Magazine article American Banker

Colonial Raises Commissions to Help Sales at Banks

Magazine article American Banker

Colonial Raises Commissions to Help Sales at Banks

Article excerpt

Vying for more shelf space at banks and other brokerages, mutual fund companies are boosting the sales commissions they pay to brokers.

Colonial Group Inc., Boston, is now paying a 5% commission, up from 4%, on its equity funds with back-end loads, said Stephen E. Gibson, president and chief executive officer.

The increase, which took effect about 90 days ago, has helped spur sales at several banking companies, including Banc One Corp., Fleet Financial Group, and BankBoston Corp., Mr. Gibson said.

The change could help Colonial's overall sales to rise to $3 billion this year, from $2.2 billion in 1997, he added during an interview at the Investment Company Institute's annual meeting here last week. He said he expects bank sales to spurt to $1 billion, from $600 million.

Colonial and Federated Investors, Pittsburgh, are among the first to boost their commission level on so-called B shares, he said, adding that he expects other companies to follow suit soon.

B shares carry back-end loads, meaning sales charges paid by investors are deferred until redemption.

Colonial, which offers the same 5% commission to its nonbank brokerages and financial planners, is financing the commissions without increasing the expense ratio that investors pay-1.8% of assets for a typical equity fund share, Mr. Gibson said.

Fund companies that sell through intermediaries like banks have increasingly replaced the once-predominant front-loaded A shares with B shares since about 1991, to compete with no-load funds. …

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