Failure to supervise Mutual Fund trading proves costly – Evaluate yours!
Cheers from Sonja Rae!
I’ve had experience in this realm. I recently helped two large Hybrid RIA’s evaluate ALL of the mutual funds positions their financial advisers have placed (or positions that were transferred in and being held “unknowingly”) in Advisory or fee-based accounts. A very insightful project as to fees clients were charged at the “fund level” such as 12B-1 fees and upfront sales charges, etc. In addition, those clients were being charged the advisory fee by the financial adviser. No bueno!
Advisory or fee-based clients should always be placed in the lowest expense ratio share class when they are in an advisory account (taking into consideration fund minimums and trading costs), of course. In most cases, share classes are eligible for conversions (without tax consequences, no impact on cost basis).
If you have questions or your firm could use evaluation in this area, I’m available as a reference or consultant.
Another aspect in this same genre to watch out for, and supervise, is mutual fund fee waivers!
This past July, FINRA reached settlements with 56 broker-dealer member firms and obtained $89 million in restitution for nearly 110,000 charitable and retirement accounts resulting from its mutual fund fee waiver initiative.
The firms had failed to waive mutual fund sales charges for the eligible accounts and failed to reasonably supervise the sale of mutual funds offering sales charge waivers.
For more detailed info, click here
