Outrageous brokerage fees: how to protect yourself

New You are able to Attorney General Andrew Cuomo introduced a $23 million settlement with UBS Financial Services a week ago. Cuomo's office accused UBS of pushing clients into fee-based brokerage accounts that cost them 1000's of dollars.

A few good examples supplied by his office:

UBS billed a 91-year-old client greater than $35,000 just for four trades over 2 yrs (roughly $8,800 per trade). It was roughly $33,000 greater than exactly the same investor might have compensated inside a traditional brokerage account.

An 82-year-old account holder compensated roughly $24,000 in costs in 2003 while making just one transaction.

Included in the settlement agreement, UBS didn't admit liability, but did accept pay restitution to clients. To well question, could my broker or financial agent be overcharging me?

First, allow me to obvious up one factor. There's no problem with fee-based brokerage accounts. They could be a good deal for the best customer — namely someone who makes lots of trades.

Request Elisabeth Your Consumer Questions .

Here's the way they work: Every year, the firm bills you half the normal commission of the need for your bank account. You receive limitless trades and you are designed to receive expert consultancy. Theoretically, the broker or agent is motivated that will help you increase your account, as their compensation is really a number of it.

But when you are making very couple of trades, a conventional brokerage account is much better. In traditional accounts, you're billed a commission only if you are making a trade. You should know that unscrupulous brokers have discovered a method to make the most with this particular type of account too. Inside a process known "churning," they create a variety of unnecessary or undesirable trades to create commissions on their own.

The Brand New You are able to attorney general's office offers these pointers to assist traders safeguard themselves:

Brokers aren't investment advisors. A broker's primary function is that will help you trade options or any other investments. If your broker claims to become a "financial agent," it doesn't make her or him a good investment agent. A good investment agent is qualified to provide you with financial planning advice for example retirement and estate planning.

Brokers are held to various standards than investment advisors. Under condition and federal law, generally, brokers are needed to market or execute opportunities appropriate to your demands. Investment advisors, however, possess a legal duty to provide you with financial advice exclusively in your own interests and in most parts of the industry relationship.

Registration needs affect both. Request the broker or investment agent upfront if they is licensed or registered before investing. Whenever a broker or agent isn't registered or licensed, that's a sure sign something is wrong. Remember, brokers are controlled through the National Association of Investments Sellers, and investment advisors must register using the Investments and Exchange Commission.

Shop around before making the decision. When you're making decision as essential as selecting your broker or investment agent, shop around before opening a free account. Brokerage and investment agent costs vary and might be negotiable. Request what services you are receiving, what you're having to pay for and whether you'll be having to pay a commission per trade, or perhaps a paid in your assets, or both.