A new survey has found that more U.S. brokers are charging fees rather than commissions, but clients pay more as a result.

According to a just-completed broker survey by Weiss Ratings Inc., the share of brokerage firms seeking to get investors away from commissions and into fee-based arrangements has almost doubled in the last two years, from 28.7% of firms in 1999 to 50.2% today.

The survey, covering the 341 retail brokerage firms, reveals that 171 now offer fee-based accounts with the fees ranging from 0.33% to 2.25% of account assets.

For an investor with an account balance of US$100,000, the largest brokers charge an average annual fee of 1.5% of the account balance, resulting in a yearly cost of $1,500. This means that an investor paying a full-service commission of $100 per trade would need to make a minimum of 15 trades per year in order to save money by switching to a fee-based account.

“Unless you are an active trader, you should probably stay away from fee-based accounts and stick to paying for each individual trade,” commented Martin Weiss, chairman of Weiss Ratings. “A broker’s ‘no-more-commissions’ pitch may sound good at first, but when you do the math, it usually doesn’t work out to your benefit.”

Most brokers reduce their percentage fees for larger accounts, and many are willing to negotiate rates lower than their published fixed fees. However, discount brokerage commissions are still more economical in most cases.

“As trading volume has dropped from its frenzied pitch in 1999, brokers have been promoting fixed fees in an attempt to ensure steady income and avoid red ink,” added Weiss. “On the positive side, this will undoubtedly take pressure off these brokers to encourage unnecessary stock trades. For most investors, however, the fee-based system is too pricey.”

In evaluating the nation’s largest 603 brokerage firms, Weiss Ratings upgraded: RBC Dain Rauscher Inc. from B to B+ and TD Waterhouse Investor Services Inc. from C+ to B-.