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Who can I complain to about one of my funds adding a 2% redemption fee? I don't think it is for short term trading, I think it is for all redemptions. This seems like outright theft to me.
@tip 2% redemption fees are not uncommon; as well as other levels and time frames for funds. Vanguard, as an example; has had various fees and/or restrictions for many years. So, your fund "added" this redemption fee recently??? What info do you have from reading the prospectus? You can complain to the fund company and/or whomever manages the fund. What fund?
You said: "I don't think it's for short term trading. I think it's for all redemptions." I'm dubious of this claim - but anything's possible I suppose. Like Catch says ... we'd love to know who imposed this type fee. More likely, there's a "cutoff" period as to when the fee ceases to apply. (Many houses do have temporary redemption fees for "new" money coming in - and that's entirely appropriate.)
If I felt strongly about an issue I'd either (1) Call and ask to speak to a manager supervisor or administrator who I would than request take the issue up with management and get back to me in some manner or (2) Write them. However, I'm afraid in this case it wouldn't do much good. If they receive enough complaints it might. And of course you can most always "vote with your feet" and move the funds to another custodian (unless locked-in to one manager by some workplace plan). Also, most use the "first in - first out" method, so that for any shares you've held longer than the redemption period, selling would not trigger the fee.
I'm not fond of such fees - but can almost always understand and appreciate why they're imposed. Years ago there were some national press stories about how easy and common it was for certain investors to "game" some of Price's international funds exploiting the time differences between U.S. and Asia. It worked because Asian markets often follow U.S. direction overnight. Not long after, Price implemented the types of fees you cite on most of their international funds and has since continued along that vein with certain domestic (particularly those investing in high yield securities). 90 days is the most common holding period with 1%-2% "early redemption" fees. However. in some cases it's longer than 90 days I believe.
Since the fees are almost always invested back into the fund for the benefit of all investors, it's hard to complain. One reason I diversified among several fund houses is that it provides a little more flexibility in this regard. I may not be able to sell an international fund at house A without paying a fee, but might achieve the same effect by selling some of a similar fund at house B.
Redemption fees, at least at Vanguard, are redeposited into the mutual fund to help offset fund operating expense so in a sense these early redemption fee (not saying yours are early) lower the expense ratio of the fund. I get a warning at Vanguard just before I trade. Also, I get a calcuation of shares available for redemption without penalty when I execute a trade. Finally, Vanguard Brokerage offers similar etfs to their mutual funds, for example:
VGENX = VDE VGHCX = VHT VEIEX = VWO VINAX = VIS
There are many more, but my point is these etfs are free to trade (in or out)...not transaction fee...no redemption fee.
@tip, why not give some details of the fund and the announcement so you can get meaningful response?
If the fund is imposing a redemption fee on existing shares retroactively you may have some means to complain.
If the fund is imposing a redemption fee on new purchases then it could be a good thing as people have pointed above depending on the holding period.
Is it possible that you have misread the announcement? Typically, redemption fees are for short-term holdings and paid to the fund and not considered a load. A back end load is a different thing that has no holding period. Not sure what the fund you are referring to is doing.
I agree with everything except back end loads. It is a rare back end load that has no holding period (e.g. two decades ago, Fidelity charged a fixed 1% redemption fee on Growth & Income Fund, on top of a 2% purchase fee).
Generally, though, back end loads are Contingent Deferred Sales Charges (CDSCs). They are contingent on how long you hold the fund. See 'B shares'.
I've never seen a fund that imposed a new redemption charge on existing shares (though brokerages do routinely take funds off NTF lists, effectively adding redemption fees to existing shares).
Comments
2% redemption fees are not uncommon; as well as other levels and time frames for funds. Vanguard, as an example; has had various fees and/or restrictions for many years.
So, your fund "added" this redemption fee recently???
What info do you have from reading the prospectus?
You can complain to the fund company and/or whomever manages the fund.
What fund?
If I felt strongly about an issue I'd either (1) Call and ask to speak to a manager supervisor or administrator who I would than request take the issue up with management and get back to me in some manner or (2) Write them. However, I'm afraid in this case it wouldn't do much good. If they receive enough complaints it might. And of course you can most always "vote with your feet" and move the funds to another custodian (unless locked-in to one manager by some workplace plan). Also, most use the "first in - first out" method, so that for any shares you've held longer than the redemption period, selling would not trigger the fee.
I'm not fond of such fees - but can almost always understand and appreciate why they're imposed. Years ago there were some national press stories about how easy and common it was for certain investors to "game" some of Price's international funds exploiting the time differences between U.S. and Asia. It worked because Asian markets often follow U.S. direction overnight. Not long after, Price implemented the types of fees you cite on most of their international funds and has since continued along that vein with certain domestic (particularly those investing in high yield securities). 90 days is the most common holding period with 1%-2% "early redemption" fees. However. in some cases it's longer than 90 days I believe.
Since the fees are almost always invested back into the fund for the benefit of all investors, it's hard to complain. One reason I diversified among several fund houses is that it provides a little more flexibility in this regard. I may not be able to sell an international fund at house A without paying a fee, but might achieve the same effect by selling some of a similar fund at house B.
Good luck & regards
VGENX = VDE
VGHCX = VHT
VEIEX = VWO
VINAX = VIS
There are many more, but my point is these etfs are free to trade (in or out)...not transaction fee...no redemption fee.
If the fund is imposing a redemption fee on existing shares retroactively you may have some means to complain.
If the fund is imposing a redemption fee on new purchases then it could be a good thing as people have pointed above depending on the holding period.
Is it possible that you have misread the announcement? Typically, redemption fees are for short-term holdings and paid to the fund and not considered a load. A back end load is a different thing that has no holding period. Not sure what the fund you are referring to is doing.
Generally, though, back end loads are Contingent Deferred Sales Charges (CDSCs). They are contingent on how long you hold the fund. See 'B shares'.
I've never seen a fund that imposed a new redemption charge on existing shares (though brokerages do routinely take funds off NTF lists, effectively adding redemption fees to existing shares).