When evaluating the true cost of investing, it’s easy to focus on performance—how your mutual funds, ETFs, or other holdings are doing over time. But there’s more to the story. Where those investments “live”—and how you buy, sell, and hold them—can quietly chip away at your returns in ways that aren’t always obvious.

In this article, we’ll take a closer look at the platforms, custodians, and brokers behind your investments and the fees they may charge along the way. From hidden trading costs to interest on uninvested cash, understanding these behind-the-scenes mechanics can help you make more informed decisions and keep more of what you earn. Let’s unpack what you’re really paying for—and what to watch out for.

An Account of Your Accounts

First, let’s define a few terms:

Investment Accounts: It’s easy to answer where your holdings live. They live in two main types of investment accounts:

• Individual accounts, which you set up and manage on your own (along with your financial advisor, if you have engaged one).
• Employer retirement plan accounts, such as 401(k) or 403(b) plans, which your employers set up and manage for you.

Custodians/Brokers: There are two kinds of custodians where your individual and retirement plan accounts typically reside:

• Traditional custodians, like Schwab or Fidelity.
• Online platforms or “robo-advisors,” like Robinhood, Wealthfront Advisers, or Schwab Intelligent Portfolios®.

Your custodian uses brokers to actually execute your trades. Some custodians double-duty as the broker; others contract with third parties.

While the terms are sometimes used interchangeably, custodians are responsible for safeguarding your assets, while brokers handle the actual buying and selling of investments on your behalf.

The Cost of Doing Business

So far, so good? Now that you’ve got a lay of the land, here’s an important insight.

It really doesn’t matter which types of accounts you’ve got, which custodians or brokers you’re using, or what your investments are. Come what may, you’re not the one trading in the market. You (or your advisor) place trading orders. Your account custodian takes it from there.

Therein lies additional costs: the costs of holding and trading everything you’ve got.

Those “Free” Frills Can Cost You

Until a few years ago, brokers would almost always charge a commission whenever they executed a trade for you. In a more recent “race to zero,” many providers are now touting commission-free trading. But is that trading really free?

Even as zero-commission trading becomes the norm, it’s important to understand where custodians still generate revenue—often behind the scenes. These practices may not show up on your statement but can still affect your returns over time.

If you take one thing from today’s piece, here it is:

As an investor, whenever you’re being led to believe you’re getting something for nothing, your best bet is to assume exactly the opposite.

It stands to reason: Custodians and brokers must be profitable, or they’d go out of business. If they’re not charging a commission on your trades, they’re still making money somehow. It’s just not where you’d expect to see it, nor can you tell how much it’s really costing you.

Tricks of the Trading Trade

Unfortunately, hidden costs usually mean higher costs. Following are a few tricks of the trading trade that often replace or augment more transparent pricing.

Cash Sweeps and Lending Practices

Ideally, you actually invest most of the money you’ve earmarked for investing. But you probably also hold a little or a lot of cash in your investment accounts. Some custodians have been profiting handsomely by quietly sweeping this cash into their in-house, low-rate bank accounts, instead of paying you market-rate interest.

They can then reinvest your cash in higher-rate holdings, or lend it out and earn interest on it—and keep the difference for themselves. Add everyone’s cash together, and the profits can pile up.

Payment for Order Flow


As described above, your custodian arranges for your trades to be executed. In theory, they’re required to seek “best execution” for your trades. In practice, one common technique is to use payment for order flow to seek competitive trading bids from third parties. Sometimes, this can generate more competitive pricing that benefits you. But it also can create conflicting incentives if an entity offers your custodian more payment (for them), without also ensuring best execution (for you).

Platforms have been under scrutiny on this front, including a 2020 U.S. Securities and Exchange Commission (SEC) charge that Robinhood was misleading customers about the true costs of their trades. Neither admitting to nor denying the charge, Robinhood paid a $65 million fine and agreed to review their payment for order flow and other best execution policies and procedures.

Bond Markups/Markdowns

If you’re trading in individual bonds, there are usually significant hidden costs known as markups and markdowns. When bonds are bought and sold, there is the equivalent of a “wholesale” versus “retail” price. The markup/markdown is the difference you pay above the “wholesale” price. This undisclosed difference typically goes to the broker, in addition to any disclosed commissions paid.

How to Evaluate the Costs You’re Paying

Take time to review your statements or talk to your advisor about the fees you may not easily see. Look for expense ratios on funds, any transaction charges, cash interest rates, and whether you’re being steered toward proprietary products. Knowing where your money is going is a key step in building financial confidence.

While custodians are regulated and required to disclose certain costs, it can still be challenging to spot every fee. That’s why working with a fiduciary advisor can help ensure nothing is slipping through the cracks.

A Conversation About Advisor Fees

Before we wrap up, let’s talk about our own advisor fees.

These days, you don’t need an advisor to handle every aspect of your investments. You can look up fund expense ratios, keep an eye on loads and trading fees, set up your own accounts, and manage your retirement plan investments at work. You can also work to minimize uninvested cash sitting in your portfolio.

As an independent, fee-only fiduciary advisor, we help clients with all of that—and much more. Our job is to provide objective, professional advice across your entire financial life:

• We help you manage your wealth across your full investment portfolio—not just one platform or account. If your advice only comes from a custodian or trading platform, it likely won’t reflect the full picture.
• We guide you through every stage of your financial life—from retirement and estate planning to tax strategies, insurance decisions, business transitions, and charitable giving.
• We put your interests first. Always. That means no commissions, no sales incentives, and no advice that isn’t aligned with your long-term goals.

Our team of financial planners is here to help you focus on what matters most—your goals, your values, and your peace of mind. When your plan works, we all win.

Let’s Talk

At Navalign Wealth Partners, we’re here to help you understand the real costs of investing, eliminate unnecessary fees, and make more confident financial decisions. Your financial plan should reflect your life—not someone else’s sales agenda. Let’s build it together.