The ETF account, which had long been a fee‑free area, is now being challenged by neobrokers that appear keen to tap into the commissions paid to ETF providers. The German financial regulator BaFin has confirmed such attempts, reports the FAZ. BaFin is aware that some intermediaries are seeking agreements with ETF issuers to collect ongoing account‑maintenance fees.
Ongoing (“bestands”) commissions would be a first for ETFs, which so far, unlike many active funds, do not pay continuous distribution fees to depository banks or brokers. “This would be a huge topic” says Ali Masarwah, portfolio analyst and managing director of the digital wealth manager Envestor. “A breach of taboos in the ETF world” he adds, warning that this would steer new entrants down the wrong path that the industry has followed for thirty years.
The trigger for this shift is the expected loss of a major revenue stream for neobrokers: starting 30 June, brokers will no longer be able to receive payments from trading venues for forwarding customer orders. Trade Republic declined to comment on specific contractual arrangements. “Regardless of any form of remuneration, every payment goes straight into the further development and quality improvement of our platform” the company said. Large ETF providers such as DWS (Xtrackers), Blackrock (iShares) and J.P. Morgan Asset Management declined to comment.
“The payments for order flow were one of the most important income sources for neobrokers” says asset manager Gerd Kommer, who has launched an ETF with the British law firm Legal & General. Kommer believes that in the future ETF issuers and brokers will increasingly split commissions. “With thematic ETFs or active ETFs that have higher total expense ratios, there is generally enough to distribute” he says. For existing, large standard products that currently carry fees between 0.03 % and 0.25 % per year, he does not anticipate any increases.
Professor Andreas Hackethal of the Frankfurt Leibniz Institute SAFE considers worries about rising costs for investors to be overblown. “ETF issuers can, in fierce competition, not arbitrarily raise their total expense ratios” he says. Neobrokers could instead develop other revenue sources-such as their own trading venues or proprietary products.