Fidelity investments plans to join the growing number of mutual fund companies offering back-end sales charges.
The Boston-based mutual funds giant is scheduled to add "B" shares to "a fair number" of the funds it sells through intermediaries by this spring, according to Nishan G. Vartabedian, executive vice president of Fidelity's bank services division. This pricing option tends to be popular in the bank channel because it functions much like a certificate of deposit, making it easier to explain to customers.
With back-end loads, the sales fee is deferred until shares are redeemed. The redemption fee declines and ultimately disappears the longer the funds are held.
While customers may like the buy-now, pay-later option, the downside for the company is waiting "three or four years before you can make any money off it," Mr. Vartabedian said.
As banks start limiting the number of fund families they sell, mutual fund companies are doing back flips to wind up on their short lists. "If we want to establish ourselves in the bank channel, we have to offer competitive pricing options," Mr. Vartabedian said.
