Designing the most appropriate share class can be an underestimated component of a mutual fund manager's sales and marketing strategy. In an environment of increased fee-for-advice models, asset-based fees at the major platforms, and heightened SEC scrutiny on distribution payments, designing the most appropriate share class plays an increasingly important role. Having the right share class should balance the total expense ratio cost and the distribution strategy for the fund, and ultimately impact the fund's total expense ratio and the manager's profitability.
In 2013, the SEC's National Exam Program published its Examination Priorities for 2013, which included the review of fund expense structures to see if funds are misusing their 12b-1 fees or using other expenses to cover the costs of distribution, i.e. distribution in guise.