- 1 average stock broker fee
- 1.1 How Much Is the Average Stock Broker's Commission?
- 1.2 Best Discount Brokers for Stock Trading
- 1.3 Comparing Brokerage Commissions
average stock broker fee
How Much Is the Average Stock Broker's Commission?
Discount online stockbrokers charge the lowest commissions for stock trades.
According to the "The Princeton Review" website, stockbrokers invest in the stock market for individuals as well as for corporations. Stock exchanges allow only members such as stockbrokers and their brokerage houses to conduct transactions. Stockbrokers also must be licensed to trade in registered securities, and they typically earn their incomes from commissions and other fees charged to clients. Stockbrokers work for brokerage firms, almost all of whom set their stockbrokers' commission fees and rates to be competitive with other firms.
A stockbroker and brokerage firm may charge you a percentage of your total stock trade or a flat fee as a commission. The "Investor Junkie" website notes that the average commission at online discount brokers was $7.96 in 2012. In 2013, the "Brokerage Review" website found that active online traders could find several quality brokerage firms charging $4 to $5 per trade. The website also noted that some firms charged as little as $2 per online trade up to $100 or more.
Nationally known brokerage firms such as Scottrade, Fidelity, Merrill Lynch and TD Ameritrade compete vigorously against each other. While you can keep your stockbroker commissions lower by using self-directed or do-it-yourself online trading, commission fees rise if you use an actual stockbroker to assist you. As of 2014, the cost to use actual stockbroker assistance in trades ranged from $29.95 to $44.99 at brokerage firms such as Scottrade. Brokerages also charge different commission rates to trade in other types of securities.
Besides stocks, there are several other types of securities traded on stock exchanges, including mutual funds and options. Scottrade, for example, charges from $17 to $42 in fees to conduct a mutual fund transaction. Stockbrokers also deal in options, or the purchase of a right to buy or sell a stock at a given price before a predetermined expiration date. Most stockbrokers charge flat fees ranging from $7 to $44.99 to trade options plus an additional fee for each option contract traded.
Stockbrokers and brokerages, especially the online firms, may charge many different fees in addition to those charged just for trading a stock or other security. For example, some stock brokerage firms charge account maintenance or inactivity fees to clients who do not maintain minimum amounts in their accounts. Some brokerages and stockbrokers also charge account transfer fees for moving an account from one broker to another. Reputable stockbrokers and brokerage firms, though, always make their commission and fee schedules available for scrutiny.
Sometimes lost in the prices and data of the stock market ticker are the fees associated with trading stocks. These fees pay for the services needed to make a stock trade, including the costs to maintain the online trading platform or the stockbroker’s compensation. All brokerages charge some form of commission on a stock trade, though they vary based on the firm, the service, the size of the trade and the price of the stock.
Investment brokerages charge different fees and commissions depending upon the services they offer. The least expensive are online trades, where the investor makes trading decisions using an Internet-based platform that doesn’t require the assistance of a broker. Account holders who aren’t near a computer can make trades through a touch-tone telephone system that can cost on average two to three times as much as an online trade, according to the TradingSim website. In some cases, an investor wants to consult with a broker before executing a trade, which can result in commission fees that are up to five times higher than online commissions.
These flat-rate fees apply to trades of most sizes, though a few brokerages apply additional fees for transactions of more than a set number of shares (one brokerage sets a maximum at 2,000 shares, another at 5,000, and yet another caps at 999,999 shares), Several of the largest brokers charge between $6.99 and $9.99 per trade, but some of the smaller services charge as little as $2.50 for each trade. These fees apply to both selling and buying. Sometimes online brokerages offer a certain number of free trades to entice new customers to sign up for the service.
Investors who want to day-trade stocks may need to consider using a direct access broker. These services don’t charge flat-rate fees; instead, they take a percentage of the trade. Since day traders routinely buy and sell different quantities of stock, flat-rate trading fees can eat into investment returns. One online broker charges $0.005 per share with a minimum fee of $1 for any trade. Direct access brokers also charge a platform fee, typically between $100 and $300, to any investor who doesn’t make a required number of trades each month. Also, day traders are required to keep a minimum of $25,000 in their account, according to the Financial Industries Regulatory Authority (FINRA).
The Securities and Exchange Commission (SEC) charges brokerages a nominal fee for stock sales; these fees are sometimes passed down to investors. Compared to commissions, the fee is small, totaling just $25.70 for every $1 million in stock sales. Some online brokerages charge account maintenance, transfer or setup fees, and additional research or legal work from the brokerage often comes with additional costs for investors, as well.
Terry Lane has been a journalist and writer since 1997. He has both covered, and worked for, members of Congress and has helped legislators and executives publish op-eds in the “Wall Street Journal,” “National Journal” and “Politico." He earned a Bachelor of Science in journalism from the University of Florida.
A brokerage fee is a fee charged by a broker to execute transactions or provide specialized services. Brokers charge brokerage fees for services such as purchases, sales, consultations, negotiations, and delivery. There are many types of brokerage fees charged in various industries. Examples include fees charged include financial services, insurance, real estate, and delivery services.
Brokerage fees, also known as broker fees, are based on a percentage of the transaction, as a flat fee, or a hybrid of the two. Brokerage fees vary according to the industry and type of broker.
In the real estate industry, a brokerage fee is typically a flat fee or a standard percentage charged to the buyer, the seller, or both. Mortgage brokers help potential borrowers find and secure mortgage loans; their associated fees are between 1% and 2% of the loan amount.
In the insurance industry, a will charge fees for their services. Brokers find the best insurance policies to meet customers' needs. In some cases, brokers may collect fees from both sellers and buyers of an insurance policy.
In the financial securities industry, a brokerage fee is charged to facilitate trading or to administer investment or other accounts. The three main types of brokers that charge brokerage fees are full-service, discount, and online.
Full-service brokers offer a wide range of products and services such as estate planning, tax consultation and preparation, and other financial services either in-person or over the phone. As a result, they earn the largest brokerage fees.
The standard commission for full-service brokers are between 1% to 2% of a client’s managed assets. For example, Tim wants to purchase 100 shares of Company A at $40 per share. Tim's broker earns a commission of $80 for facilitating the transaction ($40/share x 100 shares = $4,000, $4,000 x .02 commission = $80. When the commission is added, the total cost of the trade is $4,000 + $80 = $4,080).
A 12B-1 fee is a recurring fee that a broker receives for selling a mutual fund. The fees range from 0.25% to 0.75% of the total value of the trade. Annual maintenance fees range from 0.25% to 1.5% of the assets.
Because discount brokers offer a narrower selection of products and provide no investment advice, they charge lower fees than full-service brokers. Discount brokers charge a flat fee for each trade transaction. The per-trade flat fee ranges between $5 to $30 per trade. Account maintenance fees are usually around 0.5%.
Online brokers have the least expensive brokerage fees. Their primary role is to allow investors to conduct online trading. Customer service is limited. The per-trade flat fee ranges between $5 to $19.95 per trade. Account maintenance fees vary between $20 to $50 per account.
Investors can reduce account maintenance fees by comparing brokers, their provided services, and their fees. Buying no-load mutual funds or fee-free investments can help avoid per-trade fees. It is important to read the fine print or fee schedule and ask questions about any fees charged.
Monday, February 19th, 2018
Trade costs are no doubt on many investors’ minds. Just like paying $4 for a Starbucks latte every morning adds up, so does paying $7, $8, $9, or $10 per trade. For coffee drinkers who must have their morning brew, cost can be reduced dramatically at the expense of quality and taste. This exact philosophy holds true for online trading with a discount broker, which we will now explore.
Best Discount Brokers for Stock Trading
To find the best online discount brokers for stock trading, we considered all the possible scenarios. Whether the trades involved 100 shares or 5,000 shares, $5,000 in equity or $1 million in equity, margin or no margin, we assessed it all. We also analyzed the actual net costs per month for casual investors who might make ten stock trades a month or hyperactive traders who might place 100 stock trades in one month. We also considered monthly minimums, platform fees, data fees, and other relevant costs.
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To find the cheapest trades for options, we assessed whether the trades involved one contract or 100 contracts, $5,000 in equity or $1 million in equity, single-leg or multi-leg spreads, and more. We also analyzed the actual net monthly costs for casual investors who might make ten options trades a month of one contract each, or active options traders who might place 50 options trades a month with five or more contracts each.
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Comparing Brokerage Commissions
Trading cheaply is reasonably straightforward; however, investors should be careful when deciding on a final broker. The regular prices paid for stock and options trades are not the only cost factor that matters. A variety of other important factors can affect the net cost per trade when trading stocks and options online. Here's a list of the most important ones:
- Are there tiered commission rates? Most brokers offer flat-fee stock trading. Some brokers though, especially active trading-focused brokers, offer per-share trading. Both have their pros and cons; it depends on the order size you trade, on average. For example, placing 2,000 share orders, on average, would make a per-share broker expensive, compared to a flat-fee broker. The vast majority of investors, over 99%, trade with a flat-fee broker.
- What is the broker's order execution quality? - For discount trading, nothing helps more than having your broker consistently achieve fill prices better than the National Best Bid and Offer (NBBO). Whether the broker clears itself or with a third-party, as well as the broker's policy on payment order flow are two simple examples of factors that impact execution quality. For a full breakdown, see our Guide to Order Execution.
- What options are available for order routing? - Important to day traders, some sophisticated brokers offer direct market routing, giving customers full control of routing costs through market center rebates and fees.
- Are there extra charges for market data access or platform access? Some brokers will charge extra for access to market data such as level II quotes and international exchanges. This is very common with active trader-focused brokers such as Interactive Brokers, Lightspeed, and TradeStation. Furthermore, these brokers can sometimes charge monthly data fees or platform fees that can only be waived if a certain commission spend threshold is met. For example, Lightspeed charges an account service fee of $100 if at least $100 in trading commissions are not spent each month.
- Misc fees - Annual fees and closure fees tied to a retirement account such as an IRA, broker-assisted trading fees, mutual fund trading fees, short-term redemption fees, phone order fees, and similar all add up. IRA Closure fees typically run at around $50, and are worth keeping an eye out for.
- What miscellaneous fees are charged? Annual fees tied to a retirement account, broker-assisted trading fees, mutual fund trading fees, short-term redemption fees, phone order fees, and other various charges all add up.
- Are there extra fees for trading penny stocks or OTCBB? Some discount brokers charge extra for penny stocks (stocks under $1 per share) and pink sheets. If you like trading these types of securities, read our guide to the best brokers for penny stock trading.
Finally, two fees every broker charges (sell orders only) include an SEC trading fee of $21.80 per $1,000,000 of principal and a FINRA Trading Activity Fee (TAF) of $.000119 per share. Investors can ignore these trading fees as they are the same for each regulated online brokerage and amount to no more than a few pennies per trade. For example, a 500-share market sell order of Disney (DIS) at $108.18 would result in a total fee of only $0.18 ($.12 + $.06).
The Stock Broker job outlook is expected to climb 10%, or about as fast as average, according to the Bureau of Labor Statistics .
As of 2016 the average stock broker salary median pay was $67,310 a year or $32.36 an hour.
Stock brokers are paid a base salary but also earn commission and bonuses.
Commissions are directly connected to how well they’re able to solicit clients to trade securities.
So how much do stockbrokers make in your state?
Top Five Paying States for Stockbrokers
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How Much Do Stockbrokers Make in the Top Financial Districts in America?
Near major metropolitan areas, stockbrokers can earn a lot more compared to rural or smaller towns. These are the top five districts:
 – New York: With Wall Street located in Manhattan’s Financial District, New York City is where stockbrokers are paid the most. The average stock broker salary here was $141,250 in 2016.
 – New Hampshire: This state comes in second for highest stock broker salary in the nation at $110,350 (2016). The highest paying area was in the southern New Hampshire city of Nashua with stock brokers earning $103,490.
 – Massachusetts: The average stock broker salary in MA was $99,200 in 2016 or $47.69 hourly. Boston, MA is where securities sales representatives earn the most.
 – Connecticut: The Bridgeport-Stamford-Norwalk metropolitan area stockbrokers incomes averaged $100,790 in 2016. Statewide, registered representatives earned $96,780.
 – Vermont: The median wages for stockbrokers in the Burlington Metropolitan area was $100,000 per year and $48.08 hourly. The state’s average came out to be $80,110.
Top Paying Sub-States for Stockbrokers (Continued):
- New York-Newark-Jersey City, NY-NJ-PA – $139,730 ($67.18/hr)
- Sherman-Denison, Texas MSA – $122,170 ($58.74/hr)
- New Haven, CT 120,270 ($57.82/hr)
(All data comes from Bureau of Labor Statistics)
Average Stock Broker Salary (2005-2015)
Below, you’ll find data collected from the Bureau of Labor Statistics that show the average stock broker salary over a ten year period:
As you can see, just after the Financial Crisis of 2008 , stock broker earnings dipped a little in 2009.
However, investment activity increased in the years following 2009. In fact, the Dow Jones Industrial Average reached its highest level ever (18,312.39) on May 19th, 2015. This, of course, leads to higher incomes for registered representatives.
Salary Can Vary Depending on Brokerage Firm
Just like any other industry, different brokerage firms can pay varying amounts to their associates. Top brokerage firms like Merrill Lynch or Wells Fargo, may tweak their compensation plans for financial advisors (i.e. stockbrokers) on a year by year basis to improve performance.
The Different Ways Stockbrokers are Paid
Above and beyond an average stock broker salary, those in this field earn income in a few different ways. The accumulation can turn this career into a very lucrative profession for many.
Generally, as a stock broker matures into the profession, the base salary paid by the firm will decrease.
The main bread and butter then are the commissions generated from trading securities on behalf of clients.
In order to receive a commission from doing this one must obtain the Series 7 License.
Incentive bonuses are what make careers in this field very profitable. Typically, the more revenue you bring into a firm, the higher your bonuses will be.
Brokerages desire their advisors to seek out high net worth clientele (those with over $250,000 net worth) that will generate the most revenue for the firm.
- Attracting new clients within a year,
- Selling certain financial products like exchange-traded funds, and
- Years of service bonuses.
Finally, financial advisors can earn fees by providing strategies and analysis to their clients.
In order to receive fees for doing these financial services one must obtain the Series 65 or 66 License.
- Fee-Based – Financial advisors who are fee-based earn fees for services rendered but also earn commission on selling investment products to clients.
- Fee-Only – Those who only receive fees aren’t actually Registered Representatives, instead they’re Registered Investment Advisors (RIAs).