A client purchased some A-shares from another firm last year. I’m
bringing the assets in under my name so I get future trailers but here
is the problem.
I hate the fund and I hate the fund company he is currently invested
with. What I would like to do is move the assets into another
family and waive the load (some families allow it with A-share to
A-share exchanges between families). The order would go through
our backoffice and be networked.
Think the mutual fund company would ever catch on and if they did -
think they would really care? I could code the normal account an
advisory account or code it as a relative and get it at NAV.
My question would be...
How would my other clients view it if they found out? (bad)
Is a black mark on my record worth it? (worse)
Is my career worth it? (worst case)
Talk to your compliance dept and ask them for suggestions. Good luck.
… if the performance, fees, etc. are THAT bad. Explain it to the customer. IF you have a strong enough reason (such as fees & performance would allow commissions to be made-up in a short amount of time), have them sign a switch letter.
So it’s your opinion that American Funds would actually have a problem with me calling someone a relative who isn’t?
I’ll be getting paid. They are investing significant amounts in
C-shares with me so I’m very happy to move this sum for free and get
It’s funny how NAV transfers were allowed just a few years ago but with
litigation, they don’t allow it anymore because brokers through a fit
at their liability.
I knew an Ed Jones broker who rolled every a-share client from one fund
to another at the 6 year mark. He said it was legal.
Imagine if all those clients said they were due their commissions back
because an NAV transfer was allowed on all those old trades.
You won’t get any 12B-1s either…AmFunds does not pay 12B-1s on A-share NAV purchases for brokers and family. It’s noble to want to help your client, but I’d liquidate and use C-shares if your clients are used to them and you aren’t exceeding the C-share limit. Otherwise, drop the A-share and move on…poor performance is a good enough reason in my book.
Some funds have other share classes that would be good in this situation. I believe Dreyfus does D or Q shares (they did a few years ago…) NAV w/ 50 bps trail, and I know a few others do, it’s been awhile since I looked at this, I usually explain to people that is a benefit of using an advisory account and go in that direction.
The fact we are having this discussion is sad. Here we have a
client, with poor performing assets and you are landlocked based on
compliance, fee’s, and in the end the client is yet again
Knowing what I know and if I were the client, I would want a better
alternative presented, and pay the fee’s to bet a better
portfolio…and sign whatever form you needed…then I would move on
and expect you to be right.
I’ll look at Dreyfus in the future - thanks. I didn’t know they had those options.
As for an advisory account - our clearing firm has such a high rate of
fee that I just don’t see it as a real alternative. I’m much
better off and the client would be much better off just moving into
C-shares. Until we change our clearing firm, I’m not happy with
the products available. Maybe I’m to cheap.
And rightway, yes it is sad that we can’t do what is right for the
client because compliance is getting in the way. What I ended up
doing was liquidating and moved the client into a CEF I like.
They were very happy with this alternative.