Differences in Trade Execution Pricing Add Up, Even When It’s Just Pennies
Investors who ask their adviser to shop around for more efficient pricing on trades could end up with a lot more money in their retirement accounts at the end of the day.


If you discovered your retirement savings were reduced by thousands of dollars, you’d probably be upset! But many people lose significant sums of money from their retirement accounts without realizing it because of overly expensive inefficiencies in the execution of trades.
Every investment trade you make is influenced by how it is executed. Although commissions and fees on trades have been effectively reduced to zero, the way firms execute your trades makes a difference.
Trade inefficiencies result when firms don’t take a thoughtful approach to trade execution. These inefficiencies are usually very small, amounting to pennies per share. However, they add up quickly. If your mutual fund trades millions of shares, those pennies can become a sizable amount of money! Over years of trading, they can significantly subtract from your retirement savings.

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.
How Trades Are Cleared
Trades are conducted via clearing firms, which specialize in facilitating buying and selling investments, also known as trade orders. When you buy an investment, you get what’s called the “ask price.” When you sell it, you get the “bid price.” The difference between those two prices, usually very small, is called the spread and is one way clearing firms make money.
Some clearing firms are more expensive than others, so the best practice is to shop around for the best price. But many investment advisers don’t! They simply pick a trading custodian and create a trade order, which gets filled by the first offer regardless of how its price compares with other opportunities.
Know Your Adviser’s Strategy
Trading needs to happen in order to rebalance a portfolio and meet target levels of growth each year. The common notion is that if you buy a product and that product is good, you will get a positive return. But how the trade is done also needs to be viewed as a strategic tool to increase return. If you strategically buy a good product that results in a positive return, you will get a better return because you won’t lose some of that return through trade inefficiencies.
This concept is just like bargain-hunting in the non-finance world. Some people always buy from the same store without checking to see if another store sells the same thing for less money. If they shop around, they’ll have more money at the end of the day because they spent less on their shopping trip.
It’s important to understand how your investment adviser handles trades. Some recognize it’s not just the soundness of the investment decision-making that contributes to the client’s return, but also how much it costs to buy or sell those investments. There is a unique platform called UX Wealth Partners that finds the best available trade options for each trade ordered on behalf of clients. It’s available only to registered investment advisers (RIAs), but not all investment advisers use it.
It’s almost impossible for a regular person to determine what inefficiencies exist in trades. So if you have an investment adviser, you need to be proactive in learning how your adviser approaches trading. Ask how the trading is conducted: Is it being done via routine orders to a large custodian, which simply puts trades on the market? Or are trades orchestrated by a platform that is not only focused on executing those trades, but also on making sure clients are getting the best price for the trades?
In short, are they trading methodically, thinking about the pricing and the trade execution?
Over Time, Pennies Become Dollars
Most people spend decades saving for retirement. Over such a long timeframe, even small inefficiencies can add up to large sums of money. By making sure your investment adviser is shopping for the best prices for trade execution, you could avoid losing thousands of dollars unnecessarily.
Work with your financial adviser to make sure all aspects of your strategy are being considered.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As Director of Operations, Investment Adviser Representative Brianna Gutierrez applies her considerable management talents to growing the company while ensuring clients get the responsive, outstanding service they’ve come to expect. Brianna has a deep understanding of the financial planning process needed to effectively manage the day-to-day operations while working to maximize client returns.
-
I own 2 homes, but have 3 kids. Can my estate plan make it fair?
We ask estate planning attorneys for guidance.
-
I'm a Financial Planner: Here Are Some Long-Term Care Insurance Tips for Every Age
Strategies include adding riders to life insurance for younger individuals and considering hybrid or traditional long-term care policies for those in their mid-50s and 60s.
-
I'm a Financial Planner: Here Are Some Long-Term Care Insurance Tips for Every Age
Strategies include adding riders to life insurance for younger individuals and considering hybrid or traditional long-term care policies for those in their mid-50s and 60s.
-
Engineering Reliable Retirement Income in 2025: An Expert Guide
For dependable income, consider using a bucket strategy and annuities in tandem to promote structure, flexibility and peace of mind.
-
Crazy Markets Shouldn't Derail Your Retirement if You Follow This Financial Pro's Plan
Being nervous about retiring in a volatile market is a red flag that you're relying too heavily on your investment portfolio, rather than a comprehensive plan.
-
Key to Financial Peace of Mind: Think 'What's Next?' Rather Than 'What If?'
Even if you've hit your magic number for retirement, it's hard to stop worrying about money. Giving it a clear purpose is one way to reduce financial anxiety.
-
Three Estate Planning Documents a Business Owner Can't Afford to Skip
A business owner's estate plan should protect the company and its employees as well as the entrepreneur's heirs. These three documents are critical.
-
Financial Fact vs Fiction: Why Your 'Magic Number' Isn't Actually Magical
Do you think you're diversified if you're invested in the S&P 500 and Nasdaq? Do you think your tax rate will fall in retirement? Think again — and read on for other myths that could be leading you astray.
-
Opportunity Zones: An Expert Guide to the Changes in the One Big Beautiful Bill
The law makes opportunity zones permanent, creates enhanced tax benefits for rural investments and opens up new strategies for investors to combine community development with significant tax advantages.
-
Five Ways Retirees Can Keep Perspective Through Market Jitters
Market volatility is a recurring event with historical precedents (the dot-com bubble, global financial crisis and pandemic), each followed by recovery. Here's how people who are near or in retirement can navigate economic uncertainty.