Brokers make money in more ways than most customers realize. Some charges are visible on your trade confirmation, like commissions, mutual fund sales loads, and account fees. Others are built into the price you get, the interest you earn, or the shares sitting in your account. Zero-commission trading did not make brokerage free; it moved the cost to places you have to look harder to find.
Payment for Order Flow
When you tap “buy” on a zero-commission app, your order often does not go straight to a public exchange. Your broker routes it to a wholesale market maker, and that market maker pays the broker a fraction of a cent per share for the right to execute the trade. This arrangement, called payment for order flow, has become one of the largest revenue sources for retail-focused brokerages.
Regulators do try to keep this honest. Brokers must publish quarterly Rule 606 reports showing where they route orders and what they receive from each venue.1U.S. Securities and Exchange Commission. Responses to Frequently Asked Questions Concerning Rule 606 of Regulation NMS They also owe you a best execution duty: reasonable diligence to get you the most favorable terms available.2FINRA.org. FINRA Rule 5310 Best Execution and Interpositioning In 2020, the SEC charged Robinhood with misleading customers about its order-flow revenue and failing that duty; customers received worse prices totaling $34.1 million, more than they saved in commissions, and the firm paid a $65 million penalty.3U.S. Securities and Exchange Commission. SEC Charges Robinhood Financial With Misleading Customers About Revenue Sources and Failing to Satisfy Duty of Best Execution
Spreads and Markups
Sometimes your broker is not just routing your order; it is selling you the security out of its own inventory. In that case, the firm earns the difference between the price it buys at (the bid) and the price it sells to you at (the ask). That spread is a real cost, and it does not appear as a line item on your confirmation.
Spreads matter most in markets without a central exchange showing live prices: municipal bonds, corporate bonds, and over-the-counter stocks. FINRA’s fair pricing rule prohibits any broker-dealer from charging a price unrelated to a security’s current market value, or an unreasonable commission.4FINRA.org. FINRA Rule 2121 Fair Prices and Commissions Enforcement against excessive markups can include fines and orders to return the overcharge.
Interest on Your Uninvested Cash
Cash sitting in your brokerage account does not sit idle. Your broker sweeps it into bank accounts or money market funds, earns interest at one rate, and pays you a lower rate. The difference is theirs. Across millions of accounts, that spread is substantial. Some firms have been criticized for paying near-zero rates on swept cash while earning far more.
Multi-bank sweep programs spread your cash across several FDIC-insured banks, which can extend your total insurance well past the $250,000 per-depositor, per-bank, per-ownership-category limit.5Federal Deposit Insurance Corporation. Your Insured Deposits One thing to check: if your sweep sends cash to a bank where you already hold personal accounts in the same category, the balances combine for insurance purposes.
Margin Lending
If you open a margin account, your broker will loan you money to buy more securities and charge interest on the balance. Under Federal Reserve Board Regulation T, the initial loan can cover up to 50 percent of the purchase price of a stock.6FINRA.org. Margin Regulation Rates typically sit several percentage points above a benchmark like the federal funds rate, and the larger your balance, the more the broker collects.
The risk sits with you. If your securities fall in value, your broker can issue a margin call requiring you to add cash or sell holdings. Move too slowly and the broker can liquidate your positions without your approval.
Lending Out Your Shares
Brokers also lend shares from client accounts to short sellers and institutions that need to borrow stock. The borrower pays a loan fee, and the broker keeps a share of it. In margin accounts, brokers generally have the right to lend your shares without asking. Some firms run fully paid lending programs on shares held in cash accounts, where you opt in and get part of the fee.
The lending fee depends on how hard the stock is to borrow. Large, heavily traded companies produce small fees; smaller or heavily shorted names can generate much more. Most retail investors never see this revenue stream, but it is a meaningful part of how large brokerages profit from their asset base.
Commissions That Still Exist
Most major online brokers eliminated commissions on U.S. stock and ETF trades in late 2019. Before that, discount brokers typically charged three to seven dollars per trade. Commissions did not disappear across the board, though. Full-service firms and platforms handling options, futures, and international equities still charge per-trade or per-contract fees.
Whatever the fee, your broker must send a written trade confirmation disclosing commissions, markups, and other charges applied to the transaction.7eCFR. 17 CFR 240.10b-10 – Confirmation of Transactions
Mutual Fund Sales Loads
When you buy certain mutual funds through a broker, part of your money goes to the broker as a sales load. Front-end loads are deducted at purchase; back-end loads, sometimes called deferred sales charges, apply when you sell. FINRA Rule 2341(d) prohibits excessive sales charges and sets limits that depend on whether the fund also charges ongoing asset-based fees.8FINRA.org. Mutual Funds Front-end loads commonly run 3 to 6 percent. No-load funds are widely available as an alternative.
Real Estate Brokers
Real estate brokers earn commissions on home sales, historically around six percent split between the seller’s and buyer’s agents.9Board of Governors of the Federal Reserve System. Commissions and Omissions: Trends in Real Estate Broker Compensation Following the National Association of Realtors’ $418 million antitrust settlement, changes effective August 2024 barred seller’s agents from advertising buyer-agent compensation on Realtor-owned MLS listings and required buyers to sign a written representation agreement, specifying the agent’s pay, before touring a home. Federal law separately prohibits kickbacks and unearned referral fees in any transaction involving a federally related mortgage.10Consumer Financial Protection Bureau. Regulation X 1024.14 – Prohibition Against Kickbacks and Unearned Fees
Advisory and Wrap Fees
Many brokerages also act as investment advisers, charging an ongoing percentage of assets under management. Basic robo-advice starts around 0.25 percent; personalized human advice can run up to about 2 percent. The SEC has indicated that advisory fees above 2 percent may be viewed as excessive unless the adviser clearly discloses that the rate exceeds the industry norm.11U.S. Securities and Exchange Commission. Regulation of Investment Advisers by the U.S. Securities and Exchange Commission
An adviser being paid to give investment advice is regulated under the Investment Advisers Act of 1940 and owes you a fiduciary duty. Section 206 prohibits fraudulent or deceptive practices, which courts have read to require acting in your best interest and disclosing material conflicts.12GovInfo. Investment Advisers Act of 1940
Wrap fee programs bundle advice, execution, custody, and reporting into one asset-based charge, generally between 0.40 percent and 1.15 percent, with smaller accounts paying more. Bundling simplifies billing, but the total can exceed paying for each service separately if you do not trade often.
Account Maintenance, Inactivity, and Transfer Fees
Administrative charges give brokers steady income regardless of what markets do. The most common ones:
- Annual account maintenance fees, often $30 to $75, frequently waived above a minimum balance.
- Inactivity fees when no trades occur over a set period, ranging from roughly $50 to $200 per year in total.
- Account transfer fees when you move your holdings to another broker through the Automated Customer Account Transfer System, typically $75 to $125 for a full transfer.
Not every broker charges all of these, and many have dropped maintenance and inactivity fees to stay competitive. The fee schedule is a required disclosure; read it before opening an account.
Regulatory Surcharges Passed Through
Two small regulatory fees ride along on securities transactions and may be passed through to you. The FINRA Trading Activity Fee is $0.000195 per share for equity securities in 2026, capped at $9.79 per trade.13FINRA.org. FINRA Fee Adjustment Schedule The SEC Section 31 fee is $138.10 per million dollars of covered sales for fiscal year 2026.14U.S. Securities and Exchange Commission. Fiscal Year 2026 Annual Adjustments to Registration Fee Rates On a typical retail trade, these amount to fractions of a penny per share. Some brokers absorb them; others pass them through as line items on your confirmations.
What This Means for Your Total Cost
Compare brokers on the full picture, not just the headline “$0 per trade.” The number that matters is the sum of visible fees, execution quality, cash sweep yields, margin rates, and any asset-based charges. Commissions you do pay affect your taxes: purchase commissions add to your cost basis, and sale commissions reduce net proceeds, both of which shrink your taxable gain or enlarge your deductible loss when you sell.15Internal Revenue Service. Topic No. 703, Basis of Assets
Advisory fees, account maintenance charges, and custodial fees used to be deductible as miscellaneous itemized deductions. That deduction was suspended starting in 2018, and 2025 legislation permanently eliminated it. You can no longer deduct these investment-related expenses on your federal return, which is another reason to keep them low from the start.