Supporting Share Class Optimization Within ESI Illuminations
ESI continues to enhance the resources available to advisors participating in our Advisor as Portfolio Manager (APM) programs, including Flagship Select, Directions, and Compass.
Accordingly, ESI has been working on an ongoing mutual fund share class conversion initiative designed to reduce investment expenses for clients. Through our partnership with Capital Forensics, we have identified opportunities to convert existing mutual fund holdings into lower-cost share classes within the FMAX environment.
More recently, ESI incorporated a curated investment list into FMAX consisting of the lowest-cost permitted mutual fund share classes available through our platform. This enhancement is intended to help advisors utilize cost-efficient share classes when building and maintaining their APM model portfolios.
Introducing the ESI Lowest-Cost Permitted Share Class Resource
To further support these efforts, we are pleased to introduce the ESI Lowest-Cost Permitted Share Class lookup tool.
This Excel-based resource allows advisors to enter a mutual fund ticker symbol and quickly identify:
- The current mutual fund and share class.
- The lowest-cost permitted share class available through ESI.
- The difference in expense ratios between the current and recommended share classes.
- Whether a lower-cost conversion opportunity exists.
- Additional guidance regarding restricted or unapproved share classes.
The resource incorporates applicable ESI selling agreement restrictions and will be reviewed and updated not less than annually.
Using the Resource with FMAX
When building or maintaining APM model portfolios, advisors may encounter an Unauthorized/Unapproved Security alert on their FMAX dashboard.
If this occurs, advisors can enter the fund’s ticker symbol into the lookup tool to determine whether an alternative, lower-cost permitted share class is available.
The tool also provides guidance when an existing holding is in a restricted share class. In these situations, the resource will indicate:
“No conversion by Operations – restricted share class requires advisor review.”
This message is intended to alert advisors that the existing share class is not currently approved for additional purchases and that they should evaluate whether a conversion to an eligible alternative is appropriate.
Importantly, ESI’s operational conversion initiative is focused on identifying and executing conversions into lower-cost share classes. The initiative is not intended to automatically convert existing positions solely because a share class is no longer approved for new purchases.
For example, certain institutional share classes may have investment minimums or other restrictions that prevent additional purchases through ESI. However, clients may already hold these share classes, and converting them to an eligible alternative could result in higher investment expenses.
Advisors should evaluate these situations individually.
Requesting an Ad Hoc Share Class Conversion
Advisors who identify a potential conversion opportunity through the lookup tool or an FMAX dashboard alert may contact the Illuminations Trade Desk to request an ad hoc share class conversion.
Please provide the account number, current mutual fund symbol, and requested replacement symbol. Operations will review the request and coordinate the conversion, where appropriate and available.
Important Considerations
The ESI Lowest-Cost Permitted Share Class resource is an operational reference and does not independently determine whether a conversion is appropriate.
While our analysis has been extensive, certain fund families or share classes may not have been included in the review. Advisors should confirm share class eligibility through the applicable mutual fund prospectus or directly with the mutual fund family.
For questions regarding the lookup tool or assistance with a potential conversion, please contact the Illuminations Trade Desk at 1-800-344-7437.
Thank you for your continued partnership as we work to enhance the ESI Illuminations platform and help reduce investment expenses for our clients.