U.S. brokerage firms and custodians are considering charging distribution fees to ETF managers, signaling a potential shift in the $13.5 trillion exchange-traded fund market, according to J.P. Morgan.
The move reflects pressure on intermediaries after a decade of commission-free trading, which has reshaped revenue models across Wall Street and eroded traditional brokerage income.
Fintech platforms offering zero-fee trades and simple mobile apps have drawn millions of retail investors, diverting clients and trading volumes away from established firms.
J.P. Morgan estimates the U.S. ETF management fee pool at about $21 billion, with brokers potentially targeting 10% to 20% of total expense ratios, translating into roughly $2 billion to $4 billion a year in new costs for fund managers.
The bank described the initiative as increasingly urgent, noting that the industry’s shift from mutual funds to ETFs has been costly for intermediaries, particularly after commissions fell to zero.
Regulatory dynamics could add momentum, as potential SEC rule changes may accelerate tax-free conversions from mutual funds to ETFs, further intensifying competitive and pricing pressures.
While the largest ETF managers are likely to face higher distribution fees, the impact may be uneven: major players could negotiate more favorable terms, while mid-sized firms may feel greater strain as margins tighten.
