Fidelity has announced plans to implement a new fee structure for exchange-traded fund (ETF) trades. Starting in June, Fidelity will charge investors a $100 fee for any ETF trades valued at $2,000 or more. For trades of $2,000 or less, the fee will be 5% of the trade value.
This new fee structure represents a significant departure from the recent industry trend of providing customers with cheap or even commission-free trading options. Fidelity’s brokerage arm is hoping to recoup these costs by requiring ETF sponsors to pay a 15% support fee on their revenue.
The announcement has elicited mixed reactions from ETF providers. While some smaller firms feel they have no choice but to accept the new fees, others are still negotiating the terms. Industry experts warn that these added costs for ETF sponsors are likely to be passed on to investors through higher fund fees, potentially eroding the competitiveness of certain ETFs.
Analysts have also criticized Fidelity’s proposed $100 flat fee as being grossly out of step with current industry standards. FactSet’s Elisabeth Kashner cautioned that these expenses could ultimately be distributed across all fund investors, driving up total costs.
Fidelity has framed the new fee structure as a way to cover the costs of providing investment research and educational materials to customers. However, the move is seen as part of a broader re-evaluation within the industry regarding the sustainability of commission-free trading models.
Information for this story was found via Bloomberg, Financial Times, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
