What should brokerage cost me?
Online investment brokers are much cheaper than engaging a broker face to face, and this is the least expensive form of brokerage fees for investing. The customer service is limited, so while you may not be paying for that personalised experience, you may find yourself instead, paying for the features that the platform provides. Canstar analysis reveals a decrease in trading costs of up to 15.55% over the past five years across the platforms surveyed.
A majority of the platforms will tier their fees based on the size of the trade or the trade value. The chart below illustrates the current average brokerage costs per size of trade in dollar terms.
Average Brokerage Fees 2022 by Trade Value
| Trade Value | Average Brokerage 2022 |
|---|---|
| $1,000 | $14.67 |
| $5,000 | $15.27 |
| $10,000 | $16.28 |
| $25,000 | $24.04 |
| $50,000 | $45.17 |
| $100,000 | $91.68 |
Source: www.canstar.com.au 16/09/2022. Brokerage fees based on 1 trade per month. Averages are based on all products available on Canstar’s database for the specified date. Therefore, some changes in averages are impacted by a change in the products available in the market, as opposed to a change in pricing.
Related article: The Cheapest Online Share Trading Platforms
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How to save money on brokerage fees
The cost of brokerage is a fundamental element of online share trading and the good news for consumers is that the average cost per trade continues to fall for both high-value and low-value trades alike.
As the table below details, the average cost of placing a $100,000 trade has fallen by an average of just over $3.35 over the past five years, representing a decrease of 3.52%. The cost of placing a $5,000 trade has also fallen – more modestly in dollar terms (a $2.03 decrease) but more substantially in percentage terms (an 11.35% decrease).
Average Brokerage Fees: Change Over Five Years
| Trade Value | Average Brokerage 2017 | Average Brokerage 2022 | Change over five years ($)* | Change over five years (%)* |
|---|---|---|---|---|
| $1,000 | $17.61 | $14.67 | -$2.94 | -15.55% |
| $5,000 | $17.87 | $15.27 | -$2.03 | -11.35% |
| $10,000 | $18.65 | $16.28 | -$2.56 | -12.70% |
| $25,000 | $25.81 | $24.04 | -$1.77 | -6.85% |
| $50,000 | $49.00 | $45.17 | -$3.83 | -7.81% |
| $100,000 | $95.03 | $91.68 | -$3.35 | -3.52% |
Source: www.canstar.com.au 16/09/2022. Brokerage fees based on 1 trade per month. Averages are based on all products available on Canstar’s database for the specified date. Therefore, some changes in averages are impacted by a change in the products available in the market, as opposed to a change in pricing.
As the table illustrates, the biggest percentage discounts have been in the area of smaller-value trades. This is great news for Casual Investorsbecause when you’re only investing a small amount, the fee represents a much higher percentage of your investment.
If you invested $1,000 for example, in 2017, you would pay on average a $17.61 fee representing a 1.76% cost of trade. With average brokerage dropping to $14.67, your cost of trade is now less than 1.46%. This reduces the amount by which your investment has to grow in value before you break even.
Different investor profiles will also face varying levels of fees based on how much and how often they invest. For example, Casual Investors don’t face an ongoing fee. But the Trader profile does pay an ongoing fee and it can be quite high because they are making 30 or more trades per month so their activity actually does require quite a bit of platform involvement.
To save money when it comes to brokerage fees, it pays to do your research and shop around. Integral to this is understanding what type of investor you are and how you plan to invest. For example, if you have $10,000 to invest, it may cost you less in brokerage fees if you were to invest in one transaction, rather than dollar cost averaging over a series of transactions. Your risk profile, goals and investment timeframe are essential to making a decision around the exchange platform you need and the brokerage fees you’re willing to pay.
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