Brokerage Fee

  

Categories: Trading, Mutual Funds

Your broker makes sales happen by pairing sellers and buyers of securities. He or she doesn't do it for fun; brokers pay for designer clothes, fancy cars, and liquid lunches. One way they pay for all this is by getting fees, commissions, and other types of payments whenever a transaction is made. In other words, you pay for your broker's fancy shmancy life. 

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Finance: What is a Wrap Account?31 Views

00:00

Finance allah shmoop what is a rap account Okay yeah

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yeah inserted joke about eminem here a rap account with

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a w wraps into one annual fee All of the

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services you'd normally pay for ala carte at a given

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brokerage that is a broker might charge you a one

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percent rap account fee to manage all the assets you

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have with her in return for things like quote no

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fee unquote access to their proprietary mutual funds you get

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toe by the mutual funds no load and the quotes

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air there because there is a fee annually to manage

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the fund But at least this way there is no

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fee to buy into the fund or no load their

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god it see how that works The rap account can

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also include unlimited trading at quote no fee unquote as

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well like quotes or there again because there's usually a

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spread on each trade like you buy a twenty eight

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dollars and twenty seven cents and you sell a twenty

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eight dollars in nineteen cents So there's a seat since

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spread they're they're still making money on each trade There

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just isn't an incremental fee tacked on top of all

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That so your broker khun get that second home in

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the hamptons and that one percent feet Well that's based

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on the total amount invested with the broker got it

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So if you have a million dollars invested with them

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it's ten grand a year for that rap account fi

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system we'll wrap accounts often come with minimum investment levels

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well above those of a mutual fund like twenty five

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fifty grand or more But in having a one feet

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covers all approach a broker is not incentivized to churn

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the account or do really anything to generate commissions for

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themselves because there ain't any The only thing they're incentivized

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to dio is gather more of your assets or make

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your assets be worth more so they can keep going

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on the whole one percent dance Yeah the notion goes

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in theory anyway that if the broker helps client invest

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well over time the client will remain a loyal one

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and stay with that broker for a very long high

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margin to the brokers Time for many large brokerages rap

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accounts allowed their clients to be able to buy various

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flavors of funds mutual hedge or index at quote wholesale

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Prices unquote That is if the fund is a captive

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fund maintained by the brokerage The rap account allows the

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client to buy with no commissioner upfront charges which is

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kind of a nice nice deal for him Yeah quick

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example If jay z gives his broker one hundred million

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dollars under a rap account that charges one percent the

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broker will charge a million bucks a year in return

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for handling all of jay z's trading wiring and a

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whole bunch of other services got it One percent on

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the hundred million broker makes million bucks a year and

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if jay z also has a rap account you know

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with no w there Well there's always a chance Queen 00:02:45.555 --> [endTime] bee well pop in for a cameo

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