Douglas A. Boneparth is a Westfield resident and Founder of Bone Fide Wealth, LLC, a boutique wealth management firm in New York City, and co-author of The Millennial Money FixContact Douglas to learn how he’s not your parent’s financial advisor.

Last October, Charles Schwab announced it would offer commission free trading across its brokerage platform. Within what seemed like minutes, TD Ameritrade matched the offer with zero commission trading of their own. Since their *groundbreaking* announcements, there has been no shortage of news articles and blog posts about them and their impact on the financial services industry. It shouldn’t come as too much of a surprise that people are either in support of or against the move to commission free trading.

Those in favor first cite the obvious — that lower costs are better for the consumer. They go on to note that free trading will allow folks greater access to investing as well as incentivize them to start investing. This belief is predicated on compounding interest, that the sooner you can put your money to *work*, the sooner you can start accumulating wealth. For many in this camp, access to investing > establishing fundamentals. It’s participation above all else.

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Naturally, those against the paradigm shift view things differently. From their perspective, free trading is analogous to a gateway drug. By removing barriers of entry, critics believe commission free reading simply encourages more people to put risk on their money when, perhaps, they have no business investing in the first place. The fear is that one *hit* of trading will result in a full-on gambling addiction and not the disciplined long term investing that’s required to withstand the market’s risks. Anyone who has taken D.A.R.E. in school knows the expression, “The first time is always free.”

Personally, I find myself a critic of zero commission trading because, as many of you know, I firmly believe that you should first “Earn the Right to Invest” before risking any amount of money in the capital markets. I will continue to argue that your ability to successfully invest for your future is only as good as your ability to remain disciplined over the long term. Generally, that means possessing a strong foundation through by establishing your financial goals and mastering your cash flow.

No matter which side you’re on, the irony here is that free trading isn’t really free. As Jason Zweig points out in his latest WSJ article, Schwab is able to afford this marketing maneuver because of the spread they make on the cash in their brokerage accounts. While savings rates today can fetch close to 2%, their cash *sweep* accounts pay practically zero. But that’s not the only way free trading isn’t free. Platforms like Robinhood, make their money through the sale of their order flow to high frequency trading firms that might not execute your trade at the *best price*. Surprise! You are the product.

However, what’s not being talked about as much is how this latest round of financial marketing impacts investment advisory firms. Will the zero commission trend find its way to advisors like me who manage money on behalf of clients? Will RIA custodians face pressure to charge nothing for their advisors to trade on their platform? I am sure we will find out sooner than later but, in asking these questions, it shines light on a relatively dark corner of our profession. It begs another question, who actually pays for the trades in your managed portfolio?

In practice, most advisors are given a choice by their custodian or broker dealer as to who picks up the charges. Advisors can either absorb the costs themselves or pass it along to the client. These costs depend on a number of factors such as frequency of trading, account size, security selection and of course the cost of trading securities. For clients absorbing them, it could mean hundreds (and in some unfortunate cases thousands) of dollars each year. That’s on top of any asset management fee and fund expense(s). For firms paying them, these fees could add up to tens of thousands of dollars.

While I’ve chosen to absorb these costs for my clients, my ultimate feeling is that as long as they are disclosed, it is up to the advisor as to how they want to run their business. It’s just one of many operational decisions we advisors must make. It does have me wonder though, how many advisors fail to disclose these fees altogether? Asked differently, how many clients know whether or not these fees are passed along to them? It’s an important question and I think it will become increasingly relevant if and when zero trading fees make their way from the retail channel to advisor channel. Here’s why.

If a firm is picking up these costs, zeroing out trading fees could be a significant bump to the firm’s bottom line. But if they’re passing them along, clients become the recipients of the *savings*, whether they know it or not. That has me curious if (and how) advisors will market those savings to their clients. For those in my shoes, there’s really nothing to share. You accept the windfall and carry on. But for those passing trading fees along, disclosing the savings will likely depend on what your clients do or don’t know. Because if they don’t currently know about the costs in the first place, I’m going to assume they’re not going to enjoy learning about their *savings* later on.

Whatever happens in the future, it all comes back to transparency and making sure clients know what they are paying for. I understand many businesses owners don’t necessarily want their clients to know “how the sausage is made” or get caught up in the confusing details of our profession’s inner dealings. But given what we do and the level of trust our clients place in us, I believe it is important to explain the mechanics of our businesses with the people we serve because, in the end, radical transparency speaks volumes to one’s character as an advisor and, more importantly, as a person.

This originally appeared on my blog.