Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Franklin Templeton Takes a Load Off

If you've read more than two or three articles on, you probably know how we feel about mutual funds that charge sales fees, or loads. Such fees typically run between 3% to 5.75% of the investment and -- often unbeknownst to the buyer -- go directly to the broker or advisor who sells the fund.

The costs don't end there, either. Annual expenses of load funds are almost always higher than those that no-load funds charge. It's hardly surprising, then, that long-term returns show that no-load funds hold a clear advantage over their load-bearing peers in terms of profits for shareholders. That's why our favorite funds come from no-load shops such as Fidelity, Vanguard, and Dodge & Cox. (For more on which funds we love and which we run from, check out our fact-filled Champion Funds newsletter service.)

The good news for savvy investors is that regulatory scrutiny over how funds are sold, as well as broader investor awareness regarding expenses, has some fund companies taking a harder look at the cost structure of their offerings. Earlier this month, for example, Franklin Templeton ceased sales of its B-share classes across all of its funds. B shares carry a deferred load, incurring a charge when a shareholder sells; A shares, conversely, require that the load be paid upon purchase. More popular than A shares until just a few years ago, B shares are almost always a raw deal because of their heavy back-end fees and high annual expenses.

Case in point: Annual fees on the B shares of Templeton Foreign, one of the shop's more popular funds, stand at a wallet-womping 1.98%. In comparison, no-load Vanguard International Value, which like Templeton Growth Foreign holds stakes in GlaxoSmithKline (NYSE: GSK  ) and Sony (NYSE: SNE  ) , charges a scanty 56 basis points. Fidelity International Discovery, another no-load option, also fishes in foreign waters, with a portfolio that recently included the likes of BP (NYSE: BP  ) , Allianz (NYSE: AZ  ) , Deutsche Telekom (NYSE: DT  ) , Novartis (NYSE: NVS  ) , and Toyota (NYSE: TM  ) .

Historically, the popularity of no-load funds has waxed and waned in tandem with the market's health. During the raging bull market of the late 1990s, when even Great-Grandpa George was buying his funds directly from fund companies, many shops threw out their sales fees to attract business from the swelling ranks of gung-ho direct investors. When the market hit the skids in 2000, many of those same investors turned back to brokers and advisors or shunned the market entirely. Following suit, a slew of fund companies, including Invesco, Liberty, and Credit Suisse Asset Management, turned load, hiring advisors to woo back investors.

Other load-fund shops may follow Franklin's lead in coming months by jettisoning their B shares, but loads, like bad politicians, will surely continue to come and go. In the meantime, we can hope for the day all financial advisors are paid for their time and advice, not what and how much their clients decide to buy.

Until then, if it's hands-on money management you want, consider switching from your full-service broker or in-house advisor to a fee-based planner. And either way, make sure you understand the vagaries of fund-related fees before you sign on the dotted line.

Fool contributor Josie Raney owns no shares of companies mentioned in this article.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 490013, ~/Articles/ArticleHandler.aspx, 10/27/2016 5:28:06 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/23/2009 4:00 PM
AZ $12.45 Down +0.00 +0.00%
Allianz SE CAPS Rating: ***
BP $35.85 Down -0.19 -0.53%
BP CAPS Rating: ****
DT.DL $11.83 Down +0.00 +0.00%
Deutsche Telekom A… CAPS Rating: ***
GSK $40.34 Up +0.02 +0.05%
GlaxoSmithKline CAPS Rating: ***
NVS $71.13 Down -1.50 -2.07%
Novartis CAPS Rating: ****
SNE $31.84 Down -0.01 -0.03%
Sony CAPS Rating: ***
TM $115.50 Up +0.25 +0.22%
Toyota Motor CAPS Rating: ***