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American Funds To Expands Sales Force Aggressively
American Funds is a quality company. But unlike 15 years ago, when they were the only firm in town, so to speak, with the larger broker-dealer community, there are many other options that have done as well or better. Assets are down big time with a number of their funds. Growth Fund of America, for example, had $27 billion in assets in 2007, now only $11 billion. Washington Mutual is only now back to its 2007 asset level. For sure, a big part of the company's problems stem from the fact that they run a number of funds that own many of the same holdings, so it is impossible to create a truly diversified portfolio using just American Funds offerings. This doesn't mean they do not have some very good options. But it does mean that those 'advisors' who tend to use very few fund families have moved to other companies, or at least reduced their American Funds holdings.
American Funds has tried to make some inroads among non-commission advisors, but I am not sure how successful that has been. And they have totally avoided the retail investor, most likely as a way to reduce capital flight in down markets. But after they lost so many dollars out the door in the last meltdown, they may be questioning that strategy. There was a time when the American Funds rep in Ohio did not have to work much at all. He just raked in his cut of the hundreds of millions of dollars flowing to the company. That is clearly not the case now, as the article says. As commission advisors' numbers drop, fund companies realize they have to disclose how they operate if they want RIA dollars (some of us RIAs actually ask for detailed disclosures!). And the fact is that there are a lost of much smaller fund groups that provide almost complete disclosure as a norm. American Funds has its work cut out for them. Some good funds, for sure. But the company's marketing management really dropped the ball along the way, thinking they could rely on commission sales forever.
Having been with American Funds for some thirty years, I can observe that Bob's comments are right on the mark. They are a quality operation in some respects, with a number of excellent equity funds, but at a terrific cost considering the front loads.
With respect to diversification, we have found it necessary to place approximately half of our investments with other funds to get the coverage spread that we desire. Additionally, I believe their bond fund lineup to be second-rate, at best.
From a retail investor viewpoint, I certainly wouldn't recommend that anyone consider American Funds as they are presently structured.
I'm an AF investor and they are the best mutual fund company around as far as I'm concerned. I'm primarily an equity investor. Their international expertise is way up there. Their ethics are beyond reproach. Not suitable for the short term investor.
Comments
American Funds has tried to make some inroads among non-commission advisors, but I am not sure how successful that has been. And they have totally avoided the retail investor, most likely as a way to reduce capital flight in down markets. But after they lost so many dollars out the door in the last meltdown, they may be questioning that strategy. There was a time when the American Funds rep in Ohio did not have to work much at all. He just raked in his cut of the hundreds of millions of dollars flowing to the company. That is clearly not the case now, as the article says. As commission advisors' numbers drop, fund companies realize they have to disclose how they operate if they want RIA dollars (some of us RIAs actually ask for detailed disclosures!). And the fact is that there are a lost of much smaller fund groups that provide almost complete disclosure as a norm. American Funds has its work cut out for them. Some good funds, for sure. But the company's marketing management really dropped the ball along the way, thinking they could rely on commission sales forever.
With respect to diversification, we have found it necessary to place approximately half of our investments with other funds to get the coverage spread that we desire. Additionally, I believe their bond fund lineup to be second-rate, at best.
From a retail investor viewpoint, I certainly wouldn't recommend that anyone consider American Funds as they are presently structured.
I'm primarily an equity investor. Their international expertise is way up there. Their ethics are beyond reproach. Not suitable for the short term investor.