Mainly because there are countless swarms of highly paid salesmen out there pushing them.Can you think of any additional reasons why high ER funds survive?
They do sell lots of funds with loads. If you avoid load funds they also sell funds that have a 12b-1 fee as part of their ER. That is an ongoing yearly kickback from the fund company to the broker. That's why your friends Blackrock fund ER of 1.8% is as high as it is. The 12b-1 fee could be more than half of that. Google MCDVX, for example. Look up your friends particular fund and see what the 12b-1 fee is.How does Morgan Stanley make their money if one buys funds without commissions or loads and they are not charging for assets under management or hourly charges?
SGM wrote:Thanks for the replies. I talked to my friend and will see if he will look at prospectus for breakdown of fees. He has been dealing with the same person at Morgan Stanley for a long time and seems to like her. He might ask her directly how she gets paid. I am not sure he will get a true answer and would be better off just reviewing the prospectus.
He said," You mean I have been acting as an annuity for her all these years?"
SGM wrote: A sticking point for my friend is how so many companies can be in business all these years with high ERs?
gwrvmd wrote:It is not true that they cannot access or sell funds that are not front end loaded. The answer is the 12b-1 Sales and Distribution fee as indicated by JW Nearly Retired. The 12b-1 fee is an annual fee so the sales man gets a small fee each year as long as you stay in the fund....Gordon
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