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.
-
The $33,000 Retirement: One Man's Surprising Path to Financial Freedom at 61
Forget what society tells you, even with less than $1 million, you can be happy in retirement.
-
The Best Aerospace and Defense ETFs to Buy
The best aerospace and defense ETFs can help investors capitalize on higher government defense spending or hedge against the potential of a large-scale conflict.
-
Roth IRA Conversions in the Summer? Why Now May Be the Sweet Spot
Converting now would enable you to spread a possible tax hit over more than one payment while reducing future taxes.
-
A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)
If debt has you spiraling, now is the time to take a few common-sense steps to help knock it down and get it under control.
-
I'm an Insurance Expert: This Is How Your Insurance Protects You While You're on Vacation
Here are three key things to consider about your insurance (auto, property and health) when traveling within the U.S., including coverage for rental cars, personal belongings and medical emergencies.
-
Investing Professionals Agree: Discipline Beats Drama Right Now
Big portfolio adjustments can do more harm than good. Financial experts suggest making thoughtful, strategic moves that fit your long-term goals.
-
'Doing Something' Because of Volatility Can Hurt You: Portfolio Manager Recommends Doing This Instead
Yes, it's hard, but if you tune out the siren song of high-flying sectors, resist acting on impulse and focus on your goals, you and your portfolio could be much better off.
-
Social Security's First Beneficiary Lived to Be 100: Will You?
Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
-
An Investment Strategist Demystifies Direct Indexing: Is It for You?
You've heard of mutual funds and ETFs, but direct indexing may be a new concept ... one that could offer greater flexibility and possible tax savings.
-
Q2 2025 Post-Mortem: Rebound, Risks and Generational Shifts
As the third quarter gets underway, here are some takeaways from the market's second-quarter performance to consider as you make investment decisions.