Originally created 12/03/01

Invesco dumping 'no-load' amid bear conditions

In what industry analysts say is a stark sign of the times, Invesco Funds Group is phasing out its "no-load" fee structure for cost-conscious, do-it-yourself investors.

Beginning this March, the mutual fund family will require all new customers to buy through brokers and financial planners, paying front or back-end fees that could run more than 5 percent.

Invesco announced its changeover from no-load funds, which sell directly to investors with no commission, one day after notifying many customers by letter.

The money manager, which manages more than $34 billion in assets, offers 34 equity, bond and money market funds, including four that went the commission-load route last year.

Invesco Funds President Ray Cunningham said while the change does not apply to existing retail shareholders, it signifies a major shift in the company's efforts to gain favor with financial advisers.

Cunningham said "virtually all" of Invesco's new investment flow this year came from financial advisers.

"For some time now, the fastest growing segment of our business has been the broker-adviser channel," he said. "Our goal is to be the most valued investment manager to our clients to make our products available in the channels in which they choose to do business."

Dennis Gallant, a consultant at Cerulli Associates in Boston, said Denver-based Invesco is betting that a bear market, coupled with maturing demographics, have fundamentally changed investor confidence in do-it-yourself fund picking.

"The drivers for financial advice have been fairly strong," Gallant said. "There's been a growing affluence in America, and the wealthier and older that investors have become, the less time they have to address their finances, which have become more complex.

"That's been accelerated by the down market," he added. "It exposed a lot of flaws for people making their own investment decisions. A lot of investors were lured into a false confidence regarding their ability to manage their own money."

Denver was recognized as a mecca for several no-load mutual fund companies - most notably Janus. But despite other no-load giants such as Vanguard and Fidelity Investments, much of the mutual fund industry has returned to commission-driven sales.

According to the Investment Company Institute, direct sales to retail investors represented just 16 percent of all mutual fund sales last year.

A recent study conducted by the trade group involving 2,600 phone interviews found that most mutual fund investors rely on a professional adviser when making mutual fund purchases and sales decisions.

Don Cassidy, a senior analyst at Lipper Analytical, said Invesco also is going after a less-fickle investor.

"Investors who use brokers or financial advisers have tended to hang in there longer during hard times," Cassidy said. "Invesco went very far down the road to direct distribution over the Internet ... and a lot of their money was in volatile investors' hands. This is a way of balancing that equation for them."

"I think it's going to work out to be a very good business decision," said Ray Benton, a financial planner. "No-load funds are easy to sell in a bull market when everyone thinks investing in the stock market is easy. But once investors are in a legitimate bear market, they decide they need advice."

On the Net:

Invesco: www.invesco.com


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