Fidelity Adds Surcharge to ETF Platform

All but nine ETF issuers have agreed to absorb the $100 transaction fee.

Wealth Management Editor
Edited by: Ron Day

Fidelity Investments is introducing a $100 surcharge for buying non-Fidelity ETFs on its platform and the majority of ETF issuers have agreed to absorb the cost.

Boston-based Fidelity, which manages $45.2 billion in 67 exchange-traded funds, issued a memo March 28 to nine ETF issuers that haven't agreed to pay the trading surcharge, informing them the new fee will begin being collected June 3.

Adding the fees illustrates an increasing challenge in the ETF industry: how to generate revenue as competition among firms pushes expense ratios lower. Fidelity said the fees will be used to improve its investing platform.

“Support fees help maintain the technology and service operations needed to ensure a secure and positive experience for investors,” Fidelity wrote in an emailed response.

Fidelity’s memo puts nine firms on notice that if they don’t agree to pay the surcharge, those fees will be charged to investors or financial advisors purchasing the ETFs. How or if those fees will be passed along to investors was not immediately clear. 

Paying Fidelity's $100 Transaction Fee

According to the memo, 59 ETFs from nine different issuers are currently subject to the new surcharge, but the memo states that list is “subject to change.”

“The list won’t get longer; it will only get shorter if firms agree to pay the surcharge,” said Matt Markiewicz, managing director at AXS Investments in Port Chester, N.Y.

The firms listed in the memo include Simplify Asset Management, AXS Investments, Day Hagan Asset Management, Sterling Capital, Cambiar Investors, Regents Park Funds, Rayliant Funds, Adaptive ETFs and Running Oak Capital.

ETF issuers appeared unhappy with the fees, and resigned to paying them at the same time.

“If we agree to the charge, it costs us $100 every time someone buys one of our ETFs, or we could not agree to pay and maybe lose an investor,” Markiewicz said. “We’re dammed if we do, and dammed if we don’t.”

Tim Holsworth, president of AHP Financial in Midland, Mich., shrugged off the surcharge as the cost of doing business for ETF issuers in an age of commission-free trading.

“This looks like potentially higher fees at the trading level only,” he said. “I don’t see that as an ETF management charge because it only applies to those firms that are not part of Fidelity’s program.”

Tom Graff, chief investment officer at Facet in Phoenix, Maryland, agreed that the move by Fidelity is the ultimate fallout from removing trading commissions on brokerage platforms.

“In effect, this is how they pay for zero commission trades,” he said. “I would say by Fidelity adding this surcharge, they are saying they would prefer to funnel client money into larger ETF providers.”

Jeff Benjamin is the wealth management editor at, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.

Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.

Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.