Is anyone up for building a “True Cost of a Brokerage Account” score, or do we all just enjoy subsidizing our brokers’ oat milk lattes?
Everyone argues about commissions like it’s 2014, while the real cost leaks happen in the Settings menu from hell. I’m trying to quantify the total annual drag of a brokerage relationship, across all the cute little revenue streams they don’t put in their TikToks. Think of it like TCO for brokers: not what they say they charge, but what we actually pay.
What I want to measure, compare, and optimize:
- Order routing and execution quality: actual price improvement vs NBBO, odd-lot handling, midpoint access, PFOF vs direct routing, and whether “smart” routing is smarter than a rock.
- Cash sweep yield and structure: bank sweep vs MMF; SIPC vs FDIC tradeoffs; idle cash % you realistically keep; fees on MMFs; how fast transfers and sweeps settle; cash drag during transfers between internal accounts.
- FX conversion spread and timing: retail spot markup, hidden “no-commission” conversion rake, and whether fractional ADR trades sneak in FX you never approved.
- Shorting costs in the wild: borrow fees, HTB availability and variability, buy-in risk policies, manufactured dividend billing accuracy, and auto-locate reliability.
- Options edge cases: auto-exercise thresholds, assignment processing speed, dividend risk tools that aren’t secretly dice, and whether they margin-call your soul at 3:58 PM.
- Corporate actions and dividends: withholding tax accuracy on foreign names, ADR fee pass-through, due-bill chaos, spin-off allocation sanity, and entitlement timelines that don’t time-travel.
- Margin interest math: tiered rates vs promotional bait, intraday margin behavior, portfolio margin model differences, and how quickly they ratchet rates when the Fed sneezes.
- Settlement quirks: good-faith violations on ETFs that settle T+1, instant buying power vs actually-settled funds, and how often you get surprise freezes for “your protection.”
- Data and tools tolls: real-time data surcharges, API rate limits, premium routing fees, exercise fees, “regulatory” fees padded like a memory foam mattress.
- Tax-lot control and reporting: default lot selection, wash sale handling accuracy, corporate action cost-basis adjustments, and whether their 1099 arrives before spring migration.
What I’m proposing:
- A standardized, crowdsourced “Brokerage Net Drag” report card per account type (cash, margin, PM), expressed in annualized bps for typical strategies:
- Passive ETF dollar-cost averaging
- Active single-name swing trading
- Options income strategies
- Short-biased or pairs trading
- International/dividend-heavy portfolios
- Inputs we can all collect without a PhD:
- Average price improvement per share and fill rate
- Average realized cash yield on idle balances
- Average FX spread (bps) per conversion
- Average borrow fee and HTB availability by market cap bucket
- Option assignment/exercise fee incidence and timeliness
- Corporate action error/correction frequency
- Effective margin rate paid weighted by balance
- Tax reporting corrections required (bonus points for tears)
Questions for the hive mind:
- Which brokers look cheap on paper but become a subscription service to your own money after you read page 47 of the disclosures?
- Anyone already tracking a personal “bps leak” dashboard? What did you include, and what moved the needle most?
- Any clever setups to separate custody and execution retail-style (DVP/RVP) to dodge the worst of both worlds, or is that a prime-brokerage-only fantasy?
- For options folks: which platforms actually handle early exercise/dividend risk sanely, and which ones treat it like an optional side quest?
- For international traders: who’s nailed withholding tax accuracy and ADR fee transparency, and who thinks “TBD” is an accounting standard?
If there’s interest, I’ll throw together a simple template to compute per-broker Net Drag by strategy and we can post anonymized results. Because if I’m going to lose 45 bps a year, I’d like it to be on purpose.