With fund firms under siege from rationalization fever sweeping broker-dealers and at least one RIA custodian, ProShares' decision to remove itself from Schwab's ETF OneSource platform could signal a slight power shift back to asset managers.

Michael L. Sapir ProShares Chief Executive Officer

But a note to ETF providers: don't rush to get out of your selling agreements just yet. Ditching key distribution programs probably isn't in every shop's best interest.

Lisa Shidler of RIABiz spoke with Morningstar senior equity analyst, Michael Wong, who wonders if specialized ETFs really need to be on NTF platforms.

"If someone is looking for specialized ETFs, they'll look for them in a commission-based brokerage platform," explains Wong.

The outlet also spoke with Scott Smith of Cerulli Associates.

ProShares' decision was important enough to grab the attention of the Wall Street Journal. The paper broke the news back in late March. According to the article, the firm thought that fees were too high (around $250,000 annually per ETF and 20 bps of Schwab client assets) and that the platform didn't provide sufficient customer data.

Schwab put RIABiz in touch with ETF shops, including Rye Brook, New York-based IndexIQ Advisors, who are seeing significant benefit from their participation on the NTF platform. If other ETF shops with powerhouse brands decide to follow ProShares' example, Schwab ETF OneSource could fall prey to the same problems its mutual fund counterpart currently faces. OneSource assets have dropped from $237.3 billion in assets in Q1 of 2015 to $198.9 billion in Q4 of 2016, reports RIABiz.

The ETF OneSource platform had $21.2 billion in assets, excluding proprietary funds, as of the end of 2016, up from $16.1 billion the prior year. After ProShares' exit, the platform has 16 providers in its lineup.  

Edited by: Katy Golvala


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