Free is a four-letter word, and the financial services industry can count as well as anyone.

After ending its platform fees five years ago with the wind-down of ETF OneSource, Charles Schwab is poised to reimplement them next year, Ignites reported last month. That follows moves by Fidelity, and other big broker-dealers like Morgan Stanley and LPL, to charge issuers for shelf space on their platforms. It’s not worrying large asset managers, but the fees could put pressure on small and new players to make their funds stand out.

“For smaller shops, it requires them to be more innovative and differentiated in the products they offer,” said Matt Kaufman, head of ETFs at Calamos. Conversely, “the benefit of being new is that it allows you to price in those platform fees.”

Gotta Get Paid

Schwab has used platform fees before, specifically in its OneSource list of preferred products, but scrapped them when the firm got rid of transaction fees. Over the past five years, though, assets flowed into ETFs and largely out of mutual funds (share classes of which can include revenue-sharing). Many more ETFs have hit the market since, and the industry is on the cusp of dual share classes that will add even more products to the mix. Schwab is missing out on a revenue source, and asset managers acknowledge it.

The company noted the changing ETF landscape in a statement to ETF Upside and said it would work with fund companies in ways that would service clients’ best interests. “As our platforms grow in scale and sophistication, we are thoughtfully evaluating ETF issuer fees to ensure alignment with our focus on serving retail investors and advisors,” the company said. Sources told trade publication RIABiz that they anticipate Schwab applying fees similar to those Fidelity uses: 15% of what ETF issuers get or a $100 transaction fee charged to investors.

Almost everyone has played along:

• There are fewer than 30 ETFs from several issuers available through Fidelity that don’t give the company a cut or pay a service fee, and buyers have to pay $100 for transactions.
• Asset managers told ETF Upside that platform charges are understandable and inevitable, though they may disproportionately affect smaller firms. “There may be some products that are not available out front,” F/m CEO Alex Morris said of the effect on newer issuers.

Saved From Zero? Fund fees have been on the decline for years, although the recent surge in new actively managed ETFs has had the effect of skewing them slightly higher. Because asset managers will increasingly have to pay for distribution, the trend in ever-lower fees may be disrupted. “That money to pay them has to come from somewhere … We get it that it has to come out of us,” Morris said. “It is going to slow the pace of fees coming down across the industry.”

It’s a shift in the fund environment, Kaufman said. “It provides transparency. The fees are fairly explicit, rather than being inside a fund information sheet,” he said. “I don’t really see that as a negative.”

Despite all the exceptionalism that is as American as a bald eagle chomping apple pie while cruising on a Harley-Davidson, the US is behind much of the world in some ways. One not-so-obvious area is investment in thematic funds, though thanks to the rise in active ETFs, the country is quickly catching up. That’s not necessarily a good thing.

Assets in thematic US funds grew 50% over three years as of the third quarter of 2025, bringing the country’s share of the $779 billion market to 23%, according to a report last week from Morningstar. That has happened as active ETFs have ballooned in number and total assets. “It feels a little bit like the Wild West in the US,” said the study’s author, Kenneth Lamont, principal of manager research at Morningstar. “There are many worries to me, if you look at them.”

Siren Song

It’s easy to see why people are drawn to thematic funds, as ventures like space exploration are interesting and exciting, Lamont said. But many of the relatively new ETFs come with higher than average fees that ultimately hinder their performance, he noted. And there is no consistency, as asset managers have varying ideas of what belongs even in an AI fund, for example. As with any active funds, the quality of investment managers also differs. And not all ideas pan out.

Take, for example, the Steadman Oceanographic Fund. It started in the mid-20th century and was based on the idea of building life underwater, including agriculture and housing. Though the fund survived for about 40 years, it continually lost money until its shares were worth less than a penny. A more successful investment product, Pictet’s Water Fund, started in 2000 and focuses on companies working to help meet demands for water globally. That firm, second only to BlackRock in thematic investment assets worldwide, recently launched its first US ETFs.

“There is something very captivating about [thematics],” Lamont said. Largely, investors “just buy the story, not the actual investment.” In Europe, where assets in thematics have been declining, most products are mutual funds. In the US, active ETFs have led to ways for retail investors to make bets, in the worst cases akin to gambling, as seen with leveraged products, Lamont said.

A few highlights of the report:

• There were 332 US thematic funds as of Sept. 30.
• Net flows into them in the first three quarters of 2025 were $19 billion, showing the strongest demand since 2021.
• The biggest US issuers of thematic funds are First Trust, Global X, BlackRock, ARK and Kraneshares.

Theme Antics: Despite his many cautions, Lamont clarified that thematic funds tend to be a safer bet than picking individual stocks (trying to choose a winner in the AI race is a fool’s game, he said). Investors can set themselves up best by first picking a theme and sticking with it over the long term. Still, thematic funds are often concentrated and volatile, broadly underperforming the S&P 500 over time. Add to that the fact that active ETFs are frequently used by investors who try to time the market, and the numbers don’t look great, Lamont said.

“History is littered with themes that didn’t really take off in the way that investors at the time thought they might,” he said.

New ETF issuers are cropping up left and right, but what happens when more established firms come knocking?

Product launches have broken records, with nearly 800 new funds hitting markets in the first three quarters of 2025, already beating last year’s total of 746. But nearly half of issuers with at least 20 products bring in a third of their annual revenue from their largest fund. While top issuers may have the resources to market all of their funds, some companies, especially those with a few hundred million in assets or less, can struggle. That leaves the door wide open for consolidation, a trend that could reshape how products are developed and marketed.

“Combining and bringing ETFs together under common ownership makes a lot of sense,” said Ben Fulton, CEO of WEBs Investments, adding that just 20% of sponsors actually have the operational setup to support their products without having to outsource.

Marketing Madness

Some issuers have innovative products but lack distribution bandwidth. By rolling in strategies under a larger name, however, they can garner assets instead of languishing in obscurity. That makes the ETF industry similar to pharmaceuticals, Fulton said, where innovative products are being developed by companies with fewer assets, and merging with larger firms is a necessary precursor to market penetration. Private equity may also play a role in helping smaller issuers better market their products, Fulton added. If PE rolls in smaller firms — or provides a tech stack or a team of wholesalers — there’s more time for distributors to actually distribute.

Some recent examples of platform consolidation include:

• Last month, the crypto trading platform FalconX agreed to buy UK-based ETF provider 21Shares.
• In 2023, Amplify acquired ETF Managers Group’s product lineup, pushing the former’s total assets to over $8 billion.

“There are some great ideas sitting in smaller firms that, if brought into a larger firm or if someone used it as a roll-up, these products would shine,” he said. “But sitting by themselves in a firm with only a handful of products and maybe two or three salespeople, it’s going to be tough to fight through the maze.”