Pioneer Investments of Boston, a subsidiary of Italy's UniCredito Itliano S.p.A. since last November, is undertaking several new marketing initiatives this year.
First, the fund company has chosen to pay 100 percent of the sales charge to investors who purchase Class A shares of 28 of its mutual funds to the brokers or other financial intermediaries who sell these funds. Brokerage firms will also be compensated for sales of Class B and Class C shares, through the addition of sales charges. B and C shares usually do not carry up-front sales charges.
The increased sales charges are only applicable to new IRA investments made in the funds between Jan. 2 and April 30, but the increased payment scheme applies to all IRA plans, including regular, education, Roth and Rollover IRAs, said Steven Graziano, president of Pioneer Distributors.
The higher sales charges apply to 24 of Pioneer's equity and fixed-income funds as well as to four new global sector funds that Pioneer launched earlier this month. The sales charge change was disclosed in a prospectus amendment Pioneer filed on Jan. 2.
Current Class A front-end sales charges vary among the Pioneer Funds from 5.75 percent to 2.5 percent so the actual payments to brokers will also vary. But under the plan, brokers will, for example, receive the full 4.5 percent fee Pioneer charges those investors who purchase Class A shares of certain funds. Pioneer had previously been refunding broker/dealers a flat 4.0 percent of the sales charge.
Brokers who sell Class B shares, which lack a front-end sales charge but carry a contingent-deferred sales charge of four percent which falls to zero if the investor maintains the investment for seven years or longer, will receive a flat 0.50 percent of the amount invested. Those who sell Class C shares, which previously carried a level one percent sales charge, will also receive 0.50 percent of the invested amount.
"Tax season is always a focus for us because lots of our dealers focus their energies there," Graziano said. While a $2,000 per year IRA does not usually drive a broker one way or another, IRA Rollovers, with their larger balances, command brokers' attention and Pioneer is happy to provide brokers with the extra incentive to invest those assets with the Pioneer funds, he said.
"IRAs are of particular interest now because there is lots of money sidelined," Graziano said. Many wary investors have decided to take a wait and see approach with their investments amid a highly volatile stock market, he said. But there is still a need to invest annual IRA contributions or Rollover assets, he said.
The higher sales charge schedules also gives brokers the incentive to support the four new funds Pioneer recently introduced, said Graziano. These include the Pioneer Global Financials Fund, the Pioneer Global Health Care Fund, the Pioneer Global Telecoms Fund, and the Pioneer Europe Select Fund.
In addition to temporarily paying higher broker commissions, Pioneer has been focusing its energies on building both its internal and external wholesale forces.
"We've expanded our sales force in the last five months from 22 teams to 40 teams," Graziano said. A Pioneer wholesale team includes one regional wholesaler paired with one internal wholesaler.
Graziano said that he expects to add another 10 teams in the next few months.
"You need to be in front of the reps," he said.
Pioneer's third initiative includes adding at least two new TV commercials to the pair of commercials now running on financial news stations including CNNfn and CNBC, Graziano said. The ads are also running during two late-night local Boston news programs, he said.
The two new ads were filmed earlier this month and have the same theme as the current ads, said Graziano. Both ads will depict an individual, in one instance contemplating his retirement and in the other, the quality of services he is receiving from his fund company.
Both of Pioneer's current 30-second ads and the new ones, are part of Pioneer's "One" marketing campaign that was created last year by DiBona, Bornstein & Random of Boston.