Americans have reacted to the financial crisis of 2008 in a number of ways -- curbing spending, cutting back on debt, and pulling money out of the stock market. Actively managed equity mutual funds have been one of the biggest casualties of investor wariness, with hundreds of billions of dollars leaving the coffers of these funds, presumably for the safe haven of bonds and bond funds. And while few would deny the general shift in investor preference toward bonds in recent years, there may be some more subtle forces at play here.

A fundamental shift
A recent Wall Street Journal article highlighted the fact that while retail shares of equity mutual funds have continued to bleed assets over the past two years, not all of that money is going straight to bonds. Apparently, investors are redirecting some of that cash into the institutional versions of the same funds whose retail shares they are fleeing. Since 2009, while investors pulled roughly $129 billion from retail A, B, and C shares that charge some kind of load to the investor, they actually added $72 billion to institutional share classes.

While they are typically cheaper than their retail counterparts, institutional share classes generally feature much higher investment minimums, putting them out of reach of most individual investors. However, these funds are frequently used in qualified retirement plans like 401(k)s and other tax-advantaged plans, where investors can take advantage of their lower fees without worrying about meeting the onerous minimum investments.

One take on this shift in investor behavior is that investors are moving away from using commission-based financial advisors who tend to recommend A, B, and C shares of funds to garner a commission from the fund company in the form of a front-end or deferred load. Institutional shares in brokerage accounts overseen by fee-based advisors are becoming more common, so this could indicate that more investors are embracing fee-based financial planning.

If that is true, I think that is a welcome and long-overdue change for the industry. I'm not a fan of financial advisors being paid by a fund company for directing investors into their funds. Even if the fund is in fact the most appropriate investment for the client, there is just an inherent conflict of interest in the commission-based model. As such, I would encourage any investor who is thinking about engaging the services of a financial advisor to give serious consideration to using a fee-based advisor.

Share and share alike
Beyond any potential shift in investors' preference for fee-based advisors over commission-based professionals, I think there may be some other important conclusions that we may be able to draw from this data. First of all, if investors are moving more toward institutional funds, that means they are likely doing so within the confines of their 401(k) or other defined-contribution retirement plan. Usually in such plans, the plan sponsor has chosen a menu of funds for participants to select from.

To me, this indicates more of a desire on investors' part for guidance and help in the fund selection process. When the market is going up, it's easy to think you can do it all on your own. But in challenging environments, a lot of folks want some advice. So don't be afraid to seek out a second, or third, opinion on your investments. Whether that be through the services of a fee-based advisor or even the expertise of the Fool's own Rule Your Retirement investment newsletter service, there are reliable options out there that can give you a leg up in finding the best investments for your portfolio.

Secondly, it could be that investors are becoming more savvy about the fees and expenses they are paying for their investments. Actively managed mutual funds got slammed in the recent downturn, leading many folks to wonder why they were paying extra for middling performance results. If investors can save some money by moving to institutional class shares, it creates less of a hurdle for portfolio managers to overcome. As an example, the A shares of the hugely popular PIMCO Total Return Fund (PTTAX) come with a 3.75% front-end load and a 0.90% expense ratio. However, if you've got $1 million, or have access to the fund within a qualified plan, the institutional share class of PIMCO Total Return (PTTRX) costs just 0.46% and has no loads. Over time, that means investors in the institutional share classes are paying half of what retail investors are. So if you can access an institutional share class in a solid fund in your retirement plan, it's probably a smart idea to do so.                                                                        

Opting out
While I can understand the reasoning behind fund companies giving a price concession to larger clients or larger accounts, there is something about the practice that rubs me the wrong way. Fortunately for investors, there are some funds shops that don't try to charge different price points for retail and institutional clients. Dodge & Cox is one fund shop that has just one share class for all of its mutual funds. For example, Dodge & Cox Stock (DODGX) has been around for roughly 45 years and doesn't charge different prices for investors with a higher or lower amount of assets in the fund. For an incredibly low 0.52% a year, you can get access to a large-value fund that has outperformed 97% of its peers in the past decade and a half. Not a bad deal for an investor of any portfolio size.

Of course, if you're leery about the whole business of what you're being charged for actively managed funds, you can always avoid the whole debate and stick to a handful of low-cost exchange-traded funds. Some of my favorite ETFs include the SPDR S&P 500 (NYSE: SPY) for large-cap domestic stock coverage, the Vanguard Total Bond Market ETF (NYSE: BND) for a broad bond market allocation, and the Vanguard Emerging Markets Stock ETF (NYSE: VWO) for exposure to red-hot developing markets.

Not every investor will be able to access the institutional share class of their favorite fund (if in fact the fund shop even offers one), but if you can do so in your retirement plan, consider buying in. It could save you a ton of money in the long run.

Amanda Kish is the Fool's resident fund advisor for the Rule Your Retirement investment newsletter. At the time of publication, she did not own any of the funds or companies mentioned herein. The Fool owns shares of Vanguard Emerging Markets Stock ETF. Try any of our Foolish newsletter services free for 30 days.

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