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I need some house cleaning advice (Portfolio, not crib!)
Old 03-02-2012, 11:20 AM   #1
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I need some house cleaning advice (Portfolio, not crib!)

This morning I FINALLY moved all of my IRA funds with MSSB over to fido (where the majority of my IRA funds have been for a while).

(Prepare to have your surprised face on....) All of the MSSB funds that moved over have back-end loads. I have held them all long enough that the back-end loads are as low as they are going to go.

I am going to reallocate my IRA to a much simpler, low-cost (using Spartan index funds) portfolio that matches my target AA - couch potato-style basically.

I am new and still learning - is there any reason NOT to go ahead and take the back-end load hit now as opposed to later? (Given that I just moved the same exact funds and positions from MSSB to fido.)
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Old 03-02-2012, 11:40 AM   #2
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If the bank end load is as low as it ever will be, then that is sunk cost... you make your decision on the other aspects, what are the ongoing expense ratio, what kind of return am I getting etc. etc... the back end should not be an issue...

PS... if it were me, I would move out because I would not want to be with someone who was willing to screw me because I would bet they will be willing to screw me more in the future....
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Old 03-02-2012, 11:53 AM   #3
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Are you sure the back end loads are as low as they will ever get? The only reason I ask is that I have never heard of a perpetual back end load, the back end loads that I am familiar with all ultimately went to zero.

But if they are as low as they will ever get, I agree with TP, it is a sunk cost and you should compare the costs of those funds to the fido alternatives.

Also, if the back end load is perpetual and a percentage of exit value (as I suspect) then if you keep it there and the funds grow the back end load will only get larger, right?
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Old 03-02-2012, 12:53 PM   #4
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From the MSSB website
Class B Shares
Investments in Class B shares typically are not subject to a front-end sales charge, but purchasers normally are required to pay a contingent deferred sales charge (“CDSC”) on shares sold during a specified time period (typically six years). In addition, Class B shares are subject to higher 12b-1 fees (generally 1.00% or $100 per $10,000.00 of fund assets per year), which result in higher ongoing expenses than Class A shares. The portion of the 12b-1 fee that is used for distribution expenses is effectively an asset-based sales charge paid over time rather than a front-end sales charge applicable toClassAsharepurchases.Thesechargesallowthefund’s distributor to recover its costs of distributing the fund. Part of these costs include compensation, also known as a “dealer concession,” paid by the fund’s distributor to Morgan Stanley Smith Barney Financial Advisors. Dealer concessions on equity funds are typically 4.5% of the purchase price regardless of the size of the investment since, unlike Class A shares, there are no breakpoint discounts applicable to Class B shares.
The CDSC associated with an investment in Class B shares declines over time, and in most funds is eventually avoided entirely following the expiration of a designated holding period. Upon the expiration of that holding period, or shortly thereafter, Class B shares typically “convert” into Class A shares, at which point the investment will begin to be charged the Class A shares’ lower 12b-1 fees. For these reasons, even though they carry no front-end load, Class B shares are not, and should not be viewed as, “no-load” shares.
It may make sense to wait. Make sure to document your purchase history, which probably did not transfer to Fidelity and you will definitely need to prove they met the holding requirements..
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Old 03-02-2012, 12:58 PM   #5
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Oh! I'll let these wiser folks answer your question. I took "house cleaning" literally and was about to recommend Flylady ...
"It ain't over till it's over"
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Old 03-02-2012, 01:15 PM   #6
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Originally Posted by W2R View Post
Oh! I'll let these wiser folks answer your question. I took "house cleaning" literally and was about to recommend Flylady ...
Not many wiser than you around these parts...but I also thought it was a thread about housecleaning. Just so happens we recently closed the accounts of a relative, and she had "B" funds, so I remembered the back end load disappears if you pay the outrageous management expense hold the fund long enough.
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Old 03-02-2012, 01:17 PM   #7
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Like the other said, be sure that the back end charge doesn't go away, but I'd probably bite the bullet anyway cause you normally pay a higher fee every year.

I did the same couple years ago, and only problem is for some funds, fido has a $75 charge to buy. I have a couple that I like and can't add to my allocation without the $75. I've found other funds that fill in where I need so not a big deal. Also, there is an etf for everything now so that is another option to fill in a slot you need/want.
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Old 03-02-2012, 01:30 PM   #8
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Add me to the list of folks that thought you needed a good way to clean your "crib" ...

Anyway, if you ever do, here's a solution (click to enlarge)...
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