Unless you have recently onboarded mutual funds to a major intermediary platform, the acronyms “TF” and “NTF” may not mean much. With the industry’s focus on fee compression, these terms reflect an important aspect of how shareholders access mutual funds. Once approved for a trading platform, one question a Fund Sponsor will likely be asked prior to the operational setup is whether they would like their fund(s) offered on the intermediary’s Transaction Fee (“TF”) or No Transaction Fee (“NTF”) platform.
TF products come with a ticket charge to the investor for buys and sells. The amount of this charge is determined by the intermediary and varies per platform. Products on the NTF platform waive this ticket charge to the investor. This waiver comes at a price to the Fund and/or Fund Sponsor. Intermediaries will ultimately look for payment of services from the Funds and/or Fund Sponsor by charging a higher ongoing asset-based fee than they would if the product was offered on the TF platform. Typically this fee is paid by a combination of fund assets and Fund Sponsor revenue sharing, depending on the Fund’s Distribution Plan. Share classes with a 12b-1 or shareholder servicing plan are commonly used for this purpose; please refer to your prospectus to verify what your 12b-1 plan allows.
So how does the industry harmonize the rush towards “clean share classes” with the desire to offer products without a transaction fee? Shareholders do not want to pay ticket charges, nor do they want their investment dollars going towards ongoing fees, creating a difficult balancing act for the Fund Sponsor. Some intermediaries have addressed this by offering NTF channels for share classes with lower expense ratios. Other intermediaries look at fund strategies rather than specific share classes. In any event, Foreside has the expertise to offer advice on how to navigate these intermediary channels.
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LEARN MORE ABOUT FORESIDE ADCOMPLIANCE ™
Learn More about FORESIDE ADCOMPLIANCE ™
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