How has investing become easier and harder at the same time?
On one hand, it’s never been easier to invest. You can select from a wide variety of products with a few clicks on an app, often with no commissions or account minimums.
On the other, it’s never been harder to invest. A barrage of ads often blurring the lines between investing and gambling makes it easier to make emotional decisions and harder to evaluate relevant features to make confident decisions.
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One effective way to address this confusion is through greater transparency — and the best place to start is by understanding how most brokerages make money.
Incentives and costs
“Show me the incentive, and I’ll show you the outcome,” is one of my favorite quotes from the late, great, Charlie Munger, former partner of Warren Buffett.
When it comes types of investing costs, brokerages have a strong incentive to keep explicit costs as low and visible as possible and have a strong incentive to keep opaque costs high, as they’re harder to understand and compare.
Many brokerages promote “zero trading commissions” for many types of trades — an explicit cost that’s easy to understand and compare.
However, most brokerages make money on trades by selling them to middlemen in return for payment for order flow (PFOF) — an opaque cost in which the brokerage pockets a slice of your proceeds every time you trade without it explicitly showing up on your trade confirmation.
Moreover, many brokerages have an incentive to get you to trade riskier securities that expire, on which they typically receive higher PFOF rates.
According to Bloomberg Intelligence, PFOF generated a record $4.8 billion across the brokerage industry in 2025. While more client trades mean more money for most brokerages, excessive trading has been shown to be hazardous to your wealth.
Transparency is here, more is on the way
Good transparency is practical. It makes key information — including yields, fees, and tradeoffs — easy to find, easy to understand and easy to compare.
For example, some brokerages make it easy to see the yield you earn in your brokerage settlement account by displaying it alongside your settlement balance online or in your app. Others make it more difficult to find, forcing you to search for it on other pages.
If your settlement account yield is not easy to find, it might indicate that the brokerage is retaining a larger portion of the yield and crediting a smaller amount to your account.
Additionally, some brokerages encourage you to trade by making investing feel like a game — with flashing prices and confetti celebrations. But investors who let emotions drive their trading tend to have worse outcomes than those with more discipline. Emotions tend to run higher when the market is volatile.
Other brokerages, such as Vanguard Brokerage Services, serve up timely education when you’re placing a trade in volatile markets that reminds you to pause and consider if the trading decision aligns with your long-term goals.
Solving the paradox
Along with the importance of brokerages building transparency into their platforms, Vanguard advocated for an SEC rule amendment that “will empower retail investors to make more informed decisions by providing consistent, comparable disclosures about the execution quality provided by retail broker-dealers.”
The first reports will be published no later than September 30, 2026. Similar to how the FDA requires a standardized nutrition facts label for most prepared foods, these new reports will be standardized to allow investors to facilitate comparisons across brokerages.
How can brokerages make it easier for investors to make decisions aligned with their long-term financial goals?
They must provide clearer, more transparent information.
It isn’t just a feature of good investing platforms, but a responsibility across the industry to support better long-term financial outcomes.
Brokerage assets are held by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation, member FINRA and SIPC.
