istribution issues remain at the top of the mutual fund news, with fund companies as eager to collect and retain FAs as middle America is to collect beanie babies.
American Express' IDS funds group submitted a proposal which could increase distribution through the FA channel with a distribution fee of 25 basis points for its IDS family of funds. This 12-b-1 fee would charge .25% for sales through financial advisors and other intermediaries, hopefully making the pricing structure more competitive, thus retaining current advisors and possibly attracting more.
Pamela Moret, vice president of variable assets, said that paying advisors and other intermediaries less than other companies to distribute IDS funds gives them "a reason to consider moving to other firms."
Moret added that shareholders have told IDS they want to maintain long term relationships with the company's advisors. "We need to make sure we're creating a competitive environment for advisors to make sure they stay," she said. American Express sells the funds through 9,000 to 10,000 planners, according to Moret.
IDS also proposes changing the management fees for ten of their funds by adding "performance incentive" adjustments based on how they perform in comparison with the indexes. The fees would be raised or lowered by 0.08% to 0.12%, depending on whether they beat or lag the indexes.
This fee structure already exists for 10 of IDS' equity funds, so the adjustments would make the fee structure consistent across the board for IDS's equity funds, according to an American Express spokesman.
The management fees for three funds ( IDS Blue Chip Advantage Fund/A (IBLUX), IDS Equity Select Fund/A (INVPX) and IDS Utilities Income Fund/A (INUTX) would increase unless the assets reached a certain level. Excluding reductions if their assets increase, Moret said fees would increase by 10 basis points on Blue Chip and Equity Select, and eight basis points on Utilities Income.
IDS also proposes changing the names of its funds by replacing the IDS name with AXP, an abbreviated form of American Express Financial Corp., the funds' investment advisor, in order increase the recognition of the funds through the highly-branded American Express name. All the proposals are subject to shareholder approval on June 16.
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