If you are selling mutual funds, you must do it in the manner that is least expensive for the client.  In a "fee in lieu of commission" account, you are still selling.  Put a client in one of these accounts and if you don't "churn" the account, you'll be guilty of "reverse churning" which is just as bad as churning. 

If you want to collect fees, stop selling and start advising.   Most B/Ds don't want you to use advisory accounts because of the fiduciary responsibility that comes with the accounts.

Just an FYI on the Jones comment about C shares - this week Jones

INCREASED their payout on C shares from 30% to 35%. Still not the full

payout, but they are at least acknowledging that C’s are not the devil. I

think their new managed money platform is coming soon. I do have to

say that I think Weddle and the “newer regime” is a bit more forward

thinking than their elder brethren. It’s a good first step…

[quote=anonymous]

If you are selling mutual funds, you must do it
in the manner that is least expensive for the client.  In a “fee
in lieu of commission” account, you are still selling.  Put a
client in one of these accounts and if you don’t “churn” the account,
you’ll be guilty of “reverse churning” which is just as bad as
churning. 

If you want to collect fees, stop selling and start advising.   Most B/Ds don't want you to use advisory accounts because of the fiduciary responsibility that comes with the accounts.

Fees are fine.  And wrapping your business is the way to go.  Honestly, I think it is in the best interest of the client.

WHEN you are new FEES are a hard sell.  Let us get our feet wet, build our books. 

There is nothing wrong with selling C shares as long as you continue to work with the client, and I do that.

"There is nothing wrong with selling C shares as long as you continue to work with the client, and I do that."

Personally, I wish that everything was "C" shares.  This alligns the client's interest and the advisor's interest. 

However, if the argument is being made that it's ok to use "C" shares because you are continuing to work with the client, the argument won't fly with your B/D and the NASD.  "A", "B", and "C" are all products with sales charges.  We have a responsibility to sell the cheapest share class for the client.  "C" shares are not allowed to be a replacement for advisory accounts.  If you are using "C" shares because they are the cheapest for your client, they are appropriate.   If you are using "C" shares to generate recurring income, no matter how great your service, you'll find yourself in hot water.

the average mutual fund is held for 3 years

So what?  Average means nothing.  All that matters is the one client who is buying the fund that you are selling. 

Could this statistic be true because too many reps are having their clients sell a fund and buy a new one to generate a commission? ( Of course, part of the problem is that when a rep ACATs an account with "A" shares, they can't afford to give any type of service due to the lack of comp on the trails.) 

Also that stat doesn't take into all the times that a fund is moved to another fund within the same family. 

It doesn't change the fact that C shares can't be used for long term investments.  If the investment in the fund family (not the fund) is supposed to be short term, C shares are fine.  An investment that is supposed to be long term, can't be in C shares.

I am not saying that I agree with this stand by the NASD.  I have stated in the past that I believe that C shares should be the only share class.  It would take away many conflicts of interest.

"So what?  Average means nothing.  All that matters is the
one client who is buying the fund that you are selling. "



An open end fund, which a C share would be, is not traded it is
redeemed to the fund company.  This is another downside to mutual
funds.  When you have a good and management team that is operating
in a rough arena due to market conditions you have reps pouncing on
this as an oportunity to advise there clients to sell the fund and go
elsewhere, which is a comiission generating event, or you have
uninformed shareholders cashing in.  Either way the means the
mutual fund manager has to liquidate securities in an in-opportune
time, often with wicked tax consequences, which hurts thos shareholders
who wish to ride it out.



With managed money the clients owns the securities with there own
basis.  They and their advisor are the sole participants in
decisions of when to sell or not. 

rightway, I agree with your post. 

It still does not change the fact that reps can't sell C shares if the intent is for the client to stay in the fund family long term.  The rep must sell A shares instead if they are selling load funds for commission.

Personally, I do everything that I can do to avoid selling A shares.  I actually think that A shares are bad for the rep, which ultimately make them bad for the client.