American Funds Embraces a No-Load World
F1 shares are now available at Fidelity and Schwab without a commission.
American Funds has broadened its reach by making its entire lineup available commission-free on the brokerage platforms of Fidelity and Schwab. Whether in a taxable or tax-sheltered account, retail investors can now bypass a load by buying the F1 shares of any American Funds offering. The minimum initial investment on the Fidelity platform is $2,500, and on Schwab's platform it's $100. Although American Funds' F1 shares charge a 25-basis-point 12b-1 fee, which goes to the respective platforms, many are still competitively priced. For example, including its 12b-1 fee, American Funds New Perspective's (NPFFX) fiscal 2015 net expense ratio was 0.81%, which ranked in the cheapest quintile of similarly distributed peers.
The change at American Funds doesn't so much reflect a retreat from its long-standing commitment to work through financial advisors as it does a recognition that the means of gaining access to advice has become a continuum where no-load share classes play an important role. Investors seeking help have a host of options, ranging from highly relational fee-based advisors to robo-shops that provide computer-generated asset-allocation and fund-selection guidance based on age and risk tolerance. Wherever investors fall along that spectrum, they now have greater access to American Funds' lineup. That, of course, includes those who prefer to build and maintain their own portfolios without recourse to financial advice.
Alec Lucas has a position in the following securities mentioned above: NPFFX. Find out about Morningstar’s editorial policies.