Regulators Seek Clarity In Fee Disclosures

By Arthur D. Postal
InsuranceNewsNet

WASHINGTON – State securities regulators hope to release in September a model fee disclosure chart aimed at providing data to investors in a clear and easy-to-read format.

The decision was prompted by two surveys conducted by state securities regulators. The most recent survey was released this week, and indicated that investors “generally appear confused” about whether their brokerage firm charges fees to service and maintain their accounts.

The survey also found a lack of investor knowledge about the costs they are being charged to invest as well as maintain their accounts, “despite current regulatory requirements related to disclosure.”

The second report, issued last April, dealt with the disparities in fees charged by broker/dealers.

The reports were issued by the North American Securities Administrators Association (NASAA). The model fee disclosure chart is being crafted by a working group consisting of state securities regulators and industry officials, according to Bob Webster, a NASAA spokesman. 

“Our research shows that investors are confused and unaware of how much their brokerage firm charges to serve and maintain their investment accounts,” said William Beatty, Washington Securities Director and president of NASAA. “Investors tell us fees are important and they want to see improved disclosure.”

“Greater transparency and improved disclosure would allow investors to quickly and easily compare prices, products and firms,” Beatty continued. “While broker/dealers may be complying with the technical requirements governing fee disclosures, our research shows that improvements are needed to raise awareness among investors of the costs associated with their brokerage accounts.”

The survey found that brokerages routinely charge fees to serve and maintain brokerage accounts. However, 30 percent of survey respondents mistakenly believe their firm had no such charges and one-quarter indicated they did not know whether they were being charged fees in addition to investment commissions.

The survey also found that, of the investors who know they are being charged, 52 percent indicated that they did not know the amount they pay in fees to serve and maintain their account.

Moreover, of all investors surveyed, the survey found that 71 percent indicated that they did not know the amount of additional service and maintenance fees their brokerage firm charges for services they might need in the future, such as transferring their account to a different brokerage or obtaining documents from their brokerage.

“Fees matter to investors,” the survey found. The survey determined that nearly all investors, 81 percent, said the amount of fees they pay for services and account maintenance over the lifetime of their account is important to them.

The survey also found that nearly eight of every 10 investors would like their brokerage firm to provide a separate chart that lists its service and maintenance fees in a format that is simple to read and understand.

“Roughly two in three investors, 65 percent, would prefer a direct link on their brokerage firm’s website to a chart of service and maintenance fees,” the NASAA survey found.

The survey also found that 88 percent of investors would like to see brokerage firms use standardized and uncomplicated terms to describe service and maintenance fees in order to help compare fees between different firms.

InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].

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