Investing in Mutual Funds with Fee Based

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Dec 20, 2005 2:26 am

For fee based FA's


How do you get around the fee's involved in purchasing Mutual Funds?  Sales Loads on A shares? CDSC's on B thru D shares?


I also read something about F shares having no fee's, but agreements had to be inplace before they could be bought.  Does this limit the number of different fund families that can be sold.

Dec 20, 2005 9:38 am

Kool-aid, funds in fee-based accounts are either load-waived or no-loads, so what you're concerned about is a non-issue.

Dec 20, 2005 9:59 am

Kool Aid,


When we buy A shares it is at NAV.  Or when we use American Funds (ever heard of them?) we use the F share.


Why do you ask?  I thought Jones was still the last large brokerage firm not allowing a fee based platform?



Dec 20, 2005 11:21 pm

I was curious to know how external fee's were processed, I used mutual funds because they are the most popular product.  So I'm safe to assume that prior arrangements would be made between your firm and the funds so that A shares at NAV or F shares in the American Funds example are purchased.  Am I also correct in assuming that if an Indy FA used an external money manager to handle client stock picks that the client would not see an additional fee for the money manager?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />



PS:  Duke, I wanted to thank you for your posts.  Of all the people on this forum you seem to post the most genuine and helpful insights.

Dec 20, 2005 11:24 pm
Kool-Aid Lover:

I was curious to know how external fee's were processed, I used mutual funds because they are the most popular product.  So I'm safe to assume that prior arrangements would be made between your firm and the funds so that A shares at NAV or F shares in the American Funds example are purchased.  Am I also correct in assuming that if an Indy FA used an external money manager to handle client stock picks that the client would not see an additional fee for the money manager?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />



PS:  Duke, I wanted to thank you for your posts.  Of all the people on this forum you seem to post the most genuine and helpful insights.



Generally you are correct, althought it depends on the platform I suppose.

Dec 22, 2005 9:10 am

Kool-aid wrote: "Am I also correct in assuming that if an Indy FA used an external money manager to handle client stock picks that the client would not see an additional fee for the money manager?"


That'd be correct for a wrap account, where the client pays one fee covering everything including the manager's fee.  But, we have a number of external managers we work with who aren't a part of our formal wrap program.  Those are structured where the manager's fee is separate from our fee, although it is automatically debited against the account.  Those arrangements are typically known as "dual contract" structures, wherein the client executes a contract with the manager & a contract with us.


PS: thanks for the compliment! 

Dec 22, 2005 7:01 pm

Hey Duke- better watch who's right behind you in the polls.... And when we get our starting point guard back- watch out......

Dec 23, 2005 8:52 am

Blarm, it will be an interesting year, and I know UConn has a good shot to take it all.  I'm a bit concerned about Duke's inconsistency so far, but I guess starting two frosh -- one who's at point -- contributes to that.  Losing our starting 2 guard (Nelson) for several weeks hasn't helped either.  He should be back late Jan/early Feb. 

Dec 23, 2005 10:42 am

Ahhh. You dont have to worry about Powlus... That guy is a PIMP... When I was living in Western New York for a few years, all I heard about was this guy out of Syracuse... I have seen tape of him in high school and AAU games-- RIDICULOUS.... He is the truth...


Yeah, I am still hoping that when Duke meets UCONN ( probably Final Four or Finals) that Sheldon has foul trouble and JJ only makes 75 percent of his threes ( the best pure shooter in America- college or pro)... Should be good.


My only concern is Rudy Gay's consistency. Some nights he looks like the most talented player in Div 1... Other nights he simply doesnt show up...


Gonna be a great year.....


Dec 23, 2005 1:10 pm

I came across the ultimate fee based scam the other day.  I was reviewing an account that had putnam B shares and was charging 2.5% a year!!!!  can you imagine?  4% upfront and a 2.75% trail (.25bps for the 12b1)  makes an annuity look cheap.........


.....so I slammed her in an annuity and made out like a bandit (kids are going to have a great christmas)!!!!  It was such an easy sell I couldn't help myself.


Just kidding.  I actually had her invest in Franklin's Founding Funds A shares. 

Dec 23, 2005 6:34 pm

dude,


I have heard of this before but never seen it myself.  What broker dealer let a rep get away with that?   That would never fly at most firms.  That client must have been paying 4%/year on that money.

Dec 27, 2005 9:16 am
dude:

I came across the ultimate fee based scam the other day.  I was reviewing an account that had putnam B shares and was charging 2.5% a year!!!!  can you imagine?  4% upfront and a 2.75% trail (.25bps for the 12b1)  makes an annuity look cheap.........


.....so I slammed her in an annuity and made out like a bandit (kids are going to have a great christmas)!!!!  It was such an easy sell I couldn't help myself.


Just kidding.  I actually had her invest in Franklin's Founding Funds A shares. 



Are you sure she was actually being billed on the b-shares?  My b/d will allow b-shares to be transferred in & held in our fee accounts (they can never be purchased there), but they're not billable assets until they might convert to A-shares. 


If your client was being billed on the b-shares, please tell us who the b/d was that allowed this.

Dec 27, 2005 12:26 pm

The primary statement came from Putnam.  The billing for the fee came from the advisor.  It looks like the advisor is an independent.  My assumption is that they sold her the b shares and bill her putnam account somehow.  I am sure that the current advisor was the one who sold her the b shares.  All fee based accounts I have ever seen are either advisor class shares or special fee waived A shares.


What a scam.

Dec 27, 2005 11:53 pm

My b/d will let you xfer in B shares if the client is new to the firm (bought them elsewhere) or if you as a rep are new and are bringing your book in.  If the guy sold them and charged a fee BOTH at the same b/d, that's another story....