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Would you buy a mutual fund from Amazon?

hank
edited January 2019 in Fund Discussions
Caught the speculation on Bloomberg today. Nothing definite. But usually where there’s smoke there’s fire.

BY DANIEL LIBERTO Updated Jul 25, 2018

Excerpt:

Amazon.com Inc. (AMZN) has all the right tools in place to take the asset management industry by storm, according to Sanford C. Bernstein & Co. In a research note, reported on by Bloomberg and Financial News, the investment manager said the Seattle-based company’s strong online presence and vast customer base, including 100 million-plus Amazon Prime subscribers, leaves it “well placed” to sell mutual funds to retail investors .....

Bernstein predicted that any move by Amazon to start selling funds would prove popular with its customers. The analysts noted that a large portion of the company’s Prime subscribers fit the same profile as mutual fund buyers and added that many of them have already thrown their support behind the idea, via a recent survey by online marketplace LendEDU.

https://www.investopedia.com/news/amazon-well-placed-disrupt-asset-management-industry-bernstein/

Comments

  • johnNjohnN
    edited January 2019
    I guess you can buy almost anything from there except for cars, housing, guns nor beer
    Amz has turned into a 'virtue national anything you can buy mall'
  • rforno

    Depending what it held, allocated and cost in fees .... maybe.
  • msf
    Large retailer moving into financial services/products space. Where have I heard this before?

    Oh yes, 1981, when the U.S.'s largest retailer (Amazon is currently only third), already owning an insurance company, acquired a financial services company. Most of its business came from selling mutual funds, MMFs, and CDs. At the time, it was looking forward to making even more money off a new fangled financial product called an eye-are-eh.

    So how'd that work out with Sears, Dean Witter, Allstate, and Discover?

    Of course there are many ways for a company to get into the mutual fund business besides this one and the couple mentioned in Investopedia. It could simply serve as the sales arm of an existing fund or family as Vanguard originally did when Bogle founded the company: provide administrative and distribution services for an existing company. Or it might function like Harbor, branding the funds and overseeing the management, but outsourcing the day-to-day management of all its funds to third party money managers.



  • AnnaAnna
    The Amazon model would offer free trades with prime but raise the share price to cover it.
  • msf
    Section 22(d) of the 1940 Investment Company Act "generally prohibits the sale of mutual fund shares (i.e., redeemable shares) by a principal underwriter or dealer at any price other than the 'current public offering price described in the prospectus.' The public offering price of mutual fund shares consists of the net asset value per share, plus any applicable sales load."
    http://www.klgates.com/files/Publication/72ff3c8d-880b-4da9-bd81-2729818b0fae/Presentation/PublicationAttachment/dd749ec9-4bac-4b79-bf7d-3322dcaa43d6/IM_Alert_01192017.pdf

    In 2017, in response to the proposed DOL fiduciary rule and the emergence of "clean shares", the SEC clarified this section by stating that "different intermediaries may impose different sales loads."
    (Same citation)

    That allows different brokers to add different sales charges (loads), but the share price itself cannot be different (e.g. raised) from what is stated in the prospectus (i.e. NAV).

    Perhaps a distinction without a difference (like gas stations offering cash discounts as opposed to adding credit card surcharges). Still, any surcharge must be called out as a load and not embedded in the price.

    NTF supermarkets generally cover their costs with kickbacks from the funds (typically 0.40%/year), though some will happily sell you load funds with no commission and take a cut of that load.
  • rforno
    Amazon Prime members get access to P-Class shares that have zero-point ERs. :)
    Anna said:

    The Amazon model would offer free trades with prime but raise the share price to cover it.

  • Old_JoeOld_Joe
    Eventually Amazon would probably also try selling shares at the Whole Foods meat counter.
  • rforno

    Works for me, I can DCA with each weekly shopping run - and with a 5% Prime discount, too! :)
    Old_Joe said:

    Eventually Amazon would probably also try selling shares at the Whole Foods meat counter.

  • hank
    edited January 2019
    Old_Joe said:

    Eventually Amazon would probably also try selling shares at the Whole Foods meat counter.

    Running funds sometimes bears resemblance to sausage making.

    “Spicy Hots“ anyone?:)

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