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  • msf August 2018
Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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Fund Industry Limits C-Share Investing, Cutting 12b-1 Fee Income For Advisers

FYI: The great share-class migration that has been building this year is starting to unfold, representing a significant pay cut for advisers relying on beefy 12b-1 fees for predictable income streams.

Over the next few months, several fund companies plan to start converting C-class share mutual funds that have been held between seven and 10 years into A-class shares that pay advisers smaller 12b-1 fees.
Regards,
Ted
https://www.google.com/search?source=hp&ei=lwSAW5fLFYjYsQW0s4vIBg&q=Fund+industry+limits+C-share+investing,+cutting+12b-1+fee+income+for+advisers&btnK=Google+Search&oq=Fund+industry+limits+C-share+investing,+cutting+12b-1+fee+income+for+advisers&gs_l=psy-ab.3...3034.3034..4543...0.0..0.63.125.2......0....1j2..gws-wiz.....0.F6FvIhg6u5A

Comments

  • "C shares are going away because they are a bad deal for investors. B shares were a similarly bad deal and they are pretty much, if not completely, extinct."

    Good riddance. IMHO for long term investors (even those who moved from fund to fund), C shares were a much worse deal than B shares, which for small investors were little worse than A shares.

    B shares convert to A shares after a certain number of years. So depending on growth, you'll wind up with a little more or a little less at the time of conversion than had you purchased A shares instead. No big deal unless you invest enough to get a break on the front end load.

    IMHO their bad reputation comes from the fact that brokers misrepresent these as being better, either illegally by saying they are "no load", or legally by saying that they put all your money to work immediately. That's technically true, but their higher ERs gradually erode that advantage until they come out the same as A shares.

    C shares, unlike A and B shares, skim money off for the broker in perpetuity. That makes them more costly in the long run and thus worse for investors. In addition, they seem even easier than B shares to sell as "no load". Search MFO, and you'll find more than one poster writing about specific C shares (not identifying the share class), acknowledging the high ER but disregarding the fact that these are in fact high, very high, load funds.

    The selling point for C shares is that they are supposedly better for people who only want to own the shares for a year or two. Then what? If they buy other C shares, they continue to pay the same load, year in, year out.

    In contrast, once you pay a front end load on an A share, those dollars are good for life. You can transfer between funds of the same family without paying a new load. And until a couple of decades ago, when the industry got even more greedy, you could exchange those shares for A shares at different fund families without paying a new load.

    It's called NAV transfer:
    https://www.wealthmanagement.com/archive/several-major-fund-companies-end-nav-transfer-programs
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