Fidelity Investments reached revenue sharing agreements with nine small asset management companies, ending a period of unusual public friction between one of the country’s largest financial-services companies and the far smaller companies. The agreements mean Fidelity won’t charge investors a fee to trade the nine asset managers’ ETFs, which one of the asset managers said would have been “death.”

If the asset managers had not reached agreements with Fidelity, then it would have begun charging investors a fee up to $100 per ETF purchase on Fidelity’s platform. Fidelity generally doesn’t charge its customers commissions for online U.S. stock, ETF, and option trades.

But while the ETF companies are happy their customers won’t incur the fees, they still have to pay a portion of their revenue to Fidelity that they had avoided before. That eats into their profits in what is a highly competitive business.

Revenue sharing agreements among financial-services companies have existed for decades, but are usually negotiated behind closed doors. Fidelity’s agreements with the nine asset managers were earlier reported by Bloomberg News. Participants wouldn’t disclose the terms of the agreements.

The issue is significant for the broader world of finance, including wealth management, because it highlights how brokerage and asset management companies are seeking ways to maintain revenue streams and adapt to the rapid growth of ETFs in a world of commission-free trading and mounting fee pressures.

“Everything is getting cheaper, so how do you still make profit?” says Daniel Sotiroff, a senior manager and research analyst at Morningstar. “Because at the end of the day, you still have your costs. You have employees, lights to keep on, technology to run.”

Negotiating with a Goliath. Fidelity is one of the nation’s largest brokerage firms, asset managers, and retirement plan providers. The company has more than 75,000 employees and serves more than 50 million investors; it has $13.7 trillion in assets under administration, according to Fidelity.

A Fidelity spokesman says the company is committed to providing customers with choice through an open architecture investment platform, and it provides investors with transparency on commissions, margin rates, and fees on its website. 

“The decision to harmonize some of our fee policies comes as our level of support and service for ETFs across the industry is growing rapidly,” the spokesman says in an email. “We continue to work closely with asset managers, as we’ve always done, to engage in constructive dialogue and reach outcomes that reflect a more consistent approach across mutual funds and ETFs.”

For small asset managers, getting on a brokerage platform such as Fidelity’s is critical because it means gaining access to investors. Analysts and industry participants use a grocery store analogy; if you’re a cereal maker, you want your cereal box on the shelves of the supermarket with the most customers.