1. Money

The Biggest Rip-Off Fees of All

Saying No to Custodial Fees and So-Called Safe Keeping Fees

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A few days ago, I was reading through the commission schedule of a major East Coast bank and was shocked to find that customers were charged $25 per position, up to ten stocks for a maximum of $250, for “safe keeping” fees on the stocks in their account. Now that we are in an age where stock certificates are rare, there is virtually no effort involved with a broker keeping track of the companies in which you hold shares. For an investor with, say, $50,000 in assets, this represents a frictional expense of 1/2 of 1%! Add on the management fees that are taken out of mutual funds that you never see directly, and it’s not hard to understand why so many investors have a difficult time matching, much less beating, the market.

To add insult to injury, if you wanted to avoid these fees and request a paper certificate, the same firm would likely charge you $25 to $50 to get what rightfully belongs to you! Even more salt in the wound? Many companies offer direct stock purchase plans and dividend reinvestment plans that won’t charge you a penny for having stocks safely held with the transfer agent.

The bottom line is this: You should not be paying custodial or safe keeping fees for the right to hold stocks in your account. This is simply a way for hidden charges to ring the cash register at the broker, banks, or wealth management firm at your expense. Demand these fees be waived or you might just need to consider taking your business elsewhere.

For more information on costs you should control, read Frictional Expenses - The Hidden Investment Tax

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