A new tool is available to banks struggling to assess the affect of various mutual fund sales charges, including the newer back-end loads, on cash flows.
Strategic Insight, a New York-based mutual fund consulting firm, introduced the software program, "Evaluator," in April.
Banks and mutual fund companies have been using the program to identify how regulations, economic conditions, and business factors could affect their programs over long periods, said Philip I. Herzog, senior vice president at Strategic Insight.
What most scenarios of back-end loads have shown, he said, is that banks will often have to wait up to eight years to recoup fees paid to brokers up front.
Calculating the cash flows longhand can be a nightmare. Each investment has to be individually tracked as loads are levied over time. Then, the aggregates must be compiled. Making the task more difficult is the overlay of regulations and economic variables, he said.
Evaluator considers all those factors simultaneously. Bankers may enter as many as 170 variables into the program to see how various sales levels, and regulation requirements, will play out.
The program generates graphs to compare variations on the business plan. To develop the program. Strategic Insight had two to four people working for 14 months.
The company brought in bank and mutual fund CEOs to help determine the appropriate projection needs, he said.
To give customers more load options, more banks have been developing funds with back-end loads.