This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
Brokerage fees are a fact of life for stock traders, and the fees can range from a few euros per trade to a percentage of the position. The fees vary by broker, by product, and by trading volume, and the fees can have a significant impact on the trader's returns over time. The trader should understand the main fee categories, the typical ranges, and the way to read the fee schedule before opening the first account.
The main fee categories
The first category is the commission. The commission is a flat fee per trade, and the commission is charged when the trade is executed. The commission is the most visible fee, and the commission is the easiest fee to compare across brokers. The commission ranges from €0 at discount brokers to €20-€50 at full-service brokers.
The second category is the spread. The spread is the difference between the bid price and the ask price, and the spread is the broker's compensation for executing the trade. The spread is implicit, and the spread is not shown as a separate fee on the trade confirmation. The spread is widest on illiquid stocks, and the spread is tightest on liquid stocks and major indices.
The third category is the platform fee. The platform fee is a fixed monthly or annual fee for the use of the trading platform. The platform fee is charged regardless of the trading activity, and the platform fee is most painful for traders with a small account. The platform fee ranges from €0 at discount brokers to €50-€100 per month at premium brokers.
The fourth category is the inactivity fee. The inactivity fee is a charge for not trading for a period, and the inactivity fee is designed to push the trader to trade more. The inactivity fee ranges from €0 to €50 per quarter, and the inactivity fee is easy to avoid by trading at least once per quarter.
The fifth category is the withdrawal fee. The withdrawal fee is a charge for withdrawing funds from the account, and the withdrawal fee is charged by some brokers. The withdrawal fee ranges from €0 to €25 per withdrawal, and the withdrawal fee can be avoided by choosing a broker that does not charge a withdrawal fee.
The sixth category is the currency conversion fee. The currency conversion fee is a charge for converting the deposit currency to the trading currency, and the currency conversion fee is relevant for traders who trade stocks in a different currency. The fee ranges from 0.1 percent to 1 percent of the converted amount.
The seventh category is the data fee. The data fee is a charge for real-time market data, and the data fee is charged by some brokers for premium data feeds. The data fee ranges from €0 to €50 per month, and the data fee can be avoided by using delayed data or by using a free data feed.
Typical ranges
For a discount broker, the trader pays €0-€10 per trade in commission, a tight spread on liquid stocks, no platform fee, no inactivity fee, no withdrawal fee, and a small currency conversion fee. The total cost is €5-€15 per trade on a liquid stock, and the total cost is higher on an illiquid stock.
For a full-service broker, the trader pays €20-€50 per trade in commission, a wider spread, a platform fee of €20-€50 per month, an inactivity fee of €0-€50 per quarter, a withdrawal fee of €0-€25, and a higher currency conversion fee. The total cost can be €50-€100 per trade, and the total cost can be higher on an illiquid stock.
For a robo-advisor, the trader pays 0.25 percent to 0.75 percent of the assets under management per year. The fee covers the portfolio management, the rebalancing, and the tax-loss harvesting. The fee is charged quarterly or annually, and the fee is in addition to the expense ratios of the underlying ETFs.
How to read the fee schedule
The first step is to find the fee schedule on the broker's website. The fee schedule is usually in the "Pricing" or "Fees" section, and the fee schedule lists the commission, the spread, the platform fee, the inactivity fee, the withdrawal fee, and the currency conversion fee. The trader should read the fee schedule carefully, and the trader should pay attention to the small print.
The second step is to calculate the total cost for a representative trading pattern. The trader should estimate the number of trades per month, the typical position size, the typical holding period, and the currency. The total cost includes the commission, the spread, the platform fee, the inactivity fee, the withdrawal fee, and the currency conversion fee.
The third step is to compare the total cost across three to five brokers. The comparison should be based on the same trading pattern, and the comparison should include all the fees the trader is likely to pay. The trader should not rely on a single metric, and the trader should look for hidden fees.
Common questions about brokerage fees
Are commission-free brokers really free? No. The broker earns revenue from the spread, the payment for order flow, or the currency conversion fee. The trader pays the broker indirectly, and the trader should look at the total cost, not just the commission.
What is the typical inactivity fee? The typical inactivity fee is €10-€50 per quarter, and the inactivity fee is charged if the trader does not place a trade in the quarter. The trader can avoid the fee by placing a small trade once per quarter, and the trader can avoid the fee by choosing a broker that does not charge an inactivity fee.
Can I negotiate the fees? Yes, at some brokers. The trader who has a large account or a high trading volume can negotiate the commission and the platform fee. The trader should ask the broker for a discount, and the trader should compare the discount with the fees at other brokers.
Related resources
Where to start
If you are evaluating brokerage fees, the most useful first step is to find the fee schedule on the broker's website, and to calculate the total cost for a representative trading pattern. Our broker comparison lists the brokers and the fee schedules, which together tell you what the broker charges before you open the account.