Fidelity to Tack Service Fees on 100 More ETFs. Boutique Issuers May Be Hit Hardest

Buying certain exchange-traded funds may now cost investors as much as a round of cocktails and appetizers, or a pricey haircut. 

Fidelity is adding more than 100 ETFs whose providers don’t pay it a direct asset-based fee to its list of funds that will be charged an up-to $100 service fee as of June 1. (The service fee is 5% of the trade value up to $100.) This revenue-sharing arrangement kicked off in 2024, and the list of exchange-traded funds affected has been updated on a rolling basis. The new fee model could be a challenge for some issuers, especially smaller ones that don’t have the scale or revenue to afford the asset-based fee. Passing that charge on to their customers’ trades in the form of a service fee could hurt sales. 

“The one advantage of these platforms for individual investors is that they are completely open architecture,” said Matthew Tuttle, CEO of Tuttle Capital Management, which is the advisor of one of the ETFs added to Fidelity’s list, the Brendan Wood TopGun ETF. “This fee means that you could have a group of ETFs that now investors have to pay extra to buy.” 

The Fee Evolution 

Jason Browne, president of Alexis Investment Partners, which runs the Alexis Practical Tactical ETF, another ETF facing the service charge, said he hopes Fidelity “will consider the best interest of their customers and perhaps a more reasonable approach.” Otherwise, he added, “they disadvantage smaller accounts, which might otherwise benefit if our strategy is a good fit for their objectives.” 

ETFs have surged in popularity of late, thanks in part to active ETFs that offer exposure to niche areas of the financial markets. Amid the excitement for ETFs, Charles Schwab is also reportedly implementing a charge for shelf space for certain funds. And fee evolution is likely to continue as firms look for new ways to monetize ETF growth, said Brittany Christensen, senior vice president of business development at Tidal Financial Group: 

• “From an industry perspective, this reflects a broader shift toward aligning incentives across the ecosystem as ETFs scale,” Christensen said. “For issuers, particularly smaller ones, it does add complexity to distribution and raises the bar for accessing key platforms. At the same time, wirehouses provide data, reach and infrastructure that remain valuable to issuers.” 
• The focus now should be on finding a balanced model where distributors are compensated appropriately, while the cost-efficiency and accessibility of ETFs are preserved. 

Common Ground. A Fidelity spokesperson said the firm continues to work closely with asset managers to have a “constructive dialogue” and find a more consistent approach to fees across the asset management industry. The fees also “help provide exceptional value and customer service for all products on our platform, which operates with research tools, technology capabilities, and security measures to drive a positive experience for investors,” the spokesperson said.