With the wide array of investment products and services available today, investors are often confused by the various fees and costs involved. Cetera Investment Services, as one of the largest independent broker-dealers in the US, also has its own fee structure that clients should understand. This article takes a closer look at common fees charged by Cetera and other investment firms to help investors make informed decisions.
Account fees cover account maintenance and services
Most investment firms charge account fees as compensation for providing services related to account opening, maintenance, transfers, closures and reporting. Standard account fees at Cetera can range from $50 to $150 annually. This covers costs for paperwork processing, statement generation, transaction confirmations, and overall account supervision. While some firms waive fees for accounts over certain balances, Cetera generally charges account fees regardless of account size.
Transaction fees apply to trades and fund transfers
In addition to account fees, transactions like stock/ETF trades, mutual fund purchases and transfers between accounts also incur fees. Cetera charges a flat transaction fee of around $20-$30 for stock/ETF trades. For no-load mutual funds, the transaction fee is typically $30-50 per purchase or transfer. These fees cover trade execution, settlement and reporting. Compared to commissions, transaction fees are usually lesser but still need to be considered especially for active traders.
Expense ratios factor in underlying product costs
For investments like mutual funds and ETFs, the fees charged by the investment firm are only part of the total costs. These products also have their own operating costs and fees known as expense ratios. Actively managed mutual funds tend to have higher expense ratios of 0.5% to over 1%, while index ETFs are lower at 0.1% to 0.5%. When selecting funds or ETFs, investors should look at the prospectus to compare expense ratios.
Advisor and wrap fees for customized guidance
For investors seeking more personalized guidance and customized portfolios, advisory and wrap fee accounts are available. Cetera advisors charge ongoing advisory fees from 1% to over 2% annually based on assets under management. Wrap fee programs starting from 1.5% and up, bundle advisory fees together with transaction costs for simplicity. While advice does come at a cost, these bundled fees are meant to incentivize advisors to be prudent with trading.
Understanding the different investment fees charged by firms like Cetera empowers investors to truly evaluate the costs and benefits of various account options. With knowledge and comparison, one can aim to maximize investment returns over the long-run.