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The truth about T shares

May 18, 2017

The truth about T shares

Created to help ease conflicts, the new class has some drawbacks

May 13, 2017 | by Rob Cirrotti | GlobeSt.com

Regardless of the future of the Department of Labor’s fiduciary rule, it is clear that the fiduciary mindset is here to stay and will continue to be a catalyst for change. However, whether the future belongs to T shares is yet to be seen.

T shares came to market as a quick response to the DOL rule so that commission-based brokers could continue to earn commissions. T shares aim to address one of the main issues targeted by the DOL rule: the conflict of interest that happens when a financial professional receives greater compensation for recommending certain funds to investors and, therefore, has more incentive to recommend those offerings.

In that sense, T shares replace A shares, which generally have higher upfront commissions. By establishing a uniform front-end load — at 2.5% — and a 0.25% trailing 12-b(1) fee across funds, T shares level the playing field in terms of the potential gains financial professionals can receive based on the funds they recommend.

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Matthew C. Strife
Blue Vault Services
April 11, 2016

Blue Vault's services are without question great resources for the review of the nontraded products offered.