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I for one am not convined of the accuracy of this data. Everything I have seen tells us that, while no-load funds have increased their share, it is nothing like this study indicates. Since the data is coming from fund companies, and since not all companies participated in the study, that may account for their numbers. But let's assume this is correct (a stretch of the mind, for sure). There are many ways for a salesperson to get around a front-end commission. As the study notes, more and more of the so-called advisor class shares now have 12b-1 trail commissions attached to them. While fiduciary RIAs might use these funds for clients, they cannot receive commissions. But rest assured that salespersons with securities licenses receive them.
The study did not indicate whether the numbers are for new investor dollars or if the data include swaps/exchanges from existing A and B class shares into other A and B class shares. There is a lot of that going on, as you know.
Also know that as more wirehouse and indy brokerage firms try to change their images, they are really increasing the amount of accounts that are managed by third-party companies, such as SEI and others. Investors who are in these accounts can easily be dinged 2-3% annually in "advisor" fees, on top of trading costs. And then, don't forget that Indexed Annuities have become a very big source of salespersons' book of business, and that is even better income for them than managed accounts. Not only do these pay fat commissions when they are sold, they also pay trail commissions in many cases, and the salespersons can charge 1-2% 'management' fees on top. What a deal.
Reply to @David_Snowball: The "quirk" is likely due to the marketing channels used, not M*'s creativity. If one looks at the prospectus of an Active Port (R) fund (there are five on the list of 25), one sees they are no load, but:
Class A shares of the Active Portfolio Funds are offered only to certain eligible investors through certain wrap fee programs sponsored and/or managed by Ameriprise Financial, Inc. or its affiliates.
No different from "real" load funds that waive loads when sold through wrap accounts - there's no need to impose a fictitious load here, since the sole way it is sold is "load-waived".
Same as with BYMIX - also listed as a no-load fund, and also for the same reason. Its prospectus reads:
In general, the fund's shares are offered only to current or former Wealth Management clients of The Bank of New York Mellon Corporation and to certain investment advisory firms, individuals and entities that receive a transfer of fund shares from a Wealth Management client, brokerage clients of BNY Mellon Wealth Advisors or BNY Mellon Wealth Management Direct, and certain employee benefit plans.
It doesn't matter what you call these funds. Whether you call them "no load", "front end load", "level load", they are taking investors' money like C shares. You can pay the fund company an extra 1%/year (most of which the distributor turns around any pays to the broker), or you can pay your broker an extra 1%/year wrap fee to get the front end load waived. It's just a packaging change - and it's a change that largely happened many years ago.
Comments
The study did not indicate whether the numbers are for new investor dollars or if the data include swaps/exchanges from existing A and B class shares into other A and B class shares. There is a lot of that going on, as you know.
Also know that as more wirehouse and indy brokerage firms try to change their images, they are really increasing the amount of accounts that are managed by third-party companies, such as SEI and others. Investors who are in these accounts can easily be dinged 2-3% annually in "advisor" fees, on top of trading costs. And then, don't forget that Indexed Annuities have become a very big source of salespersons' book of business, and that is even better income for them than managed accounts. Not only do these pay fat commissions when they are sold, they also pay trail commissions in many cases, and the salespersons can charge 1-2% 'management' fees on top. What a deal.
Load-bearing: 18 "A" or "529-A"
Institutional: 6
Retail, no-load: 1
The latter is BNY Corporate Bond, Investor Shares (BYMIX).
In an "only Morningstar" quirk, many of those "A" shares are designated as no-loads.
David
The "quirk" is likely due to the marketing channels used, not M*'s creativity. If one looks at the prospectus of an Active Port (R) fund (there are five on the list of 25), one sees they are no load, but: No different from "real" load funds that waive loads when sold through wrap accounts - there's no need to impose a fictitious load here, since the sole way it is sold is "load-waived".
Same as with BYMIX - also listed as a no-load fund, and also for the same reason. Its prospectus reads: It doesn't matter what you call these funds. Whether you call them "no load", "front end load", "level load", they are taking investors' money like C shares. You can pay the fund company an extra 1%/year (most of which the distributor turns around any pays to the broker), or you can pay your broker an extra 1%/year wrap fee to get the front end load waived. It's just a packaging change - and it's a change that largely happened many years ago.