NASAA Research Shows Investor Confusion over Brokerage Fees (with Lofchie Comment)

The North American Securities Administrators Association ("NASAA") published research indicating that investors are confused about the service and maintenance fees charged to their accounts by brokerage firms.

A research firm was commissioned by NASAA to conduct a public opinion poll that surveyed over 1,000 investors with brokerage accounts across the United States. The poll asked investors about their awareness of service and maintenance fees charged by brokerages.

Brokerage firms routinely charge fees to serve and maintain customer accounts. Yet, according to the findings, nearly a third of the investors polled mistakenly believed that their firms imposed no such charges. Additionally, more than half of the investors who did realize they were being charged indicated they didn't know the amount they paid to service and maintain their accounts.

NASAA stated that it has convened a working group consisting of state securities regulators and representatives of FINRA, SIFMA, the Financial Services Institute and broker-dealer firms. The goal of the group is to work to develop standardized and uncomplicated broker-dealer fee disclosure.

Lofchie Comment: There is no doubt that NASAA can provide a laundry list of useful ways for brokers to improve their fee disclosure. It is disappointing that the government conducts studies in which the results are essentially cooked. Many of the questions asked in the survey were designed to elicit the answers that NASAA wanted to hear; e.g., whether investors would like their brokerage firms to provide fee information that is "simple to read and easy to understand." According to the survey, 79% of investors answered yes. We can only assume that the other 21% didn't understand the question.

See: Investor Confusion about Brokerage Service and Maintenance Fees Survey; NASAA Press Release.