WHY THE BIG BOYS SUDDENLY LIKE NO-LOADS
You have done a great disservice to mutual-fund investors ("The big boys finally say `yes' to no-loads," Finance, Nov. 6). Your reporter suggests that investors will be better off with these new no-load options: "Instead of a hefty load, investors will pay the broker a small annual fee...between 1% and 2% [annually]." This would be in addition to annual operating expenses, which are around 1.5% per year.
No wonder the "big boys" are diving in. This "small" fee would dwarf any load, even after a relatively short holding period, especially if investors would normally realize discounted commissions through large purchases. The industry just doesn't get it. The problem is not that investors are unwilling to pay a load. (On the contrary, most people are happy to pay for good financial advice.) It's that brokers have trouble justifying the cost associated with the quality of the advice and services they provide.
Theodore S. Kerr
Hefren Tillotson Inc.