ACA Publishes Article Highlighting Intermediary Use in Mutual Fund Distribution

A recent ACA article titled, “What to Know About Intermediary Channels for Mutual Fund Distribution,” highlights the way mutual funds use intermediary channels in their distribution plans. The article discusses the role of the intermediary, including as a guide and an access point for shareholders. The article notes, “[i]ntermediaries assist consumers through every point of an investment transaction.” A shareholder could interact with a broker-dealer, a regional broker-dealer, a wirehouse, an independent broker-dealer, or a registered investment adviser. Additional intermediary channels include banks and insurance companies. The article highlights that each of these channels offers unique opportunities for the fund(s) to court various types of shareholders. The fund(s) could also opt for a direct channel, where shareholders purchase fund shares directly from the fund company via the fund’s transfer agent or by using a fund platform.

If the fund plans to use an intermediary channel, typically it reaches one of two agreements. The first is for those that “seek payment only in the form of sales loads and 12b-1 fees,” which is typically a “selling agreement” with the fund’s principal underwriter. The second type of agreement is an “operating agreement” where the mutual fund company and/or adviser enters into an agreement for costs that extend beyond sales loads and 12b-1 fees.

Click here to view the ACA article on Intermediary Use in Mutual Fund Distribution.