Published Tue, Feb 3, 2026 · 11:01 PM
[NEW YORK] US brokerage firms and custodians may seek distribution fees from managers of exchange-traded funds (ETFs), JP Morgan said, marking a possible crucial shift in the country’s US$13.5 trillion ETF market.
The US market over the past decade has seen the rise of new fintech firms that introduced commission-free trading, disrupting established Wall Street business models.
Platforms such as Robinhood attracted millions of retail investors with zero trading fees and simple mobile apps, pulling customers and trading volume away from traditional brokerages.
To combat the shift in the competitive landscape, legacy players such as Fidelity and Charles Schwab have raced to win over clients, by slashing trade commissions to as low as zero dollars for ETFs.
But the discounts have started to weigh on revenue, as the investors move in large numbers from mutual funds into ETFs.
This could prompt brokers to charge distribution fees, as they try to recover revenue lost to zero-commission trading and the move away from mutual funds.
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JP Morgan estimates the US ETF management fee pool to be US$21 billion, with brokers targeting 10 to 20 per cent of the total expense ratios – the annual cost of running a fund – implying US$2 billion to US$4 billion a year in new distribution costs.
On Monday (Feb 2), JP Morgan said: “This is an important initiative for financial intermediaries, as the migration of mutual fund assets to ETFs has been a costly transition, following the migration to US$0 trading commissions over the last 10 years.
“We also (detect) a greater sense of urgency for custodians and brokers, given the potential for the US Securities and Exchange Commission rule changes to accelerate the tax-free transition from funds to ETFs.”
While the largest publicly traded ETF managers, including BlackRock, Invesco, Franklin and Janus, are all likely to see a higher distribution fee, the impact is likely to be uneven, the bank noted.
Big players such as BlackRock and Vanguard could be better positioned to negotiate the fees, while mid-sized managers such as Invesco could face greater pressure, it added. REUTERS
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