For years, one of the biggest selling points of exchange-traded funds, or ETFs, was that they could be bought and…
For years, one of the biggest selling points of exchange-traded funds, or ETFs, was that they could be bought and sold on most major brokerage platforms without paying a trading commission.
“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,” says Mark Andraos, partner and wealth advisor at Regency Wealth Management. “However, ever since this race-to-zero trade commissions initiative began, brokerages have lost significant revenues derived by purely facilitating trades.”
That status quo, however, is beginning to change. At the start of June, investment communities across Reddit were flooded with questions from Fidelity Investments customers after they noticed a new service fee appearing on certain ETF purchases.
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One of the highest-profile examples involved the Roundhill Memory ETF (ticker: DRAM), which became the fastest-growing U.S. ETF on record after amassing roughly $25 billion in assets under management within months of its April 2026 launch. Some investors reported being surprised to see they were immediately down on their investment after a service fee was deducted from the purchase.
The new charge was not unique to DRAM. Effective June 1, 2026, Fidelity began applying a transaction fee equal to 5% of the trade value, capped at $100 per transaction, on purchases of a large number of ETFs that fall under its designated transaction-fee program.
“Typically, Fidelity requires an ETF issuer to pay a revenue-sharing fee to remain a part of Fidelity’s commission-free offering,” Andraos explains. “If an ETF issuer refuses to engage in Fidelity’s revenue-sharing arrangement, Fidelity passes a trade commission onto the end retail investor.”
The development marks a notable shift from the era of commission-free ETF trading that helped fuel the industry’s explosive growth. At the same time, the ETF market has become dramatically more crowded. According to ETF Central’s screening tool, more than 5,500 U.S.-listed ETFs were available at the beginning of August, with new launches continuing almost weekly. As competition intensifies, brokerage firms are reevaluating how they price access to the rapidly expanding universe of ETFs.
“Coming from an ETF issuer, I’m obviously not a fan, especially if this gets passed on to the end client in new fees, which it probably will,” says Matthew Tuttle, CEO and chief investment officer at Tuttle Capital Management. “One of the benefits of ETFs over mutual funds is lower fees, and this could flip that.”
For do-it-yourself investors, that means the true cost of owning an ETF may now extend beyond its published expense ratio. Understanding which funds are affected, how these new service charges work and whether other brokerage platforms could adopt similar policies may become just as important as comparing headline expense ratios. In this guide, we’ll cover:
— What fees and expenses do ETFs charge?
— Which ETFs are affected by Fidelity’s new service fee?
— Will other brokerages follow suit?
What Fees and Expenses Do ETFs Charge?
It is important to distinguish Fidelity’s new transaction fee from the costs that are built into an ETF itself. The Fidelity charge is external. It is imposed by the brokerage platform rather than the fund issuer, meaning the same ETF may be purchased without that fee at another brokerage.
By contrast, virtually every ETF has two core sources of cost that all investors should understand: its expense ratio and its bid-ask spread.
The expense ratio is expressed as an annual percentage of assets under management. Investors do not pay this upfront. Instead, it accrues daily and is deducted from the fund’s assets over time, reducing long-term returns. While part of it includes the management fee paid to the ETF issuer, it also includes operating, administrative, marketing and distribution expenses.
DRAM, for example, charges a 0.65% expense ratio. On a $10,000 investment, that equates to about $65 per year in fee drag, assuming the account balance remains unchanged.
The second intrinsic cost is the bid-ask spread. Because ETFs trade on stock exchanges throughout the day, every fund has a bid price, representing what buyers are willing to pay, and an ask price, representing what sellers are requesting. Investors generally buy at the ask and sell at the bid. The difference between the two is the spread, which represents a trading cost.
For DRAM, the latest 30-day median bid-ask spread is 0.02%. In practical terms, an investor who bought and immediately sold shares would, on average, lose about that amount to trading friction alone. In general, narrower spreads are preferable because they reduce transaction costs.
An ETF’s spread depends not only on trading activity in the ETF itself but also on the liquidity of its underlying holdings. Funds invested in large-cap U.S. stocks typically maintain very tight spreads, while ETFs holding less liquid assets, such as emerging market equities, often trade with wider spreads.
For most investors, the expense ratio and bid-ask spread are the only costs intrinsic to ETF ownership. Fidelity’s transaction fee, by contrast, sits on top of both of these costs. It is imposed by the brokerage rather than the ETF and applies only to certain funds, not the ETF market as a whole.
Which ETFs Are Affected by Fidelity’s Service Fee?
The service fee does not apply uniformly across the ETF market. Instead, it is concentrated among a relatively small group of funds sponsored by issuers that do not participate in Fidelity’s ETF support program. Broadly speaking, the affected funds tend to fall into five categories: products from boutique ETF issuers, thematic ETFs, leveraged ETFs, single-stock ETFs and options-based income ETFs.
One issuer that stands out is Roundhill Investments, whose lineup spans nearly all of these categories. As a result, a significant portion of the ETFs currently subject to Fidelity’s service fee come from a single sponsor, although funds from several other smaller issuers are also included.
Notably absent from the list are ETFs sponsored by the industry’s largest asset managers. None of the ETFs from Vanguard, BlackRock’s iShares franchise, State Street Investment Management, Invesco or Charles Schwab are currently subject to Fidelity’s service fee. These firms collectively account for the majority of ETF assets in the U.S. and generally distribute low-cost, broadly diversified index ETFs.
“Although there are over 100 ETFs subject to Fidelity’s ETF-surcharge list, the affected ETF managers appear to be smaller, niche or specialized funds,” Andraos notes. “The vast majority of retail ETF investors will not be impacted by these commissions, as larger players typically either pay the platform fees or are exempt from it as part of a long-term strategic partnership with Fidelity.”
The concentration among smaller issuers reflects how much the ETF industry has evolved in recent years. Rather than building an ETF business from scratch, many boutique asset managers now launch niche funds through white-label platforms such as Tidal Financial Group.
These firms handle much of the regulatory, operational, trading and distribution infrastructure, allowing issuers to focus primarily on portfolio management and marketing. By lowering the cost and complexity of bringing an ETF to market, white-label platforms have fueled what many industry observers describe as a “Cambrian explosion” of new ETF launches.
The result has been thousands of increasingly specialized products, giving investors more choice than ever before while also creating new questions about how brokerage platforms recover the costs of supporting such a rapidly expanding universe of funds.
Will Other Brokerages Follow Suit?
The biggest concern for many investors is not Fidelity’s policy by itself, but whether it becomes the start of a broader industry trend. As one of the largest retail brokerages in the U.S., Fidelity’s decision could encourage competitors to adopt similar ETF platform fees.
If that were to happen, the impact would extend beyond boutique ETF issuers to the retail investors who have become accustomed to commission-free trading and an ever-expanding selection of ETFs. Notably, Charles Schwab has already signaled that it is exploring a similar approach.
According to Barron’s, management discussed potential ETF platform fees during the company’s April earnings call, arguing that ETF sponsors generate recurring fee revenue while brokerages bear much of the cost of attracting and servicing the investors who purchase those ETFs. A Schwab spokesperson indicated that any implementation would likely occur no later than the first quarter of 2027.
At the heart of the issue is how ETF economics are shared. Barron’s notes that Fidelity’s program is designed around sponsors paying an asset-based platform fee of as much as 15%. Sponsors that choose not to participate instead have their ETFs designated for the transaction fee, which shifts the cost to investors through the brokerage’s purchase surcharge. In effect, the negotiation is between brokerages seeking compensation for distribution and ETF issuers deciding whether to absorb that cost themselves.
“ETF issuer revenues have been consistently caught in the pincer of lower management fees and increasingly higher platform fees,” says Mike Loukas, principal and CEO of TrueMark Investments. “The recent moves by both Schwab and Fidelity are a prime example.”
The rest of the brokerage industry remains divided. NerdWallet noted that several major brokerages, including Robinhood, eToro, Merrill Edge, SoFi, tastytrade and M1 Finance currently have no plans to impose comparable ETF transaction fees. Others, including E-Trade and J.P. Morgan Self-Directed Investing, may exclude ETFs from sponsors that do not participate in their distribution arrangements.
Ultimately, this is a commercial negotiation between brokerage firms and ETF issuers over how to divide the economics of one of the fastest-growing segments of asset management. The challenge is that retail investors can become the pressure point in those negotiations. Higher platform fees may discourage investors from buying innovative products, while restricted distribution can make it more difficult for newer ETF sponsors to compete with established firms.
“Clearly, platforms are grappling with an erosion of mutual fund fees as that product wrapper sunsets, but eventually something needs to give,” Loukas says. “We definitely don’t want to become the restaurant industry where every fee is now itemized and passed through to the customer, but naturally the marketplace has been searching for a viable solution.”
Whether the brokerage industry settles on platform fees, limited distribution or another model remains an open question, but the outcome will influence not only investor choice, but also how easily the next generation of ETF issuers can bring new ideas to market.
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New ETF Fees Beyond Expense Ratios: What Investors Should Know originally appeared on usnews.com
Update 08/06/26: This story was previously published at an earlier date and has been updated with new information.