no-transaction-fee program

MaryW commented on the word no-transaction-fee program

In today's market, asset management services are distributed to US-based investors primarily through five principal distribution channels: direct, professional advice, retirement plan, supermarket platforms and institutional.

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4. Supermarket platform channel. The supermarket channel is made up of discount brokers that offer mutual funds from a large number of fund sponsors. This channel includes many no-advice discount brokers that operate almost exclusively online. The most important feature of a fund supermarket is its no-transaction-fee (NTF) program whereby an investor may purchase funds from a wide range of fund companies with no transaction fees. The NTF offerings from a discount broker often number in the thousands, providing an investor the convenience of purchasing no-load funds available from different manufacturers through a single, user-friendly platform. Although initially categorized as a low-margin, no-frills, bare-bones business model targeted at cost-conscious consumers, many of these supermarkets have beefed up

their client services by offering comprehensive investor education material; a wide selection of financial research; and sophisticated, yet user-friendly, online and mobile tech applications. While the asset manager must pay fees to the distributor for a fund to be listed on a platform, given that most of these platforms operate under a high-volume, low-cost model, the fees are usually lower than the revenue-sharing agreements prevalent in the professional advice channel. However, the old adage “you get what you pay for” applies

here: the product line from one manager will be thrown into a vast ocean of thousands of different products from dozens, if not hundreds, of other asset management firms — with no dedicated sales support.

Ernst & Young, Sea of Change on the Horizon: US Fund Distribution 2014 (2014), pp. 5, 7

December 28, 2016