Fidelity to charge ETF sponsors up to $100 per buy order

Fidelity will impose a 5% transaction charge, capped at $100 per order, on client buy orders for exchange-traded funds whose sponsors do not pay the firm a direct asset-based fee, effective June 1. The firm published a list of affected ETFs and said the list may change without notice.

Fidelity sent the notice to registered investment advisors and wealth management firms. The document states that revenue from sponsor payments will support ETF availability on Fidelity’s brokerage platform, including shareholder services, calculation and analytical tools and investment research and education materials related to ETFs.

Executives provided prepared statements and responses instead of on-camera interviews. Steve Richard, head of Fidelity Institutional Wealth Management Services, said Fidelity has provided clearing and custody services for more than four decades and pointed to the company’s scale and range of businesses. Trevor Norton, head of custody, described the company’s pricing as relationship-based and emphasized investment in client service, practice-management support and technology.

Fidelity administers about $5.5 trillion in assets under administration across roughly 3,300 registered investment advisors and wealth firms and handles about 5.5 million daily trades in 48 capital markets and 21 currencies. The firm’s custody clients include independent RIAs and firms that are dually registered as broker-dealers. BNY Mellon’s Pershing and Fidelity are identified as among the largest custody providers for broker-dealers.

Custodians derive revenue from transaction charges paid by investors, fees from fund companies for distribution and platform access, and interest and securities-lending income from client cash and holdings. As mutual fund revenue streams have declined and ETF assets have grown, custodians have been pursuing alternative revenue sources tied to ETF servicing arrangements.

A Citizens Bank analyst wrote that ETFs represent a near-term lever for boosting profits through servicing fees and other arrangements, and that firms will be more proactive in seeking compensation for platform services. Industry consultants and advisors framed Fidelity’s change as part of a broader shift in how custodians monetize platform services. Tim Welsh, founder of Nexus Strategy and a former custody executive, noted that service and platform control are key issues for advisors and that scale influences negotiating power.

Smaller advisory platforms said custody relationships remain central to their business. Trey Prescott of Advisory Services Network recalled that Fidelity’s early support helped the firm scale, and he described Fidelity as a key provider while noting that many advisory firms now use multiple custodians to offer choice to advisors.

Fidelity’s published ETF list offers a public view into negotiations between custodians and asset managers. The new fee will join other recent custody and brokerage pricing changes as firms seek revenue from the expanding ETF market while continuing to offer trading technology, analytics and client support services.