Industry Practice
In the mutual fund industry, there are four different ways in which the services of the financial planner/investment consultant are compensated. Compensation may adhere to one method or be a combination of the different methods. However, the method used should be explained clearly to the client, understood and agreed. These methods are:

Front-end load or sales charge ("FEL") - The client pays a sales charge on each purchase transaction. This sales charge comes out of the investment amount and is remitted bty the fund company to the dealer. Depending upon the size of the transaction and other factors, this can range from zero to 5%. There can also be a switching charge of 1% or 2% for switches between mutual funds.

Deferred sales charge ("DSC") - There is no current sales charge to the investor. The client's entire investment amount is placed in the mutual funds being purchased. The fund company pays the dealer a commission for placement of the funds. In order that a fund company can recover the cost of the commission payment, there is a holding period of six/seven years for the investor. If funds in excess of 10% annually are removed from the program with that particular company during the holding period, there would be a redemption fee on a declining scale dropping to zero after six/seven years. The investor is able to change financial advisors and, if appropriate, retain the investments without incurring any redemption penalties.

Fee for service - Some advisors charge an initial fee (usually 1%) at the start of the program and an annual fee (usually 1%), based on the value of the account, calculated quarterly.

Fund trailer or service fees - These fees are paid to the dealer firm out of the fund company's management fees, part of which goes to the financial advisor. These service fees are intended to compensate the advisor for ongoing service to the client. The costs are factored into the Management Expense Ratio ("MER") and do not represent an additional cost to the client.

Reduced trailer fees with institutional class shares – With larger wealth management accounts, some fund companies have introduced these new shares so that larger investors can participate in their mutual funds but with a lower management expense ratio. Both the fund management company and the financial advisor receive a lower compensation, so as to provide this benefit to the client.

Our Practice
Over the years, the different compensation options have evolved and our current practice is to do most business on a front-end zero commission basis for clients (wherever possible - some products do not offer this option). Often this is thought of as no-load. There are no purchase or redemption charges. Our compensation is derived entirely though the embedded trailer or service fees in addition to any additional fees as agreed upon in advance.  The fund's MER is designed to cover the cost of the trailer or service fees and so there is no additional cost to the client for this service.