Equity Services Financial Advisors (“EFA”) believes that it is important to provide clients with investments which are in their best interest. This means that if less expensive investments are available in their accounts, they should be offered.
EFA has identified some mutual fund share classes available in Flagship Select and Directions accounts which have higher internal fees, but are otherwise the same as other available share classes of the same fund. These fees are assessed by the mutual funds and are reflected in a fund’s “internal expenses.” Over time, higher internal expenses can lower the performance these investments.
Often, No Transaction Fee (“NTF”) mutual funds have higher internal expenses. For legacy Flagship Select and Directions accounts with ticket charges (accounts opened prior to February 15, 2021), using these more expensive funds may still make sense. However, for those accounts which use the new pricing structure and are not assessed ticket charges (accounts opened after that date, or older accounts which have since transferred), less expensive share classes are the better option.
On or around April 15, 2022, you will be unable to place orders for some NTF mutual funds, and some other funds with high internal expenses, in Flagship Select and Directions accounts with the new pricing structure.[1] Usually, a less expensive share class of the same fund will still be available for purchase. If not, you should consider using a different mutual fund which is available. Even after these changes, there will still be over 15,000 funds available to recommend to your clients. If you would like to verify whether a fund you intend to recommend to your clients is available, you can do so by clicking here and viewing the available funds list.
On or around April 29, 2022, EFA will automatically convert any existing holdings in these funds with higher fees to a different share class of the same fund because it will save the client money and improve the account’s performance. Your clients will be sent a letter informing them of these changes shortly, which will afford them the opportunity to “opt out” of the conversion if they wish. Click here for a copy of this letter.
EFA is informing you of these changes in case you attempt to recommend or rebalance to a fund which is no longer available in some Flagship Select and Directions accounts. Additionally, for Investment Advisory Representatives with clients in legacy Flagship Select and Directions accounts which are still charged ticket charges, this is an excellent opportunity to consider whether the use of NTF Funds in these accounts is still cost effective. You may wish to consider moving the account to the new pricing structure, which will charge an increased platform fee, but allows for free transactions on most investments in the account.
If you have any questions about these changes, please contact Tom Longfellow, Sandy Colvin or Mike Chiarella at 800-344-7437.
[1] If you place an order for one of these funds prior to this date, it may be flagged by ESI’s back office, and it may reach out to you if a less expensive option is available for the client.TC126252(0422)1