In Search of Revenue, Brokers Raise Their Fees : Securities: To offset higher costs and lower volume, brokerages hike some fees and invent others.

Facing cautious individual investors and a downturn in investment banking income, brokerages are turning to retail customers with commission hikes and account fees to boost revenue.

Within the next two weeks, two major retail brokerages will raise commissions about 5%. The hikes reflect industrywide efforts to boost revenue, after rounds of cost cutting that pared thousands of jobs and lowered brokers’ commissions, analysts say.

“The focus was on costs, but it is shifting to the revenue side,” said Dean Eberling, a brokerage industry analyst with Shearson Lehman Hutton Inc. “Everyone’s been upping either commissions or custodial fees or fees related to inactive accounts or IRAs.”

Dean Witter Reynolds Inc., the nation’s third-largest retail brokerage, this week will increase stock and option commissions by 5%. Witter will hike its maximum commission for a 100-share trade to $107 from $97 and increase the minimum to $50 from $40.

“It’s a continuation of what other firms have done over the last six to 12 months,” said Perrin Long, an analyst with Lipper Analytical Securities Corp.

Joining Witter is fifth-ranked Paine Webber Inc. Citing rising costs, the firm will increase commissions an average of 4.6% beginning Aug. 1. In March, the company imposed a $50 maintenance fee on accounts that have been inactive for longer than 18 months. Paine Webber also implemented a $1.90 charge for certain routine account transactions that previously were free.

“Obviously, it’s like the auto companies,” Eberling said. “Volume is down, retail activity is soft; therefore, they are trying to raise rates to cover those high fixed costs” with the hope that higher fees will not drive away customers.

Long, however, downplays the role of sluggish trading volume and depressed investment banking in the latest increases, instead attributing the hikes to rising costs.

“When costs go up in any business, normally those increased costs are passed on to the consumer,” Long said. “If you don’t raise your fees or prices from time to time, you’re going to be behind the eight ball.”

Long said the increasing fees parallel a trend in the banking industry that has left customers paying more for services, such as automated teller machine withdrawals and check processing.

Among those joining the trend are Smith Barney, Harris Upham & Co. and Prudential-Bache Securities Inc. This month, Smith Barney imposed a $50 annual inactivity fee, after a commission increase of 4% last September.

Prudential-Bache will raise its annual maintenance fee to $50 from $30 at the end of August. It last increased its commissions in December.

Greater fees and commissions, combined with the leaner organizations, that emerged from post-crash cost cutting, could improve earnings, Eberling said.

“We could see some fairly material positive changes in earnings,” he said.