticket charges don't have as big an impact on the account. Second, reps can pass through lower costs to their clients while, in many cases, earning the same or slightly more than they did at their prior firm.

Finally, critically, a low ticket charge gives reps the ability to compete with discount firms for self-directed business. Not only will you get better insight into your clients’ overall financial picture, but this can also translate into a new way to generate business and an untapped revenue source. It can also help you cater to a younger demographic that is more interested in having a self-directed account. In today's competitive and cost-conscious environment, you need to leverage every advantage available to you.


Miscellaneous Fees and Charges

These are the baggage charges of broker-dealers; however, instead of providing advisors with choices on how to manage clients, these fees often inflate costs for everyone. Unfortunately, this nickel-and-dime practice is all too common, and here are the most common fees and charges you may see:

·       Technology/Platform Fee

·       Affiliation Fee

·       Email Fee

·       Continuing Education Firm Element Fee

·       Customer Service Fee

·       Trade desk fee (for phoned-in orders)

·       Branch Audit Fee


You also need to consider costs that are passed through to your clients, who can often get hit with miscellaneous fees and hidden charges just like you, including:

·       Inactivity Fees

·       Maintenance Fees

·       Annual IRA Fees

·       Postage & Handling Fees - Yes, some firms may assess your clients a handling fee for every transaction you make, and this fee could be more than your commission charges. Think I’m joking? Read this post on to see how egregious this has been in the past:


The Signing Bonus/Incentive Shell Game

It is easy to be swayed by a big signing bonus or forgivable loans, but take time to evaluate how the incentive will impact your business over the long haul. Doing a little math often demonstrates that lower ticket charges and little or no miscellaneous fees can more than make up for an upfront bonus within a few months.

For example, Firm A is offering you a $25.00 ticket charge, $500 in monthly fees, and providing you with an upfront bonus of $10,000 (excluding taxes). Firm B is offering you a $10.00 ticket charge, but their ticket charge includes all of the separate miscellaneous fees that Firm A assesses. 

Assuming you did 250 transactions a month, you would save $3750 each month in ticket charges alone by going with Firm B. If you add in the $500 monthly fee the monthly savings jump to $4250. 

At Firm B you would have saved $12,750 after just 3 months which more than makes up for that $10,000 signing bonus. And keep in mind that those savings will continue to accrue resulting in an annual savings of over $50,000 every year of your affiliation.

So, be prepared to dig into any offer sheet to ensure you understand all of the costs you and your clients might be responsible for paying. Sure, schedules may change from year to year, but make sure you do your homework and dig deep to identify those miscellaneous fees and hidden charges. These kinds of surprises not only can impact your bottom line but also affect the relationships you have with your clients.


Gary Martino is the Vice President of Sales and Business Development at MoneyBlock (Member FINRASIPC), an online broker-dealer serving independent reps and advisors ( Prior to this role, Gary was Chief Operating Officer at brokersXpress, where he helped on-board more than 650 independent reps and advisors.


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