Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

  • Sven November 2019
Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Shareholder service fees

This is a fee charged by a fund "to respond to investor inquiries and provide investors with information about their investments." "FINRA imposes an annual .25% cap on shareholder service fees."

All quotes above and below are from
https://www.sec.gov/fast-answers/answersmffeeshtm.html

Often one sees this charge represented as a 0.25% 12b-1 fee. But it can just as easily be called out as a separate line item, or it can be "paid outside a 12b-1 plan [and simply buried] in the 'Other expenses' category." Thus there are three different ways that the service fee can show up. This facilitates a fair amount of deception:

1. Since a noload fund can hide the 0.25% service fee in the opaque Other Expenses category, such a fund looks more "honorable" than another fund showing a 0.25% 12b-1 fee.

2. A load fund can take a 1.00% 12b-1 fee and split it into two line items: a 12b-1 fee of 0.75% (the max allowed for distribution fees) and a separate 0.25% service fee line item. (See, e.g. JNBCX.) Such a fund looks better than another fund showing a simple 1.00% fee, even though they're both charging the same amount.

Because such legerdemain is legal, because one never knows what's being paid for out of "management fees" and "other expenses", IMHO the total ER is the principal number to focus on. A noload fund that documents a 0.25% 12b-1 fee for shareholder services is no better or worse in terms of what it charges than one that hides the fee elsewhere.

Comments

  • Agree. You explained clearly how Pimco managed to raise their fees.
Sign In or Register to comment.