Welcome to Financial Advisor IQ

Janus Unveils DOL Rule-Friendly Share Classes

January 31, 2017

Asset manager Janus is introducing two new low-cost share classes aimed at advisors trying to comply with the Department of Labor’s fiduciary rule, which requires retirement brokers to put clients’ interests first, WealthManagement.com writes.

The firm filed with the SEC to register share classes called P and Z and plans to start selling them in March, pending the regulator’s approval, according to the web publication. Janus’ new offering is similar to the T shares rolled out by other mutual fund providers as they too carry lower commissions than A shares, WealthManagement.com writes.

P shares will have a 0.25% 12b-1 fee, according to the web publication. Z shares, meanwhile, will only carry a management fee and operational expenses but no embedded commissions, sub-transfer agent fees nor 12b-1 fees, according to the publication. Z shares will be offered in qualified and non-qualified retail accounts, WealthManagement.com writes.

Janus said in a statement that the new share classes are designed to meet the increased scrutiny the DOL is expected to give to commissions and other fees not seen as in the best interest of clients, ThinkAdvisor writes.

T shares, meanwhile, vary depending on the fund company, according to the publication. Some T shares are “transaction” shares without any specific definition. Others come with a maximum load of 2.5% and 12b-1 fees of 0.25%, ThinkAdvisor writes.

Morningstar wrote earlier this month that the 3,800 T share classes it expects in the near future could significantly reduce what financial advisors charge their clients.

But Z shares may push out all other share classes, Diana McCarthy, a partner at Drinker Biddle & Reath, wrote in a recent client alert cited by ThinkAdvisor.

T shares allow the load charges to be determined by each intermediary as long as they’re fixed across all shares offered by the intermediary, she wrote.

Brokers, meanwhile, may opt for Z shares as intermediaries revamp their operations to comply with the DOL’s fiduciary rule.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.
  • To read the Wealth Management article cited in this story, click here.