Costs and Fees

What this video covers

• What 12b-1 fees actually cover: distribution/marketing expenses and ongoing shareholder-servicing expenses, and why they require approval by the board of directors and a majority of independent directors
• The maximum 12b-1 fee components: 0.75% distribution fee plus 0.25% service fee, for a combined 1.00% annual cap deducted from fund net asset value (NAV)
• What the management fee is: compensation to the investment adviser for portfolio decisions, typically the largest ongoing cost in an actively managed fund
• How the expense ratio differs from sales charges: it bundles ongoing costs (management fee, 12b-1 fees, administrative costs) but excludes one-time loads and brokerage commissions
• Why a same-family fund exchange is a taxable event even with no new sales charge, and how this contrasts with a tax-free 1035 exchange for insurance products