My broker says I have to close my one-fee-does-it-all account. What's up?
You're among the million or so investors who will likely be hearing from their brokers soon as a result of recent regulatory changes. Brokers will no longer get a pass on the rule that requires anyone who gives advice for a fee -- even just stock tips -- to be registered as an investment adviser. That designation legally binds them to put their customers' interests ahead of all else.
Before, brokers who offered fee-based accounts needed only to ensure that securities were "suitable" for clients -- a lesser standard that is still in force for brokers paid in commissions. At stake is $281 billion in fee-based brokerage accounts, also called wrap accounts. The average account is worth $279,000 and is paid for by a percentage of assets under management rather than commissions.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Most likely you'll have to choose between transferring your money to an account with full advisory services (assuming your broker offers one) or a commission-only account. You could pay $200 a year more than you do now to go the full-advice route, according to consultant Cerulli Associates, so make sure you need the extra attention.
If you choose to pay commissions instead, you may also end up shelling out more money, according to industry calculations. You'll want to monitor trading to make sure it's no more frequent than was the case in your wrap account.
-
Gen X? Challenges Lie Ahead as Retirement NearsTapping home equity and working longer are key strategies that can help overcome a savings shortfall.
-
How Grandparents Can Help with Education ExpensesBefore paying for your grandkids' education, it's important to consider how to help them without risking your own retirement. Here are 10 things to think about.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for a Fall Interest Rate Cut by the FedA lot can happen between now and then, but the probability the Fed cuts interest rates in September is back above 80%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?
-
How the Stock Market Performed in the First 6 Months of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
Fed Cuts Rates Again: What the Experts Are Saying
Federal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
-
Fed Goes Big With First Rate Cut: What the Experts Are Saying
Federal Reserve A slowing labor market prompted the Fed to start with a jumbo-sized reduction to borrowing costs.
