Broker fees: what you really pay per year, and why the lowest-fee broker depends on you

All monetary examples use hypothetical currency units. Use one currency throughout a calculation. The three fee schedules below are made up for teaching; they are not the prices of any real provider.

Short answer: no broker has the lowest fees for everyone. What you pay in a year is the sum of up to eight cost layers: order fees, savings-plan fees, spreads, how your orders are routed, currency conversion, custody or account fees, inactivity fees and the fund’s own ongoing charge. Which fee schedule comes out cheapest depends on your habits: a small monthly savings plan, a few large orders, or frequent trading. Write down how you invest, take only the fee lines that apply to you, multiply them out for one year and for twenty, and compare the totals.

Why “the broker with the lowest fees” is the wrong question

Many investors don’t see their costs at all. In a 2024 survey of 2,861 US investors, 20% said they don’t pay fees of any kind, and 18% did not know how much they pay. Among fund and ETF owners, 41% said they don’t pay fund costs. FINRA Foundation, 2025. Yet every fund has running costs; they are deducted inside the fund before you see your balance.

The price of a trade isn’t fixed either. Researchers placed about 85,000 simultaneous market orders in 128 US stocks through six accounts at five brokers between December 2021 and June 2022. The average round-trip cost per account ranged from 0.07% to 0.46%, before any commission. Schwarz et al., working paper 2022, published in the Journal of Finance (2025).

Germany’s financial regulator BaFin summed it up in its consumer guidance on the 2026 rule change: where you trade most cheaply depends on what, when and how much you want to trade (our translation). BaFin, 2026.

The eight cost layers of investing through a broker

1. Order fees (commissions)

A charge per buy or sell order. It can be a flat amount per trade or a percentage of the order, often with a minimum. In the US, the major retail brokers dropped commissions on online stock trades in late 2019. Schwarz et al., 2022. US regulator FINRA notes that commission-free trading can still come with “fees or costs associated with the trade”, and that firms can earn from interest on uninvested cash, bid-ask spreads or payment for order flow. FINRA.

2. Savings-plan execution fees

If you invest automatically every month, each purchase is an execution. Some fee schedules charge a flat amount per execution, some a percentage, some nothing. A flat fee matters most for small amounts: 1.5 units on a 100-unit purchase is 1.5% of the money, gone before it is invested.

3. Spreads and trading venues

Every security has a buy price (ask) and a lower sell price (bid); buy and sell immediately and you lose the gap, even with zero fees. How wide the spread is depends on the product, the time of day and the trading venue your order is sent to. Some brokers let you choose the venue; others route orders for you.

4. Payment for order flow (rules differ by region)

Payment for order flow (PFOF) means a trading firm pays your broker for sending it your orders. The concern is a conflict of interest: will the order go where the price is best, or where the payment is highest?

• United States: PFOF is permitted. Brokers must disclose their order-routing practices and payments in quarterly public reports (Regulation NMS Rule 606) and give customers routing information (Rule 607). CRS IF12332, 2023. An SEC proposal from December 2022 to change how retail orders are handled was withdrawn in June 2025. SEC.
• United Kingdom: since its 2012 guidance, the regulator has said PFOF is “unlikely to be compatible” with its inducement rules for retail business; by 2019 it described the practice as having largely ceased for retail and professional clients. FSA FG12/13, FCA 2019.
• European Union: EU law prohibits investment firms acting for clients from receiving PFOF. Member states that already had such firms before 28 March 2024 could grant an exemption until 30 June 2026; only Germany notified ESMA that it would use it. ESMA, 2024.
• Germany: the ban applies since 1 July 2026. BaFin, 22 July 2026. BaFin notes that brokers may make up for the lost income, for example with higher order fees, monthly base fees instead of per-order pricing, or savings plans that are no longer free, and that a fee increase only takes effect if you agree to it. BaFin consumer page.

Elsewhere, check your own securities regulator. The practical point is the same everywhere: a “free” price rarely removes the cost; it moves it to another layer.

5. Currency conversion

If you buy a security listed in another currency, your money is exchanged first, and the broker may add a markup to the exchange rate. It often isn’t shown as a separate fee. In the EU, brokers must indicate the currency involved and “the applicable currency conversion rates and costs”. Delegated Regulation (EU) 2017/565, Art. 50. How exchange-rate margins work in general is explained in our guide to currency conversion fees.

6. Custody or account fees

A yearly charge for holding your investments, either flat or as a percentage of the portfolio. Example: 0.1% a year on 50,000 units is 50 units, every year (50,000 × 0.001).

7. Inactivity fees

Some fee schedules charge you for not trading over a period. Patient, long-term investors are the ones most likely to trigger it, so check for it explicitly.

8. The fund’s ongoing charge (expense ratio)

The fund’s own annual cost, deducted from the fund’s assets rather than billed to you. It is identical at every broker, but it is part of your real bill. EU averages for retail investors over 2020–2024: equity ETFs about 0.22% a year in ongoing charges, equity funds that are not ETFs about 1.38%. ESMA, 2026. Why low-cost index funds exist is covered in our index funds guide.

Plus: tax handling (a cost in time, not money)

Tax rules are national; this is not tax advice. Three regional examples:

• Germany: the domestic bank or broker that pays out your investment income withholds the tax automatically (§ 44 EStG); income that wasn’t taxed at source, typically from an account abroad, has to be declared in your tax return (§ 32d EStG).
• United Kingdom: interest, income and gains inside an ISA are tax-free (up to £20,000 can be paid into ISAs in the 2026–27 tax year). Outside an ISA, you may have to report gains yourself. GOV.UK.
• United States: brokers report your sales to the IRS on Form 1099-B; you still file the return. IRS.

A cheap account that leaves you with hours of extra paperwork may not be cheap for you.

Worked example: same ETF, three investors, three fee schedules

Formula for one year:

Yearly cost = (number of executions × fee per execution) + (number of orders × order fee) + base fees + (traded amount × spread cost) + (amount converted × currency markup) + (average holding × fund ongoing charge)

Assumptions (all EXAMPLE values): one broad equity ETF with an ongoing charge of 0.20% a year at every broker. No market growth, so every number can be checked with a calculator; with growth, percentage-based costs would be larger. Fund costs use the average holding during the year.

Guess first: on schedule A, who pays more per unit invested in year one, the monthly saver or the big-order investor?

• Monthly saver: 12 × 1.5 = 18 plan fees + 1,200 × 0.05% = 0.60 spread + 0.20% × 600 average holding = 1.20 fund cost → 19.80 units, or 1.65% of 1,200.
• Big orders: 2 × 5 = 10 order fees + 10,000 × 0.05% = 5 spread + 0.20% × 5,000 = 10 fund cost → 25 units, or 0.25% of 10,000.
• Frequent trader: 120 × 5 = 600 order fees + 120,000 × 0.05% = 60 spread + 60,000 × 0.25% = 150 currency markup + 0.20% × 10,000 = 20 fund cost → 830 units, or 8.3% of 10,000.

The saver pays about 6.6 times as much per unit invested as the big-order investor (1.65 ÷ 0.25), because a flat fee per execution is large relative to a small purchase.

Year one on all three schedules (broker costs + fund cost):

Three investors, three different winners. Schedule B’s free savings plans suit the saver, but its wider spread and currency markup punish the trader; schedule C’s subscription is expensive for small accounts and cheap for heavy use.

Twenty years, same habits, no growth:

Fund costs over 20 years are 0.20% × 1,200 × 200 = 480 for the saver (the average holding grows by 1,200 a year), 4,000 for the big-order investor and 400 for the trader. Two lessons follow. For the big-order investor on schedule A, 4,000 of the 4,300 units are the fund’s ongoing charge, so the fund choice matters more than the broker. For the trader, almost the entire bill is trading costs, and the gap between schedules is 10,800 units. For context on how small annual percentages compound over decades, see investment fees and the compound interest guide.

You can run the same calculation with your own numbers and up to three real fee schedules in the broker cost calculator.

Which fee matters most for which investor

How to read a fee schedule and the cost disclosures

1. The fee schedule or price list. Find every line from the formula: orders (flat, percentage, minimum), savings-plan executions, venue surcharges, currency conversion, custody, inactivity, transfer-out fees. Note the date; schedules change.
2. EU: the cost information from your broker. Before you invest, the broker must add up its own service costs and the product costs and show the total “both as a cash amount and as a percentage”, with “an illustration showing the cumulative effect of costs on return”. Where there is an ongoing relationship, you receive personalised information on the costs actually incurred once a year. Delegated Regulation (EU) 2017/565, Art. 50.
3. EU: the key information document (KID) of the fund. At most three A4 pages, with a section titled “What are the costs?” that shows total costs in money and percentage terms. Regulation (EU) No 1286/2014, Arts. 6 and 8.
4. US: Form CRS, prospectus, routing reports. Broker-dealers provide a relationship summary of at most two pages, including a section on fees and costs. SEC. A fund’s own costs are in its prospectus; order routing and PFOF are in the quarterly Rule 606 reports.
5. Elsewhere: look for your regulator’s equivalent documents. If a number is not written down, ask for it in writing.

How to compare offers where you live

• Check the licence first, cost second. UK: FCA Financial Services Register. US: FINRA BrokerCheck. Germany: BaFin company database. EU-wide: ESMA registers. In other countries, use the securities regulator’s official register.
• Use the same profile for every offer. Enter the same monthly amount, number of orders, average order size and currency share for each fee schedule.
• Separate broker costs from fund costs. The ETF’s ongoing charge is the same everywhere; compare it separately when choosing the fund.
• Include local tax handling and account types. Tax-advantaged wrappers and automatic withholding differ by country.
• Re-check after rule changes. The German PFOF ban is an example of a regulatory change that led some brokers to change their pricing models.

Common mistakes

• Comparing only the headline order fee and ignoring spreads, currency markups and base fees.
• Treating “commission-free” as “cost-free”.
• Forgetting the fund’s ongoing charge because it never appears on a statement.
• Ignoring inactivity or custody fees on a long-term, rarely touched account.
• Using someone else’s ranking whose example investor trades very differently from you.

Questions people ask

Is commission-free trading really free?

No single layer being zero does not make the total zero. FINRA points out that commission-free trades can still involve fees or costs, and that firms can earn through spreads, interest on uninvested cash or payment for order flow. FINRA.

Is a savings plan cheaper than buying once a year?

It depends on the execution fee. With a flat fee per execution, small monthly purchases cost more per unit than one large order (1.65% versus 0.25% in the example). With free executions, the savings plan can be the cheapest route.

What counts as a low ongoing charge for an ETF?

There is no universal threshold. As a reference point, EU retail equity ETFs averaged about 0.22% a year in ongoing charges over 2020–2024 according to ESMA.

Does the EU ban on payment for order flow make investing more expensive?

BaFin says it remains to be seen whether execution prices improve, and that some brokers may change fees to replace the lost income. Compare your total bill after any announced change.

This guide is general education, not financial or tax advice. Fees, rules and tax treatment change; check the current documents of any provider you consider and your local regulator.