Take a Load Off: Do-It-Yourself Investors Get More Fund Choices
The Wsj has an article on the availability of mutual funds that were only available as load funds sold through brokers and commission based advisors
Take a Load Off: Do-It-Yourself Investors Get More Fund ChoicesDo-it-yourself investors are getting more mutual funds to choose from. Many funds once available only through financial advisers—historically, with sales commissions, or "loads"—are now available to self-directed investors without those charges.
For decades, most fund companies that sold their funds through commission-based financial advisers shied away from offering individual investors the same wares without the loads. A big concern was angering securities firms and their armies of advisers by offering the same products more cheaply elsewhere.
But amid big changes in the securities industry, some fund firms that primarily sell through advisers are concluding that it's OK to also offer their products without loads to do-it-yourselfers through discount brokerages.....
Most adviser-focused fund firms make their load-waived shares available only to clients working with an adviser, not to self-directed investors. Still, the growing use of these shares has blurred a classic division within the fund industry. Fund firms used to focus on one of two business models: They offered no-load funds to do-it-yourselfers and to fee-only advisers, or they distributed load funds through securities firms. (brokers continue to offer load funds) Now, the two groups of fund companies are doing business with each other's traditional constituency. Fee-based advisers at securities firms and fee-only advisers are both using a mix of no-load and load-waived funds....
For self-directed investors, a commissioned fund with the load waived is essentially the same as a no-load fund that never had a sales charge attached. The two would show up side by side if investors use a discount brokerage's screening tool to find funds in a particular category that are available without transaction charges. They should be evaluated on all the usual factors—including annual expenses, track record, manager longevity and strategy.This illustrates another example of the contrast between a broker and a registered investment advisor. As a fiduciary responsible to act in the clients interest a registered investment advisor could never recommend a more expensive class of the same fund. The broker under no such standard would only be obligated to make sure the fund was appropriate to the client in the most general of terms.