Felix Salmon reports about a Merrill Lynch client who is also active on Wikinvest:
“This guy probably knows that he’s paying his Merrill broker an annual management fee of 1.75%, which alone is more than $40,000 a year. But he doesn’t know that other Merrill clients in his position are paying far less - that Merrill brokers basically charge as much as they can, and the average Merrill client on Wikinvest pays less than half that, just 85 basis points.
“And there are other things this guy doesn’t know, as well, because they’re buried in his statements - things like the fact that Merrill charged him $5,763 to make 24 trades last year, over and above that $40,000 management fee. That’s about $240 per trade.”
From a European perspective this case would not even be among the most expensive fee arrangements. Looking at European private banks, overall fees of 200 basis points (2% of invested assets plus hidden fees, that come with the products) are not so uncommon. Check our research on open and hidden fees in wealth management accounts and what to do about it.