A Financial Advisor Comments On The Genesis of DSC Funds

Last week I had a guest post by Ken Kivenko titled “The Genesis of DSC Mutual Funds“. Financial advisor and author of the book Professional Financial Advisor II,  John De Goey, CFP adds his comments:


According to your latest article re: The Genesis of DSC (forwarded to me by Preet, BTW), you refer to trailers as “fees”. Please don’t.  As you will recall from previous conversations, all prospectuses and regulators refer to trailers as “commissions”.  The “re-branding” of the actual status of trailers is something the industry does in trying to legitimize their services as being offered by professionals, not salesmen.  If, as you so often say, mutual funds are sold, not bought, then surely you would agree that the term “Trailing Commission” is not only technically correct, but that it is also a more accurate term from a moral perspective, as well.

The mutual fund industry seems determined to engage in a clandestine form of re-branding.  Specifically, they figure that if enough people will refer to trailing commissions as “trailer fees”, then these commissions will undergo a metamorphosis into fees simply by virtue of having been re-positioned by other people in the broader marketplace. Alas for mutual fund companies (and thank goodness for consumers), calling an apple an orange doesn’t turn it into an orange. Trailers were, are and always will be a form of commission.  Here’s why the difference is critical: professionals charge fees; sales representatives earn commissions.  The fund industry wants to position representatives as professionals without having them actually ACT like professionals.  As of today, many commentators, journalists and others have been unwittingly co-opted into this subtle, but highly dangerous re-branding scheme.

Thanks to John for his comments and his permission to post them to this website. Comments are welcome as always.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
Related Posts
Showing 2 comments
  • financial advisor

    The entire industry may be re-regulated and fees broken out differently. Unfortunately, there isn’t one “best way” to pay your financial advisor. If you want a simple plan, you might be best off with an hourly or fee for plan set-up. With a buy and hold portfolio, you might be best with a commission plan(which is what the discount online firms are also). If you want continuing advice, you might want a fee-based account, but the advisor has incentive to prevent assets from ever leaving the account. The fact is, the individual should have the right to choose their account fees, however, those fees should be broken out and clear to all.

pingbacks / trackbacks