Many U.S. retail bond investors don’t think their brokerage firm is sharing enough information about how individual bonds are priced and the way that they’re sold, according to a study released today by Charles Schwab..
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Highlights of the study:
- Bond investors are confused about what investment firms charge to buy or sell individual bonds.
- Seventy-three percent say it’s “extremely important” to know how their firm is compensated.
- Twenty-four percent don’t know how their bond firm is compensated.
- Half say understanding the mark-ups and fees is “extremely important.”
- Forty-four percent of investors who say they pay a mark-up don’t know what it is.
- The perceived average mark-up on a $1,000 bond is $6.10.
- Two-thirds say it’s “extremely important” they receive competitive pricing on bonds.
- A majority know that bond prices vary across firms.
- Only 35 percent believe they always get the best price from their firms.
- Forty percent do not know how to get the best price.
- Roughly 40 percent say it’s too time-consuming or too complicated to shop for the best price.
The online survey, conducted by Koski Research in September 2011, was completed by 510 individual investors in the U.S. with a minimum of $250,000 in total investable assets and at least $25,000 in bonds that were purchased within the past two years. These bond holders were fairly affluent, with an average of $486,000 invested in individual bonds, and an average of $1.8 million in household savings and investable assets.