PLANADVISER - May/June 2018 - 42

practice management
Clean Shares' Popularity
T
The class improves fee transparency but still needs a clearer definition
he retirement plan industry has
seen a pronounced increase in the
offering of clean shares. According
to research firm Morningstar, " clean
shares help financial service companies
that wish to shift to a 'level fee'
model in which advisers' compensation
comes only from a level charge
on a client's assets and not from any
varying third-party payments. "
However, there are disagreements
about the definition of clean shares,
it noted in a comment letter to the
Department of Labor (DOL). As Aron
Szapiro, director of policy research at
the firm, in Washington, D.C., says, " At
Morningstar, we don't love the term
'clean shares.' There's no commonly
agreed upon definition and no regulatory
definition, either. "
There is general agreement that
clean shares do not have front-end
loads or 12b-1 revenue-sharing fees,
either of which are used to pay for
a mutual fund's distribution costs.
When those are absent, investors pay
an externalized fee for advice-that is,
the broker or adviser charges it directly
to the client. " But, " Szapiro says, " there
is disagreement about whether clean
shares should include sub-transfer
agency-or, sub-TA-fees or other
kinds of revenue sharing. "
According to Szapiro, Morningstar
prefers two types of clean share labels:
semi-unbundled-having no 12b-1 fees
and no load; and unbundled-having no
12b-1 fees, no load, no sub-TA fees and
no revenue sharing. With unbundled
shares, the retirement plan sponsor is
provided more transparency, because it
pays for administrative expenses apart
from share costs, he says.
" To the extent that there is payment
to intermediaries, particularly revenue
sharing and sub-TA, it can present some
conflicts of interest, " Szapiro warns.
" There is differential compensation for
different products that can influence
intermediaries. It doesn't mean the
42 | planadviser.com may-june 2018
Art by Doris Liou

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PLANADVISER - May/June 2018

Table of Contents for the Digital Edition of PLANADVISER - May/June 2018

Key Partnerships
Clean Shares' Popularity
The Retirement Purse
The Power of Hosting Events
A New Best Interest Model
Limited Liability of a Trustee
Rollover Recommendations
PLANADVISER - May/June 2018 - C1
PLANADVISER - May/June 2018 - FC1
PLANADVISER - May/June 2018 - FC2
PLANADVISER - May/June 2018 - C2
PLANADVISER - May/June 2018 - 1
PLANADVISER - May/June 2018 - 2
PLANADVISER - May/June 2018 - 3
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PLANADVISER - May/June 2018 - 33
PLANADVISER - May/June 2018 - 34
PLANADVISER - May/June 2018 - 35
PLANADVISER - May/June 2018 - Key Partnerships
PLANADVISER - May/June 2018 - 37
PLANADVISER - May/June 2018 - 38
PLANADVISER - May/June 2018 - 39
PLANADVISER - May/June 2018 - 40
PLANADVISER - May/June 2018 - 41
PLANADVISER - May/June 2018 - Clean Shares' Popularity
PLANADVISER - May/June 2018 - 43
PLANADVISER - May/June 2018 - The Retirement Purse
PLANADVISER - May/June 2018 - 45
PLANADVISER - May/June 2018 - 46
PLANADVISER - May/June 2018 - 47
PLANADVISER - May/June 2018 - The Power of Hosting Events
PLANADVISER - May/June 2018 - 49
PLANADVISER - May/June 2018 - A New Best Interest Model
PLANADVISER - May/June 2018 - Limited Liability of a Trustee
PLANADVISER - May/June 2018 - Rollover Recommendations
PLANADVISER - May/June 2018 - C3
PLANADVISER - May/June 2018 - C4
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