Key Considerations for Client Best Interest
Recently, we’ve observed an increase in redemptions of Class A mutual fund shares within a short period after purchase. While client needs and market conditions can evolve, early redemptions of front-end load funds may raise cost considerations and best interest concerns.
Because clients pay a sales charge upfront, Class A shares are generally designed for longer-term holding periods. As a practical guideline, consider approximately one year of holding for each percentage point of sales charge paid to help offset that upfront cost. Redeeming sooner may result in higher overall expenses for the client and may require additional review.
Our goal is to support recommendations that align with Reg BI expectations and strong client-first practices.
When to Pause and Consider a Case Preview
A case preview with the Suitability Team is recommended when:
- Redeeming a Class A fund within a short holding period after purchase
- Switching fund families or purchasing another Class A share that triggers a new sales load—especially when lower-cost alternatives may be available
- Activity reflects patterns such as short holding periods, repeated exchanges, or transactions just below breakpoint thresholds
If Moving Forward, Be Prepared to Document:
If after consulting your partners in Suitability, it’s determined that it’s appropriate to proceed, the following documents will be required:
- The original sales charge paid and cost impact of the new recommendation
- The client-specific reason for the change
- Alternatives considered (including lower-cost options)
- Why the recommendation is in the client’s best interest, including how any conflicts were addressed
Thoughtful documentation helps protect both your client and your practice.
The Direct Business Suitability Team is available for case previews at 800-344-7437 (option 2, 5, 2) or via email at ESIDBCasePreview@nationallife.com. We’re here as a resource and welcome the opportunity to partner with you.
TC8839940(0326)1