Full-service or Discount Broker?

Why do many retail investors stick with high-cost, full-service brokers? In their January 2025 paper entitled “Fee Awareness and Brokerage Choice”, Gregory Eaton, Steven Malliaris and Miguel Puertas survey a sample of retail customers of full-service brokers to answer this question. They assemble 399 survey participants via CloudResearch, requiring that each: lives in the U.S.; is at least
moderately involved in household financial decisions; owns investments; and, has a full-service brokerage account (average annual fee over 0.15%) other than an employer-sponsored retirement plan. Survey questions explore participant:

1. Understanding of respective current broker fee structure.
2. Familiarity with robo-advisors as a low-cost alternative.
3. Hypothetical choice between a full-service advisor that charges 1% annual brokerage fee and a robo-advisor that charges 0.1%, when presented at either a 1-year horizon or a 20-year horizon, assuming identical gross investment returns.

Using survey responses and annual assets under care (AUC)/fee structures for retail accounts at 10 brokers (Ameriprise, Bank of America, Charles Schwab, Edward Jones, E*TRADE, LPL, Morgan Stanley, Raymond James, Stifel and TD Ameritrade) during 2009 through 2022, they find that: (more…)