A bevy of new share classes are cropping up to help advisors comply with the Department of Labor’s fiduciary rule — T, P, and Z to name a few.
Janus recently filed with the Securities and Exchange Commission to launch P and Z share classes for all of Janus’ intermediary funds except money markets.
Both share classes “give lower sales charge options to our intermediary partners,” according to Janus.
Because DOL’s rule is designed to mitigate conflicts of interest, particularly in regard to fees charged to their retirement clients, including retirement plans and IRAs, DOL “is focused on sales commissions and other fees that may not be considered to be in the best interest of the client,” Janus said.
These new Janus P and Z share classes are expected to be available in late March, pending SEC approval.
P shares “coincides with the emerging industry trend of launching lower cost shares as well as added features that aid intermediaries’ objectives of eliminating conflicts of interest,” Janus states, and includes a 25 basis-point 12b-1 fee, similar to other firms’ newly launched “T shares.”
Z shares, also called “clean shares,” do not include embedded commissions and allow intermediary partners to “overlay their own fee options,” Janus explained. These shares are also free of 12b-1, or subtransfer agent fees, which are typically paid to the intermediary, and only include a management fee and other asset manager operational expenses, according to Janus.
The SEC recently issued guidance to help mutual funds streamline the process of offering certain fee structures that are designed to achieve level compensation consistent with DOL’s rule, which takes effect on April 10.
The seven-page guidance, issued by the Division of Investment Management in December, focuses on disclosure issues and certain procedural requirements with offering variations in mutual fund sales loads and new fund share classes.
Fund companies are pursuing new T shares, or “transaction” shares, while others are issuing more traditional front load funds. The transaction share class has no set definition and can vary from fund to fund. Some mutual fund shops refer to T shares and mean a 2.5% load while others refer to T shares as a share class with a scheduled variation. T shares can also be referred to as institutional-type share classes with no payments at all to distributors.