Phoenix Investment Partners of Hartford, Conn. is raising the front-end sales charge on its equity and balanced mutual funds in seven proprietary fund families as of April 3. The change, which will standardize the maximum sales fees charged on class A shares of Phoenix' various mutual fund groups, was increased to 5.75 percent from the current 4.75 percent charged on most of its mutual funds. That rate applies to all fund purchases of less than $50,000.
The front-end sales charges applicable to two other levels of assets will also rise, but not as dramatically. Purchases between $50,00 and $99,999 rise to 4.75 percent from 4.50 percent. Purchases between $100,000 and $249,000 rise to 3.75 percent from 3.50 percent. The sales charge on purchases between $250,000 and $499,999 will decrease to 2.75 percent from 3.00 percent. The sales charge for purchases between $500,000 and $999,999 remains unchanged at 2.00 percent. There are no sales charges at higher asset levels.
The changes apply to those equity and balanced funds managed in the Phoenix-Aberdeen, Phoenix-Duff & Phelps, Phoenix-Engemann, Phoenix-Hollister, Phoenix-Oakhurst, Phoenix-Seneca and Phoenix-Zweig fund families.
Some charges for fixed-income funds within those Phoenix Investment Partners' fund families will also change. Like the equity and balanced funds, the sales charge for fixed-income fund purchases between $250,000 and $499,999 has been dropped to 2.75 percent from 3.00 percent. The maximum sales charges across all of Phoenix's fixed-income mutual funds will remain at 4.75 percent, with lower sales charges applying at higher asset levels.
Phoenix, which has spent the past several years acquiring niche fund investment managers and co-branding fund products with its new investment partners, wanted to bring consistency to the sales charges across the funds' A share classes, said Jack Sharry, president of Phoenix's retail division. While most were carrying up-front sales charges of 4.75 percent, five of the Zweig mutual funds that Phoenix acquired in December 1998, for instance, had a maximum sales charge of 5.50 percent, said Sharon Bray, a Phoenix spokesperson.
In addition to making uniform all of its class A sales charges, Phoenix wanted to makes its fund more competitive with other firms in the eyes of brokers, said Sharry.
"We were hearing that our sales charges were not in line with the industry, that it was low, well below the industry average," he said.
Phoenix, which sells its retail funds through the broker/dealer channel, did not want to take a larger piece of the sales commissions, said Bray. Phoenix will continue to return all but 50 basis points to the brokerage firms.
"We didn't take the opportunity to fatten our profit margin," said Bray. "This really was a move to support the advisors."
Not only are fund groups that charge loads going head-to-head against other funds that carry sales charges to attract brokers, but many no-load fund groups have, or are contemplating adding, share classes that offer various pricing options to appeal to a variety of audiences.
"You have to align your pricing with the business practices and structures offered by leading companies," said Avi Nachmany, executive vice president and co-founder of Strategic Insight in New York. "If you don't do that, the underlying message is that you don't appreciate the work of the brokers as well as others do."
Phoenix is not alone in trying to capture the attention of broker/dealers in an increasingly crowded marketplace by maintaining competitive funds' pricing. Last summer, John Hancock Funds of Boston increased the compensation it paid broker/dealers who sell 401(k) and other retirement plans by rejiggering the sales charges it pays at various asset levels over $1 million. The idea was to provide incentives for brokers to sell larger retirement plans, said George Manning, national sales director for the retirement plan market at Hancock.
"As assets increase, the desire to have help increases and the role for a financial advisor of a plan is increasing," said Manning. According to 1998 statistics from the Investment Company Institute, 77 percent of long-term fund sales are brought in by financial advisors. The use of financial advisors stands at 74 percent for recent retirees who have $250,000 or more in investable assets, according to a 1999 study done for the Forum for Investor Advice in Bethesda, Md. by Matthew Greenwald & Associates.