Although I don’t invest in any mutual funds with loads or sales charges, I know that many people like to buy American Funds. Although they don’t do any print advertising or press releases, they are the third-largest fund company in the world behind Fidelity and Vanguard. Buying $10,000 in the Class A shares of the American Funds Growth Fund of Americas (AGTHX) would normally cost you 5.75% ($575) in sales fees upfront. Or since American Funds are only sold through advisors, perhaps you’re paying them an annual management fee of at least 1% of assets instead, or some combination thereof?
But new website InvestForLess.com would like to charge everyone a flat $250 annual fee and grant you access without any sales charges (turn down the volume since there’s an annoying auto-loading video).
From this Kiplinger article, it sounds like they are officially registered advisors, trying to sell their bare-bones services (i.e. access to advisor-sold funds) on a volume-based model:
InvestForLess is sort of like the Costco of mutual funds. It charges $250 per year for membership in its platform. Once you join, you can buy the “adviser” or “institutional” share classes of funds on its platform for free. This is possible because InvestForLess, despite looking and smelling like a broker, is structured as a registered investment adviser, with Trade-PMR, a broker-dealer, as its custodian. So InvestForLess members will have access to the same share classes that are available to other advisers on the Trade-PMR network.
However, there is already some pushback from commission-based advisors, as both Charles Schwab and Scottrade have agreed to, and then since backed out, from being their custodian. Currently, their custodian is Trade-PMR. I don’t think the fight is over yet, but it’s an interesting development.
By Jonathan Ping | Investing | 5/6/10, 1:29am