Oct 27, 2011
- Tom Warren, founder and president, UAT Inc.
Trading Commissions: Opportunities in Electronic Trading
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Tom Warren |
One of a trustee’s fiduciary responsibilities is to monitor and control expenses. Behind this obligation stands the fact that trading commissions are an asset of the fund and that trustees can work to minimize trading commissions for the benefit of a fund and its shareholders.
This responsibility is more important in light of a recent Morningstar study which concluded that the average U.S. equity fund pays approximately 0.30% (30 basis points) per year in brokerage costs. “This is roughly 30 percent of the average no-load large-cap fund’s expense ratio,” Morningstar said. This 30% is in excess of the expense ratio and appears as a separate brokerage expense line item in the Statement of Additional Information. In essence, it is higher than it needs to be. New technology that capitalizes on today’s electronic trading environment allows trustees to work with their advisors to lower shareholder costs dramatically. ....