SEC Issues Investor Guidance on Mutual Fund Fees and Expenses

Financial services firms should be aware that the SEC has recently stressed the importance of mutual fund fees and expenses disclosures, as well the impact they can have on an investor’s portfolio. In a recent Investor Bulletin, the SEC highlighted the fees and expenses that mutual fund investors typically incur. The SEC advises that investors should pay close attention to a fund’s expenses and management fees which represent a percentage of the assets of the fund and are paid out of the fund’s assets. Indeed, the SEC encourages investors to compare the expense ratios of different funds. According to the Investment Company Institute, mutual fund holdings represent a significant component of the savings and investments of many US households, with mutual fund assets now accounting for more than one-fifth of households’ financial assets. Data from ICI indicates that almost 57 million people, or about 46 percent of US households, own mutual funds. The SEC’s bulletin likely signifies an effort to ensure that registered representatives adequately disclose and discuss mutual fund fees and expenses at the point of sale. Although investors should be held to the prospectus disclosures, registered representatives should be properly trained on how to interpret and inform investors of any mutual fund fee and expense structures that they recommend to investors. You may find the SEC bulletin here: http://www.sec.gov/oiea/investor-alerts-bulletins/ib_mutualfundfees.pdf