Toronto-based Franklin Templeton Investments Corp. is proposing changes to its product pricing structure that are meant to produce lower fees for clients within some funds and help advisors understand when their clients are eligible for those lower fees.
“In consulting dealers and advisors across the country to discuss ways to make it easier to do business with us, we have identified our pricing structure as a key area that could benefit from a fresh look,” says Duane Green, managing director of Canada for Franklin Templeton Investments Corp. in a statement on Monday.
“The new ‘Simplicity Pricing’ program that we are introducing is intended to make it easier for advisors to recommend the most appropriate fund series and will benefit investors by offering them the best value for their investment dollars,” he adds.
Specifically, Franklin Templeton’s proposed new pricing model recognizes higher levels of investment with a flat fee, which will begin at $100,000 in a fee-based account and $200,000 for commission-based accounts. There will be additional fee breaks for commissions-based accounts when invested assets reach $2.5 million and more than $5 million. There will be no minimum for managed accounts. The changes are expected to be in effect later this year, pending regulatory receipt of disclosure documents.
The firm is also introducing account linking for the related accounts of individual investors and the accounts of family members so that investors can meet those minimums required for fee savings more quickly
Starting in December, advisors should also find it easier to move their clients into those lower-fee series with the implementation of automatic notifications on a monthly basis that will inform advisors of the clients who qualify for those particular series. This will apply to both commissions-based and fee-based advisors in Series A and Series F and the return of capital (ROC) versions of those two series.
Although the move into a lower-fee series will happen automatically for the clients of fee-based advisors, commissions-based advisors will have to make that change manually, which will provide advisors with an opportunity to explain the difference to clients in how they’re charged.
“Clients [of commissions-based advisors within the lower-fee series] are charged outside of the fund through a redemption of the units [on a] quarterly [basis], so the advisor needs to have a discussion with a client just to make sure everyone understands how it’s going to work,” says Dennis Tew, head of operation and business strategy at Franklin Templeton.
The firm is also ensuring that all of its funds within fee-based accounts have a preferred pricing series, which will be classified as Series PF for non-ROC funds and Series PFT, for the more tax-efficient ROC funds. That change will be effective Oct. 3.
The difference in fees between preferred pricing for commissions-based accounts and fee-based accounts will also be eliminated for certain funds, which will apply to both non-ROC funds and ROC funds.
The new fees and the list of funds to which they apply can be found in the firm’s announcement.
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