Wells Fargo and Merrill Agree to Pay $4.4 Million Over Small Stock Trades. What Happens When Retirement Investors Pay Too Much to Trade?

Small stock trades aren’t always cheap ones. On Oct. 15, state securities regulators announced a $4.4 million settlement involving two Wells Fargo (NYSE: WFC | WFC Price Prediction) brokerage units and Merrill Lynch, part of Bank of America (NYSE: BAC). The North American Securities Administrators Association (NASAA) said the firms had charged unreasonable commissions on thousands of small-dollar stock trades.

What Regulators Found on 256,000 Small Trades

Massachusetts regulators led a multistate investigation that uncovered unreasonable commissions on more than 256,000 stock trades over five years. The problem was minimum commissions, which can turn even a modest transaction into an expensive one.

The two Wells Fargo units collected nearly $3.9 million in unreasonable commissions across approximately 228,243 trades between Sept. 30, 2020, and Oct. 1, 2025. Merrill Lynch accounted for another $549,000 in excessive charges during the same period.

Affected customers in participating states will receive refunds plus interest, and the firms must certify that they’ve changed their commission practices. The investigation concerned retail brokerage accounts, not specifically 401(k)s. But workplace retirement investors can face trading commissions through brokerage windows, along with fund expenses and other charges that quietly eat into their savings.

A $250,000 Balance and a Fee Nobody Noticed

Picture a hypothetical 55-year-old with $250,000 in his 401(k). He never sees a separate bill for investment expenses, so he assumes his plan costs him nothing. But his funds and plan charges run an extra 0.5 percentage point a year compared with similar, lower-cost options.

On his current balance, that difference amounts to roughly $1,250 in one year, assuming the balance doesn’t change.

Now stretch the comparison over a decade. Suppose the cheaper portfolio earns 6% annually after fees, while the more expensive one earns 5.5%. With no additional contributions, his $250,000 would grow to approximately $447,700 in the cheaper option, compared with $427,000 in the pricier one.

That’s a difference of nearly $20,700 from an additional half-percentage-point in annual costs, compounded over 10 years.

Four Places 401(k) Costs Hide

1. Fund expense ratios. These expenses are built into the fund’s returns rather than billed separately on your statement. You can find them in your plan’s investment disclosures and fund documents, but it’s easy to overlook their effect on your balance.
2. Administrative and recordkeeping fees. These pay for running the plan: recordkeeping, legal work and the website. Some plans charge a flat dollar amount and others take a percentage of assets. When they come out of your account, they show up on your statements.
3. Managed account or advice fees. A 2025 NEPC survey found that 46% of participating retirement plan sponsors offered managed accounts. These services may charge an additional asset-based fee on top of the expenses of the underlying investments.
4. Brokerage window commissions. A Plan Sponsor Council of America survey found that 25% of companies offered a self-directed brokerage window. These accounts let employees buy investments outside their plan’s regular lineup, but they can carry trading commissions, transaction fees and other charges.

Why Fees Keep Taking a Bite in Any Market

Investments can recover from a bad year, although there’s no guarantee they will. Fees work differently. They reduce your investment returns in good markets and bad ones, and every dollar spent on costs loses the chance to grow over time. Unlike market performance, expenses are something you can compare in advance and, in some cases, reduce.

Where to Find Your Real Costs

Start with your plan’s annual participant fee disclosure, often called the 404(a)(5) notice. It shows the expense ratios of the plan’s regular investment options and describes administrative and other charges. Your quarterly statements generally show fees deducted directly from your account, but fund expenses are already reflected in investment returns. If you use a brokerage window, check its separate fee schedule, too.

Next, compare two funds that do the same job. Say your plan offers two S&P 500 options, one at an illustrative 0.05% and one at 0.55%.

On $250,000, the cheaper fund costs about $125 a year and the pricier one about $1,375, assuming the balance stays unchanged. Both track the same index, so their market exposure should be similar, although their holdings and performance may differ slightly.

Switching to the cheaper option could save roughly $1,250 in the first year alone, with more money left to compound over time. You don’t have to predict the market to recognize that difference. The Wells Fargo and Merrill customers needed a multistate investigation to recover excessive commissions. Your own plan’s fee disclosures can help you spot costs before they eat away at years of retirement savings.

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