Are 12b-1 fees revenue sharing?

Are 12b-1 fees revenue sharing?

The 401(k) industry calls it revenue sharing. The mutual fund industry calls it 12b-1 fees, subtransfer agency fees, shareholder servicing fees, and profit-sharing payments. The DOL has taken the position that fiduciaries have a duty to know and evaluate indirect payments. …

Are 12b-1 fees tax deductible?

Because, while commissions are not deductible, per se, they can add to the cost basis of a position (such as a commission paid for the purchase of an individual security), reduce the proceeds of a sale (such as a commission paid for the sale of an individual security), or reduce the amount of taxable income produced by …

Is it good or bad that this fund charges no 12b-1 fees?

Funds that charge 12b-1 fees believe they help increase a fund’s value through marketing and building demand. However, whether that’s true is up for debate. Critics say 12b-1 fees do nothing to increase the value of a fund or boost its demand, making the fees feel like an unnecessary upcharge.

What is a revenue sharing fee?

Revenue sharing is the allocation of additional fees to the expense ratio of a mutual fund to offset the cost of non-investment management services.

Why is revenue sharing bad?

With revenue sharing, you’re limiting your exponential growth potential because the faster you scale the more you end up forfeiting. And if your company really grows, this model becomes unsustainable. There’s a dark side to shared payment systems in terms of credit card disputes, refunds, identity theft, etc.

What is revenue sharing in a 401k plan?

Revenue sharing typically refers to the compensation plan recordkeepers and service providers receive from mutual fund companies (or investment managers, affiliates, etc.) in exchange for assuming part of the mutual fund company’s administrative functions.

Can an investment adviser receives 12b-1 fees?

Registered investment advisory firms that are dually registered, i.e., registered as both investment advisers and broker-dealers, can receive 12b-1 fees as part of the brokerage function.

Are IRA management fees taxable?

Management fees paid from your IRA account have never been deductible on your federal tax return.

Does Vanguard charge 12b-1 fees?

All Vanguard mutual funds are no-load and have no 12b-1 fees. The firm does some advertising but does not pay commissions to brokers or financial advisors who recommend its funds.

How often are 12b-1 fees reviewed?

What Is a 12B-1 Fee? A 12b-1 fee is an annual marketing or distribution fee on a mutual fund. The 12b-1 fee is considered to be an operational expense and, as such, is included in a fund’s expense ratio. It is generally between 0.25% and 0.75% (the maximum allowed) of a fund’s net assets.

Does revenue sharing still exist?

General revenue sharing continued into the 1980s, although the amounts allocated steadily diminished. Although still in use, revenue sharing was hampered by the general downturn in the economy that took place after September 2001, which left less money available to fund such programs.

What are the fees for a 12b-1 fund?

The 12b-1 fee can be broken down into two distinct charges: the distribution and marketing fee and the service fee. Total 12b-1 fees charged by a fund are limited to 1% annually.

Where do I find the 12b-1 fee on my 401k?

Find it in a 404 (a) (5) participant fee disclosure. This should be easily-accessible from your 401 (k) provider’s website. Look at your 408 (b) (2) fee disclosure. When looking at either of these documents, just CNRTL+F and search “12b-1” – if you don’t see a column for the 12b-1 fee, you’re not being charged one!

What’s the maximum 12b-1 fee for Class C shares?

Class C shares usually have the greatest likelihood of carrying the maximum 1% 12b-1 fee. The presence of a 12b-1 fee frequently pushes the overall expense ratio on a fund to above 2%.

How are 12b-1 and subtransfer agent fees paid?

For an insurance product (e.g., a group annuity contract), both the 12b-1 and subtransfer agent fees also are often paid to the provider. The insurance company provider retains those amounts to cover the costs of its recordkeeping and other services, and pays the broker through a separate asset charge.