Traditional A shares purchased through a broker include an immediate fee called a front-end load
(expressed as a percentage of the purchase) as well as management fees and ongoing fees for distribution expenses, called 12b-1 fees, Morningstar explained in its research.
Summary statistics for front-end loads
appear in Panel B of Table 2.
One class might, for instance, involve a front-end load
but no 12b-1 fee.
Today, an investor who buys a load fund has to decide among front-end load
funds, back-end load funds, funds with 12b-1 fees, funds with 12b-1 fees and declining redemption fees and so forth.
The new "T" mutual fund share class "has a uniform front-end load
and 12b-1 structure across fund families," Saxena said, noting that the share class was created by asset managers "specifically to make it easier for [brokerage firms] to offer mutual funds within commission-based transactional retirement accounts, within the constraints" of the BIC exemption.
On a sales-weighted basis, "investors buying front-end load
shares in those years outperformed the average for share classes in the same Morningstar category by 27 basis points," Schott Stevens wrote, while "similarly, publicly available data show that investors concentrate their purchases in front-end load
share classes with lower expense ratios and pay brokers lower-than-average loads -- further contradicting the Department's claims of harm to retirement savers.
In the United Kingdom, mutual funds organized as corporations charge significantly lower front-end loads
than mutual funds not organized as corporations, after controlling for other factors.
You go from A-shares in a mutual fund with front-end loads
and expense ratios and put it in an ETF pipe instead, which results in substantial cost savings for the end investor.
The vast majority of Wharton MBA students were unfamiliar with concepts such as expense ratios and front-end loads
, and even when provided with fact sheets about such fees, only 6% of the students chose to invest in minimum-fee index funds.