B Shares: Effective Investor Solution? Or Recipient of a Bum Rap?

Altman, Terry R.; McMorrow, Philip
June 2004
Journal of Financial Planning;Jun2004, Vol. 17 Issue 6, p20
Academic Journal
The article presents opposing views on the effectiveness of B shares. According to Terry R. Altman, it is about time B shares were brought to the forefront. He has found that most B shares are sold by people who want to hide the fact that investing might cost something. Instead of educating the client on various pricing structures, it is simpler and quicker to just use the no-load B shares. The next item that should be on the block is annuities. With all of the price manipulation that takes place within them, they make B shares look tame. With today's tax brackets, there are fewer and fewer appropriate places for this investment type to be used, as well. On the other hand, Phil McMorrow, as an example, said that the U.S. Securities and Exchange Commission has stated in an enforcement action against H.D. Vest Inc. that any B share purchase in excess of $100,000 is suspect at best and subject to regulatory scrutiny. What is overlooked in the regulatory overkill on this subject is the fact that more shares are purchased with B shares than A shares, although, granted, the difference is not great with significant investments that could have been done at breakpoint sales charges. The problem with B shares is that they are not well understood by many representatives, and the mutual fund companies themselves were very late in setting reasonable limits to their purchase. Couple this with obviously poor-to-minimal sales supervision by front-line managers and one has a recipe for trouble.


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