A newly popular mutual fund share class that charges an annual fee in place of front-end or back-end sales commissions seems to be catching on more quickly at brokerages and independent financial planning firms than at banks.

Sales of so-called level-load shares, for which investors typically pay 1% of assets a year as a fee to their brokers, have grown faster than sales of other share classes. But people in the industry say that the culture at bank brokerages has held down the growth of level-load shares, which are also commonly known as C shares.

Bank brokers are more likely to sell shares with front-end loads because those commissions - typically anywhere from 3% to 5% -- dwarf the 1% that C shares pay in their first year. The fatter commissions from A shares put more money in brokers' pockets in the short run, and they make a bigger immediate impact on bank brokerages' quarterly revenues.

Though annual-fee-type products like C shares and wrap accounts are more profitable over the long run than traditional load shares, banks are loathe to cannibalize their revenue stream to build a big business in the newer products, said James Overholt, a consultant at Milliman & Robertson Inc. of Chicago and the former head of Great Western Financial Corp.'s brokerage.

Bank brokerages have only in the last several years come into their own and been in a building mode, he said.

At Putnam Investments in Boston, executives say they expect the company's newly introduced C shares to be more in demand at wirehouses, independent financial planning firms, and regional brokerages than at banks.

I think it's the culture of the organization, said Vincent Esposito, national sales director for the company. There are several reasons, he said. For one, wirehouse brokers typically sell a wider range of investment products than bank brokers do, and the C shares are simple to use and understand, making their lives easier.

Mr. Overholt said independent financial planners are the most frequent users of C shares, followed by nonbank brokerages and then bank brokerages.

Some bank investment executives simply think C shares are too costly for investors.

C shares are for a very narrow set of people because they are a very expensive way to buy funds, said James Eads, the head of Washington, D.C.-based Riggs Bank's brokerage arm. They are really only applicable if you have a short-term investing need.

But there is wide agreement that level-load shares are a product whose time has come. Assets under management in C shares grew at an annual rate of 91% from 1990 through October 1998, according to Financial Research Corp. in Boston. Assets in front-end load shares grew 26% over the same period, and back-end share assets increased at 46% a year.

Level-load shares have started to catch on because of the stock market boom, which has pumped brokerages full of cash and allowed them to start making the transition from products with up-front sales charges.

When the stock market cools and mutual fund sales level off, those companies that have shifted to an asset-based fee approach will be rewarded, Mr. Overholt said.

The companies wanted it, the brokers wanted it, and the clients wanted it, he said. It was just a matter of how you get yourself weaned from this stream of income.

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