This has been bugging me for a while. Fees. Wall Street sure loves fees.
Heck, I’m a fee-only adviser, so by definition I kinda need them to eat, so I understand– But today I was reminded one of the stupidest risky business fees Wall Street loves to charge…
The outgoing transfer fee.
This is the fee the firm you’ve been using will charge you to transfer your account(s) to another institution.
Now, I have no real idea how much money this $50-$100 fee per account actually mints for these firms annually, but if you do the napkin math — each firm with an average of say 14,000 advisors that manage say 200 relationships (and that’s probably low) — and each of those relationships has an 2 IRAs and a taxable account (and that’s probably low)…
And let’s assume their attrition is about 10% a year…
Well, that’s about $84 million a year per firm if the fee is $100.
zomg. For doing presumably a super bang-up job on keeping you happy…
Now, apply that to just Morgan, Merrill, Wells, UBS and Citi — you’re talking $420,000,000 a year passing between these firms of malcontent accounts switching around. Add in Schwab, Fidelity, Vanguard, and TD… that’s $756 million dollars a year. And that’s just the outgoing transfer fee.
To me what’s worse is this… it’s the principle of the whole thing.
Here is the firm’s chance to show you the door, and nicely — it’s the very last impression they’ll be leaving with you, and probably as you head to a competitor.
They could say “thank you”, or “is there anything we could do better before you leave?”…And instead they give you the bum’s rush while pulling yet more money from your pocket.
Could you imagine the hospitality industry pulling this stunt? You call down to the front desk and say, “hey, this room sucks I’m going across the street” And they actually charge you more to leave. with your stuff.
They actually charge you for leaving.
The way I see it, some of these firms should just shut down now and have EVERYONE transfer out. It might just be their best quarterly report ever.