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Third Party Distribution

                Definition of 'Third-Party Distributor'
The name given to institutions that sell or distribute mutual funds
and Life-Insurance Policies to investors for fund management and
 Insurance companies respectively without direct relation to the
     fund itself. For mediating these transactions, third-party
 distributors receive a portion of the trailer fees associated with
 mutual fund sales and Corporate commission for acquiring new
                              business.
Mutual funds and third party
                         distribution
Distribution of Mutual Funds


 Mutual funds are sold through five principal distribution
  channels:

   (1) the direct channel,

   (2) the advice channel,

   (3) the retirement plan channel,

   (4) the supermarket channel,and

   (5) the institutionalchannel.
Direct Channel



  In the direct channel, investors buy and redeem shares directly from
the fund or, more precisely, through the fund’s transfer agent. The fund
 company sponsoring the fund does not provide investment advice, so
  investors must undertake their own research to choose funds. Fund
companies selling directly to investors provide a variety of products and
                    tools to assist in decisionmaking.
Advice Channel

     The principal feature of the advice channel is the
       provision of investment guidance, assistance,
        and advice by financial professionals. These
   include full-service brokers at national wirehouses,
       independent financial planners and advisers,
 registered sales representatives at banks and savings
          institutions, and insurance agents. Such
     advisers help fund shareholders identify financial
 goals such as retirement, tax management, education
      savings, and estate planning. They assess the
      risk tolerance of their clients and select mutual
    funds and other investments to meet these goals.
Retirement Plan Channel



                    Employers sponsoring defined contribution
                   plans rely upon third parties to administer the
                plans and provide plan investments to employees.
                    The third-party administrator (TPA) typically
  handles the recordkeeping and other administrative services and assists the
               employer in the selection of the investment options
    offered to employees. Investment options typically include mutual funds,
   guaranteed investment contracts, stable value funds, and company stock.
Supermarket Channel



   The most important feature of a fund supermarket is its non transaction-
           fee (NTF) program, whereby an investor may purchase
       mutual funds with no transaction fees from a large number of fund
      companies. The NTF offerings at a discount broker often number in
 the thousands, providing an investor the convenience of purchasing “noload”
                funds from different families at a single location.
Institutional Channel



     The institutional channel comprises a variety of
    institutions purchasing fund shares for their own
    accounts. These institutions include businesses,
     financial institutions, endowments, foundations,
    and state and local governments. Fund sponsors
      often create special share classes or funds for
                    institutional investors.
Channel

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Third party distribution

  • 1. Third Party Distribution Definition of 'Third-Party Distributor' The name given to institutions that sell or distribute mutual funds and Life-Insurance Policies to investors for fund management and Insurance companies respectively without direct relation to the fund itself. For mediating these transactions, third-party distributors receive a portion of the trailer fees associated with mutual fund sales and Corporate commission for acquiring new business.
  • 2. Mutual funds and third party distribution Distribution of Mutual Funds Mutual funds are sold through five principal distribution channels:  (1) the direct channel,  (2) the advice channel,  (3) the retirement plan channel,  (4) the supermarket channel,and  (5) the institutionalchannel.
  • 3. Direct Channel In the direct channel, investors buy and redeem shares directly from the fund or, more precisely, through the fund’s transfer agent. The fund company sponsoring the fund does not provide investment advice, so investors must undertake their own research to choose funds. Fund companies selling directly to investors provide a variety of products and tools to assist in decisionmaking.
  • 4. Advice Channel The principal feature of the advice channel is the provision of investment guidance, assistance, and advice by financial professionals. These include full-service brokers at national wirehouses, independent financial planners and advisers, registered sales representatives at banks and savings institutions, and insurance agents. Such advisers help fund shareholders identify financial goals such as retirement, tax management, education savings, and estate planning. They assess the risk tolerance of their clients and select mutual funds and other investments to meet these goals.
  • 5. Retirement Plan Channel Employers sponsoring defined contribution plans rely upon third parties to administer the plans and provide plan investments to employees. The third-party administrator (TPA) typically handles the recordkeeping and other administrative services and assists the employer in the selection of the investment options offered to employees. Investment options typically include mutual funds, guaranteed investment contracts, stable value funds, and company stock.
  • 6. Supermarket Channel The most important feature of a fund supermarket is its non transaction- fee (NTF) program, whereby an investor may purchase mutual funds with no transaction fees from a large number of fund companies. The NTF offerings at a discount broker often number in the thousands, providing an investor the convenience of purchasing “noload” funds from different families at a single location.
  • 7. Institutional Channel The institutional channel comprises a variety of institutions purchasing fund shares for their own accounts. These institutions include businesses, financial institutions, endowments, foundations, and state and local governments. Fund sponsors often create special share classes or funds for institutional investors.