What it means
A load is a sales charge taken when someone buys or sells fund shares. Fund companies waive it where the sale involves little or no sales effort or where another party is already paying the adviser.
For example, a company retirement plan buys in bulk, so a commission is not needed. Common waiver categories include purchases through employer retirement plans, investments held in accounts where the adviser charges a flat or percentage fee instead of commission, and reinvested dividends.
Some fund groups also waive loads for their staff, for charities or for amounts above a high threshold. Each fund sets its own rules, which appear in the prospectus.
A load-waived fund is not the same as a no-load fund. A no-load fund never charges a sales fee to anyone, whereas a load-waived fund has a load that applies unless the buyer qualifies for an exemption.
Investors who do not qualify may face the full charge. Waivers can be lost.
An investor who moves shares to an account that does not qualify, or who is not told about a waiver in the first place, may pay a charge that was avoidable. It is wise to ask directly and to confirm the waiver in writing.
Even when the load is waived, other costs remain, including the expense ratio and sometimes ongoing distribution fees. The sales charge may be gone, but the real cost of owning the fund should still be compared across alternatives over the full holding period.
Some waived-load share classes carry higher yearly fees to make up the difference.
In practice
Real-world examples.
Example
A software engineer's company 401(k) plan offers a fund family's share class with the load waived for plan investors. He contributes $800 a month without paying any sales charge. His colleague who buys the same fund outside the plan would pay the full load.
Example
A financial planner moves her clients into fee-based accounts, where she charges 1% of assets each year. Because she is paid directly, the fund company waives the sales load on the funds she selects. Clients pay her fee and the fund's expenses but no commission. She discloses the arrangement in her client agreement.
Example
A charity invests an $11,000,000 endowment through a fund company's institutional channel. The size of the investment qualifies for a waived load. The charity's treasurer confirms this in writing before wiring the money. On a 4% load the waiver would be worth $440,000.
Formula
Calculation
Value after n years = Amount invested x (1 + Annual return)^n
An investor has $100,000 to put in a fund with a 5% front-end load. With the load, $95,000 is invested; with the load waived, the full $100,000 is invested. Assume a 6% annual return for 10 years, so the growth factor is 1.06^10 = 1.790848. With the load, the value is $95,000 x 1.790848 = about $170,131. With the waiver, it is $100,000 x 1.790848 = about $179,085. The waiver is worth about $179,085 - $170,131 = $8,954 over the decade, assuming equal returns and costs otherwise.Case study
Seen in the real world.
Oakmont Dental Group is an illustrative, fictional practice with 40 employees and a new retirement plan. The owner was offered a fund menu where each fund carried a 4.5% load for individual buyers.
The plan administrator confirmed that the funds were load-waived for plan investors, so employees' contributions went in at full value. The owner still compared expense ratios and chose the share classes with the lowest running costs.
A year later one employee left and rolled her balance into a personal account. The new account did not qualify for the waiver, and she paid a load on a fresh purchase. The practice manager added a note to the exit checklist advising leavers to ask first, which saved later leavers from the same cost. The owner also asked the administrator to explain the other fees in the plan.
Watch out
Common mistakes.
- Assuming a waiver stays in place when the money moves to a different account type.
- Believing a waived load means the fund is free, when expense ratios and other charges continue.
- Not asking for a waiver in writing, leaving no proof if the charge is applied later or the account is transferred.
Questions
People also ask.
Is a load-waived fund the same as a no-load fund?
No, a no-load fund never charges a sales fee, while a load-waived fund only drops the fee for qualifying buyers.
Who usually qualifies for a waiver?
Common qualifiers include employer retirement plans, fee-based advisory clients, fund company employees and investors above a stated size.
Where can I check whether a waiver applies?
The fund's prospectus and the account application set out the waiver rules, and the adviser or fund company can confirm them in writing.
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