Eaton Vance Corp. plans to begin paying ongoing service fees to brokers who sell its mutual funds, making it one of the last fund companies to do so.
The fees, known in industry jargon as trail commissions, have "increasingly become a necessary feature to have in a fund," said James B. Hawkes, executive vice president at Boston-based Eaton Vance.
Effective Oct. 1, the mutual fund company will begin accruing the fees on its Marathon and limited-maturity funds owned for at least one year by brokerage customers.
Dealers will be paid a fee quarterly of 20 basis points for Marathon Funds and 15 basis points for selected limited-maturity funds.
The company, which has about $12 billion in assets under management, decided in early August to introduce the trail commissions to "maintain a competitive product in the marketplace," Mr. Hawkes said.
Eaton Vance wholesalers had requested the fees when they found it harder to compete against rivals who offered them, Mr. Hawkes said.
Nearly every major fund sponsor already offers trail commissions to dealers who sell their funds. Such fees are paid in addition to loads, which are commissions paid at the time of the sale. "Service fees have become a fact of mutual fund life," Mr. Hawkes said.
The fees should make the funds more attractive to sell and "will also benefit shareholders by encouraging brokers to service them better," he said.
Expects Modest Improvement
Brokers who sell Eaton Vance funds have been supportive of the program, although Mr. Hawkes said it is too early to see any impact on sales. However, he expects it will "modestly improve" sales.
Boston neighbor Colonial Mutual Funds offers trail commissions on all of its funds, with the exception of eight state tax-exempt funds, said Thaddeus R. Gillespie, a Colonial spokesman.
Because of the popularity of some funds, such as tax-exempt products, companies do not feel a need to offer sales incentives. Colonial pays a 25 basis point service fee on most of its funds.
Eaton Vance still has seven limited maturity funds that do not pay service fees, but Mr. Hawkes said that might change.