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CLU, ChFC, MSFS

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Sample eGroup Discussion Threads

Financial Planning Section Sample Discussion Thread

QUESTION:
Hello everyone. What are your thoughts on using a portfolio of C shares instead of a wrap account? If the combination of the wrap account fee and the underlying fund expenses exceed the expenses of using C shares, is this a viable alternative?

Thanks for your input.
Ronald Reick


REPLIES:

I am a huge advocate of the wrap programs. I think that using them give maximum flexibility to the client. Although the "C" shares and fees in the wrap program are similar, I don't like is the use of 1 fund family. I think it is naive to think that 1 fund family can manage money in every asset class better than its peer group. I have a great deal of success introducing the client to a wrap account, with close to unlimited investment options, no up front cost to them, relatively low fees and expenses, and NO CDSC. It is a great alternative for the client, and it gives them a feeling of comfort that you, or whoever the manager is for the wrap account, will be looking out for their investment account at all times. Not like the old buy and hold strategy, but a real supervision of their account.

Patrick W. Ray, LUTCF
President - Creative Planning Group
2541 Spyglass Court
Edwardsville, IL 62025


Patrick, I agree. C shares seem to work for a short investment period. Wrap accounts, which allow investing in no-loads or load waived funds including institutional funds, do not incur the higher ongoing internal fees that C shares normally have. I think that is the reason that the SEC in down on C shares for most investors unless it is short term investing.

Leo E. Strine, CLU®, ChFC®, MSFS, MSM
Registered Representative*
Financial House
5818 Kennett Pike
Centreville, DE 19807


I got the opposite impression. I was thinking that the SEC is less impressed with "wrapped mutual funds" than with C shares. I suppose we shall see, what we shall see.

Fred
Frederick J. Dawson, ChFC, CLU


I made that statement because of the required form which notifies and asks the investor to sign stating that they know that they are using B and C shares instead of A shares. Am I wrong in this? If so, please inform and enlighten me. Lord knows, I need it.

Leo Strine


One thing that I have found to be helpful is the NASD's fund expense analyzer available on their website. I will sit down with my clients and talk about fund expenses, investment time horizon etc and we will go to the NASD website and run a comparison between the A and B Shares or C shares etc. It gives the client a good feel for what it costs to utilize the different shares classes and more importantly, the compliance department likes to see a copy in the file.

Here is the link: http://www.nasd.com/Investor/Tools/Calculators/FundCalc/expense_analyzers.asp

Jeff

Jeff Vincent, CFP
Great Basin Financial Services
6340 South 3000 East, Suite 500
Salt Lake City, UT 84121


That is SOOOO Cool. I think I'm going to make it part of every new application from now on. Protects the client AND protects the rep!

-- Mark Bertrang, CLU, ChFC

Bertrang Financial Corp.
1401 Main Street, Suite # 101
Onalaska, WI 54650-2837