Retirement Class

Making a profit in smaller qualified retirement plans has been difficult for advisors because of high costs. However, it's gotten easier in the past couple years, thanks to the emergence of shares, or retirement shares. Advisors using A shares often have no profit left over after operational costs. But R shares usually carry a 50- to 75-basis-point trail that covers overhead and still leaves a little

Making a profit in smaller qualified retirement plans has been difficult for advisors because of high costs. However, it's gotten easier in the past couple years, thanks to the emergence of “R” shares, or retirement shares.

Advisors using A shares often have no profit left over after operational costs. But R shares usually carry a 50- to 75-basis-point trail that covers overhead and still leaves a little something for the advisor.

According to Financial Research Corp., 47 firms now offer R shares or an equivalent. American Funds dominates the pack, accounting for 85 percent of the sales from 2003 through 2004, largely because it has five different types of R shares.

Frank Gregory, head of defined contribution services at Lord Abbett, says his firm's equivalent, “P” shares (pension), are designed for the $1 million to $10 million-plan market and carry a 45-basis-point trail.

“We've made a big push in the last 12 months to educate brokers and plan sponsors about the benefits of this share class,” Gregory says.

Assets* In “R” Shares
November 2004 (YTD) $49,035
December 2003 $23,604
December 2002 $7,481
December 2001 $4,427
Source: Financial Research Corp.
*Long-term and money market funds (dollars in millions)
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