But making up for lost sub-TA fees (i.e., the “infrastructure” fees) is a different matter. “As ETF and double-zero or triple-zero share classes are used more frequently, you’re seeing more distributors put more client-facing fees into the mix to recoup some of the revenue sharing they may have lost,” Powers says.
For example, Cerulli says that several larger B-Ds, including Morgan Stanley and Wells Fargo, have implemented a type of platform fee charged to their managed account clients invested in taxable wrap programs where the investor pays four to six basis points for record-keeping and other shareholder services.
“That fee is designed to be reimbursed by asset managers,” Powers says. “I think that’s an interesting approach because as the sub-TA fees decrease with the increasing use of ETFs and triple-zero share classes, that fee is now transparently facing the client. The message that needs to resonate from the industry is, ‘Hey, you may be charged this fee, but you need to understand that the cost of your investment product is being reduced, in theory, by that amount.’ Clients’ all-in cost shouldn’t change if it’s being done right.”