(Bloomberg) – a potential regulatory In favor of the ETF industry is expected to shake the business models of Wall Street brokers, with billions of dollars in discussion.
Wirehouses and brokers/traders run the risk of losing between $ 15 billion and $ 30 billion a year in fees they currently raise from the mutual funds they offer to customers, according to a report released Thursday by Cerulli Associates.
These losses are possible if the insurance and exchanging commission allows mutual fund managers to add a class of shares traded to the funds they operate. They have not been able to make this change before due to a patent held by Vanguard Group, but that patent recently expired and the SEC has alert that it is likely to approve some of the offers pending from competitors. Fund managers are looking to embrace hybrid structure massively.
Financial firms that provide mutual funds to customers collect so -called shelf space fees from assets managers offering funds in exchange for distribution and operational support. However, the traded exchange funds usually do not rotate these types of tariffs. If double -grade funds gain the approval of the SEC, Cerulli predicts that tariffs can be reduced to a wide range of industry players, including larger ones, freelancers/independent traders and regional firms.
The analysis assumes that all existing mutual funds that are not already in the account of the tax efficient pension or institutional shares classes would be transformed into a class of ETF shares. While researchers point out that they would take “years to play” and may not happen, they add that “it is worth noting that this development is a major economic challenge” for brokers/traders.
“I think it would be premature to appreciate the volume of conversions, at this point, given where we are in the approval processes and where the asset managers are in choosing the funds they will actually join a class of ETF shares,” Chris Swansey, one of the authors in Cerulli, in an interview. “We just want to say that this is the general income that is in danger, in the discussion of those mediating platforms.”
Trading platforms have already had to adapt their business models as investors continue to shift money from mutual funds and low -cost traded funds marketed by the index. Loyalty has been ROLE ETF issuers to give it a portion of the income that issuers receive from fidelity customers.
Cerulli researchers propose that one way the broker/traders brake the possible blow from the changing fund landscape is to introduce similar revenue agreements with ETF issuers.
“There is a considerable income here, but it is also possible for the property managers to find a way to turn a crisis into an opportunity and may result in greater demand for revenue shares in a wider variety of ETF products,” said Daniil Shapiro, another author of the report.
The vanguard created and patented The double class design of the stock two decades ago, which portes the efficiency of ETF taxes in the mutual fund. She helped Vanguard save her billions on taxes, and since the patent expired in 2023, wealth managers have been fighting for the permission of SEC to recreate the model. Blackrock, loyalty and dimensional funding advisers are among many firms with pending applications.