UBS apparently offers some investment accounts for which the fees can constitute an effective $8,800 per trade. They’ve been sued by the New York Attorney General and will now pay $21.3 million to settle those charges.
I can’t help but wonder, taking all the fees charged in the 3,000 affected accounts, and subtracting the $21.3 million fine, if the investment company still comes out ahead. One customer in the example was charged $35,000 in fees. If we assume that’s high and go with an average $20,000 for all of the 3,000 accounts, that’s a total of of $60 million.
I could be way off on the average fees, but $21.3 million no longer seems like a stiff penalty. It’s more like paying extra tax on the income.
Meanwhile, I’ve paid no outright fees in my investment accounts over the past few years. I hope that when I’m 91 years old, I’ll still have the mental faculty to avoid being suckered into bad deals. More importantly, I just hope I live that long and maintain any sort of mental faculty at all.
UBS Settles Fee-Based Charges for $23.3 Million [Marketwatch]
Subscribe
8:41 pm (reply)
I think the article is a little misleading about the cost per trade. I imagine UBS accounts mentioned were in Wrap account where they charge a fixed percentage of assets. So dividing that cost by the number of trades is inaccurate. Clearly the company has incentive to sell clients the most expensive product just as a car dealership tries to sell a car with options the client doesn’t need. In itself this not a problem, however often times clients are misled by unscrupulous agents to buy things that they don’t understand. The article here doesn’t give enough to detail to know what really happened.
9:06 pm (reply)
I think it’s understood that the “cost per trade” in accounts is not really a transaction fee for each trade, but a way of breaking down the total fees by a measurement that makes sense to most people—the same way a car’s expenses can be broken down as a car’s “cost per mile,” which takes all expenses into account and then breaks them down in a way in which the costs can be compared across cars. Also, a piece of clothing’s “cost per wear” doesn’t mean you have to pay that amount each time you wear it.
4:51 am (reply)
I don’t think i could go through 90+ :)