An article in Friday's Wall Street Journal highlights potential bias in the planning industry in sales mutual funds.

The article highlights LPL, H.D. Vest and a unit of AIG as firms that have settled with the NASD over allegedly favoring certain funds in exchange for compensation.

While all deny that they continue the practice of directed brokerage, fund firms are clearly paying for some sort of preferential treatment. At LPL, for instance, the NASD found that from 2001 to 2003, 29 out of 135 funds offered by the firm paid for "preferential treatment, which included enhanced access to the firm's sales force, participation in firm meetings and placement of promotional material on the firm's internal website."

A list of LPL's current sponsoring funds are on its website and includes funds from AIM Investments, Dreyfus, Eaton Vance, Fidelity Advisor, Franklin Templeton Investments, Oppenheimer Funds, Pimco Funds, Putnam and Scudder Investments.

What's interesting about this issue is that even with disclosure, there is still scrutiny of these practices. All of which means that fund firms will have to get a lot more creative about how they make their funds stand out to advisors.  

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE