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New Share Classes Can Increase Returns

New share classes reduce conflicts of interest and boost returns, four Kansas City firms merge and investor sentiment has fallen off.

In response to the Department of Labor’s fiduciary rule, some asset managers have introduced new T shares and clean share classes to help advisors comply with the rule. A new analysis by Morningstar found that these share classes can not only reduce conflicts of interest, but also increase investors’ returns. Morningstar estimates that the new T shares can increase returns by around 45 basis points (per 100 basis points of load), compared to the typical A shares. T shares allows advisors to receive commissions in retirement accounts and still be compliant with the DOL rule. Clean shares would strip away all the indirect payments, including 12b-1 fees; Morningstar estimates investors pay about $15 billion per year on 12b-1 fees. “In the long term, clean share classes represent the best way to enhance transparency, which is why countries such as the United Kingdom and Australia have moved toward a clean share model,” the research firm writes. The analysis is included in Morningstar’s comment letter on the rule.

Four Kansas City Wealth Management Firms Merge

Gateway Financial, Pegasus Capital Management, Summit Wealth Advisors and Trinity Planning Group have merged, the Kansas City Star reports. The new merged firm, which includes 14 advisors, 35 associates and $1.47 billion in assets, will be called Infinitas Coordinated Wealth Counsel. The merger was partly prompted by the firms' mutual use of Commonwealth Financial Network as broker/dealer. The combined firm offers financial planning, estate planning, accounting and insurance counsel, tax strategy, charitable giving guidance, retirement planning, succession planning, executive compensation counsel and employee benefits insight. It is being led by senior partners Wade Carpenter, Tim DiSette and Ray Evans.

Investor Optimism Levels Out

Investor sentiment has fallen off slightly from the first quarter, according to the results of E*TRADE’s latest “StreetWise” study. Bullish sentiment fell two percentage points from the first quarter to 63 percent. More than half of investors expect the market to rise at least five percent or more this quarter, down five percentage points from the prior quarter, and the number of investors who believe the economy is healthy enough for additional rate hikes fell one percentage point. However, investors did indicate that they see opportunities in international equities, information technology and the energy sector.

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