MutualFundWire.com: Fund Rationalization Fever Spreads Beyond the Wires
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Thursday, March 9, 2017

Fund Rationalization Fever Spreads Beyond the Wires


Fund rationalization fever is spreading far beyond the biggest, highest profile broker-dealers, as the DoL rule (which may or may not start taking effect on April 10) looms.

Chris Finefrock
 ValMark Securities
Vice President - Financial Planning
Valmark Securities, an Akron, Ohio-based independent broker-dealer with more than 100 member firms and (per BrightScope estimates) 433 registered financial professionals, will be reducing its mutual fund family lineup to about 20 families, from about 100 today, Valmark vice president of investments Chris Finefrock tells InvestmentNews. And an unnamed source at another, unnamed B-D "with several thousand advisers," hints that others are making similar cuts for the sake of simplified due diligence in a more fiduciary-minded world.

"The fewer products you have on the platform, the easier that becomes," that unnamed exec tells InvestmentNews. "Let's just say I would not want to be mutual fund company Number 298 [out of 300] in sales these days."

And those due diligence overload concerns may be more acute with smaller firms, who don't have the same level of resources to throw at the problem.

At least three of the four wirehouses, and one of the big three RIA custodians, have already caught fund rationalization fever. Mother Merrill has been very public about its efforts to adapt to the fiduciary reg, and that includes whittling the number of funds on its platform. Wells Fargo and Morgan Stanley are quietly making similar reductions. Even Fidelity is looking "to streamline and scale things".

Meanwhile, platforms are also charging big bucks for data, a tough proposition for boutique and startup asset managers. Fido has created an NTF program featuring institutional shares. And the biggest indie B-D, LPL, created both an exclusive NTF program with select firms and is working on mutual-funds-only brokerage accounts. And B-Ds and fund firms are looking into new share classes, namely T shares and clean shares, though the T shares push may be stalling thanks to the proposed DoL rule delay.

INews' article also features comments from Roger Stamper, associate director of research at Fuse Research Network, and Denise Valentine, senior wealth management analyst at Aite Group.


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