While registered investment advisors have had an allegiance to no-load fund companies because they were the first to offer their funds through supermarkets, advisors' taste for no-load funds also stems from their perception that no-load funds are not pushed on them, according to a new report by Cerulli & Associates of Boston.

The new report, "RIAs: The State of the Fee-Based Financial Advisor Market," says that advisors are often turned off by load company wholesalers offering "an expensive pen or a fancy meal."

The no-load product, commonly sold through fund supermarkets, lends itself better to the advisor than commission-based load products because the advisor is charging his client a fee.

The first fund supermarket was opened by Schwab in 1992 and was integral to the growth of the RIA market because it was an easy and inexpensive channel through which advisors could get mutual funds for their clients without a commission. But, that is not the only reason RIAs favor no-load funds, according to the Cerulli report. It explains that advisors are turned off by wholesalers trying to push product and would much rather pick and choose no-load funds on their own which they perceive to be less expensive.

The report, which used seven years worth of data and surveyed over 1,200 RIAs in 1998, noted that advisors are most concerned about performance and believe that they can find great performing funds by themselves in the no-load universe.

That appears to be true. According to the Cerulli report, 90 percent of all mutual fund assets under RIA management, or $97 billion, are distributed through no-load firms.

Cerulli says that RIA's will continue to favor no-load funds unless load companies change their sales tactics. As a channel, RIAs hold only 3.6 percent of all long-term mutual fund assets and it is growing. In 1998, mutual fund assets under management by RIAs rose 44 percent to $108 billion from $75 billion in 1997.

Those numbers have probably prompted many load companies to become innovative in their methods of selling to RIAs. For example, the report says, Eaton Vance of Boston, which sells its funds with a load, decided to start marketing to advisors less than two years ago by using two people in the office and one in the field, the report said. In the first 12 months, Eaton Vance gathered $100 million in assets from advisors, much of it by focusing on brokers who had moved from a commission payment structure to a fee-based system, the report said.

"But Eaton Vance also recognized early on that (advisors) appreciate more than anything straightforward, useful information that doesn't look, feel, or smell like a sales pitch," the report said.

Of course many load companies are getting their funds into fund supermarkets by waiving their loads. According to Cerulli, over a dozen companies, including Alliance Capital, Franklin Templeton, Kemper, MFS , Van Kampen and Putnam, have waived the loads on funds to get them onto supermarket lists available only to advisors.

"We have a variety of different relationships with advisors," said Pamela Plehn, spokesperson for Kemper Funds. Forty percent of Kemper's business is in the financial advisor channel, she said. The balance is in the bank and regional/wirehouse brokerage channels.

The report did say, however, that despite these efforts to put loaded funds in supermarkets, the response from advisors has been lukewarm because advisors, "remain suspicious of marketing-driven fund complexes."

"When it comes to expenses, the load-waived funds often raise suspicions among advisors that there are higher fees being built into the load-waived funds." Officials at Cerulli said that those fees advisors most object to include 12b-1 marketing fees.

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