New ETF Fees Beyond Expense Ratios: What Investors Should Know
Regency Wealth Management partner, Mark Andraos, was recently featured in a U.S. News & World Report article titled “New ETF Fees Beyond Expense Ratios: What Investors Should Know”
In the article, Andraos discussed the changing landscape of commission-free ETF trading and why some investors are beginning to encounter transaction fees on certain ETF purchases.
“In late 2019, Charles Schwab announced commission-free equity and ETF trading for all retail investors, and shortly after, TD Ameritrade (which has since been acquired by Schwab), E-Trade, Fidelity and others followed suit,” Andraos said. “However, ever since this race-to-zero trade commissions initiative began, brokerages have lost significant revenues derived by purely facilitating trades.”
Andraos also explained how revenue-sharing arrangements between brokerages and ETF issuers can affect the fees investors pay. “Typically, Fidelity requires an ETF issuer to pay a revenue-sharing fee to remain a part of Fidelity’s commission-free offering,” Andraos said. “If an ETF issuer refuses to engage in Fidelity’s revenue-sharing arrangement, Fidelity passes a trade commission onto the end retail investor.”
Together, Andraos’ comments highlight how the economics behind commission-free ETF trading are changing, with brokerage firms looking for ways to offset lost trading revenue and, in some cases, passing those costs on to investors.
At Regency, we remain focused on helping clients understand the evolving investment landscape, including changes in how brokerage firms structure fees and provide access to a growing range of investment options.
Read the full article and see all that Mark had to say!
This article and the quotation included is not intended as investment advice, nor should it be construed as a recommendation to buy or sell any securities by Regency Wealth Management or its employees. The author does not guarantee the accuracy or completeness of the information presented and strongly advises investors to conduct their own research and consult with a qualified financial advisor before making any investment decisions. Investing in stocks involves risks, including the potential loss of principal.
Regency Wealth Management is a SEC Registered Investment Advisor managing over $600 million for families and small institutional investors. Regency was founded in 2004, is headquartered in New Jersey, and serves clients across the country.