What are breakpoint sales?
A breakpoint sale is the sale of a mutual fund at a set dollar amount that allows the fundholder to move into a lower sales charge bracket. Breakpoint sales provide fee discounts to investors based on investment breakpoint levels determined by the fund company.
Is a breakpoint sale a violation?
Definition of Breakpoint Sale A breakpoint sale is designed for the purpose of trying to earn a larger commission. This is a violation of the Rules of Fair Practice and should never take place..
What does breakpoint mean in business?
A breakpoint is the dollar amount for the purchase of a load mutual fund’s shares that qualifies the investor for a reduced sales charge. Breakpoints offer investors a discount for making larger investments. The latter form of investment purchase in a fund must be documented by a letter of intent (LOI).
What are breakpoint fees?
A breakpoint is the dollar amount for the purchase of a load mutual fund’s shares that qualifies the investor for a reduced sales charge. Breakpoints allow for reduced fees for large purchases, which often benefit institutional investors.
How much does a breakpoint sale cost an investor?
Following the above breakpoint schedule, an investor planning to invest an initial $40,000 in a front-end load fund would receive a discount and face a charge of 4.25%, or $1,700. If the investor is properly advised she will be told that adding $10,000 for a total investment of $50,000 would qualify the sale for a lower sales charge of 3.75%.
What does breakpoint mean for a mutual fund?
Sales loads on mutual funds can be front-end, back-end or level. Breakpoint schedules are levels set by the mutual fund that allow an investor to receive a sales load discount. Discounts from breakpoints are typically applied to funds with front-end sales load, but they could be applicable to all shares of a fund.
How are breakpoint sales related to accumulation privileges?
Breakpoint sales provide fee discounts to investors based on investment breakpoint levels determined by the fund company. Accumulation privileges allow an investor’s sales charge from a breakpoint schedule to be based on their total investment in the fund.
When to sign a breakpoint letter of intent?
If an investor is unable to provide the funds needed to qualify for the lower fee at the time of investment, they can sign a letter of intent promising to reach the total amount, or breakpoint, in a set time period.