No-Load Shares Continue to Gain Ground in Mutual Fund Sales

Point-of-sale commissions continue to fade from the mutual fund sales process as advisers increasingly sell funds in fee-for-advice arrangements, according to a new study by Strategic Insight, an Asset International company.

Among long-term mutual funds, sales via class A shares—traditionally the primary share class pricing structure through which brokers and financial advisers sell funds—continue to accelerate toward sales done at NAV (without any type of front-end sales load), the study found. During 2009, 68% of A-share sales among fund managers primarily selling through financial advisers were made at NAV, which means they carry no front-end “load” or commission, up from 66% of A-share sales in 2008 and 58% in 2007. 

A shares sold at 4% or higher commissions declined to just 13% of total A-share sales in 2009, down from 14% of total A-share sales in 2008 and 16% in 2007. Even this low proportion was influenced by a handful of fund managers still relying more significantly on high-commission A shares, as evidenced by the median firm in its survey garnering just 8% of total A-share sales at these high commission levels in 2009, SI said. 

“These sales trends in A shares are being driven by the evolving way that financial advisers sell mutual funds to their clients,” said Strategic Insight senior analyst Dennis Bowden, the study report’s lead author, in a press release. “Mutual fund sales are moving away from high-commission model models as more funds are sold in a structure where advisers receive fees for advice. As this trend continues, fund sales through share classes without a front-end sales load will also continue to expand.” 

While sales at NAV continued to make up an increasingly dominant portion of total A-share sales, overall fund sales through A shares (both with a front-end load and without) continued to decline during 2009—accounting for 40% of total mutual fund sales among survey participants—down from 43% in 2008 and 46% in 2007. In total, A shares continued to be the single largest-selling class of fund shares among survey participants. 

On a dollar-for-dollar basis, A-share sales at NAV fell 11% in 2009 from 2008 levels, while commissionable A shares (sold with any type of front-end load) contracted by 21% year-over-year. This decline in A-share sales was driven particularly by a decrease in sales of A shares at NAV within fee-based advisory programs (including mutual fund wrap platforms). 

A shares at NAV accounted for 46% of total fee-based advisory sales among fund managers primarily selling through financial advisers during 2009, down from 56% of such sales during 2008. Meanwhile, no-noad shares accounted for 54% of total fee-based advisory sales during 2009, up from 44% in 2008. 

These findings come from SI’s new report, “The Strategic Insight 2009 Fund Sales Survey: Perspectives on Intermediary Sales by Distribution Channel and Share Class.” The study was based on SI’s proprietary survey of 32 fund firms that distribute primarily through financial advisers. Survey participants managed in aggregate $3.3 trillion in U.S. open-end stock and bond fund assets as of the end of 2009, representing roughly half of industry-wide long-term fund assets.

More information is available at