RBC Dain Rauscher
After 5 years of having an account with RBC Dain Rauscher, I have finally closed it out. I realized that at this point in time having a full service broker wasn’t right for me. I first opened the account when I was 18 because I wanted to invest in some stock. The first and only stock transaction I did with them was purchase 20 shares of Microsoft. I was pretty excited when I made the trade, but that soon changed when I found out what the trading commission for it was. It cost about $65 to make the trade. When you factor that out, you find that the stock will have to rise $6-$7 before you make any money. That made me pretty upset, but I didn’t sell because then I would have eaten $130. So I hung onto it ever since.
I got really excited when they paid their one-time $3 dividend. I was mostly excited because the dividend ($3 x 20 = $60) was almost enough to cover my commission to purchase the stock. I never really paid a whole lot of attention to the account because there was just one stock in it. A year or so later I was looking at a statement that came in the mail. When I looked at it I noticed that there was nothing in the cash account. I knew that there should have been at least $60 in there plus a smattering of small dividends plus a bit of interest from the cash account. This was a bit upsetting to say the least. The next day I called in to talk to “my broker.” Of course the broker was not available, so I end up getting passed around from secretary to secretary and finally end up with someone who sounded like they hadn’t worked there too long. I told her what happened and she said that she would look into it and give me a call back.
After about three days of playing phone tag during my lunch I finally found out what had happened. Apparently if you do not have over $100,000 in your account you are charged a $100 annual maintenance fee. When you have only ~$500 in your account that comes out to be a 20% deduction. She did seem excited to tell me though that since I only had ~$70 in cash assets in the account they only charged me that and wrote off the rest. How nice of them.
After this incident I decided to close out my account and transfer it to Fidelity. For some reason I got charged $112.98 for the transfer. I guess that is the closing fees associated with closing out an account. That seems kind of ridiculous for transferring 20 shares of stock. Between the $65 purchase price, the $112.98 close out fee and the $20 sale price, I am going to have to sell Microsoft for $9.90 more than what I bought it for to break even.
I guess there are a few lessons to be learned from this:
- High priced full service brokers only make sense if you have a ton of money
- If you are doing all the research to buy and sell stocks, you shouldn’t be paying a premium to do it.
- Know the fee structure of a full service broker before you get into one. Otherwise the fees will eat you alive.
Overall I think it was a decent learning experience. Buying that first 20 shares is what really got me interested in trading. I don’t think that I would be as active into my trading today if I hadn’t started out this way. Although it may look like a wasted $270, but in the end I learned a lot about how these companies work. If you have a lot of money and just want someone to do all the work for you, a full service broker may be right for you. If you are just starting out and don’t mind doing a bit of research, then a low priced broker like Fidelity, Scottrade or Schwab would likely be the better option.
Tags: broker, fees, fidelity, microsoft, Stocks, trading