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Rating:Are CapGroup's Captains Steering Off Course? Not Rated 5.0 Email Routing List Email & Route  Print Print
Tuesday, May 01, 2012

Are CapGroup's Captains Steering Off Course?

News summary by MFWire's editors

The Lovelace family spent decades building the American Funds brand as one that never overshadows the advisors that sell its funds. Yet, a prominent trade paper for advisors wonders if the folks at Capital Group are doing just that now that the family is out of the picture.

"Is American Funds losing its touch with financial advisers?," wonders wonders InvestmentNews reporter Jason Kephart.

Kephart's article was sparked by American Funds executives decision to take the wraps off a suite of mutual funds intended to offer advisers a predetermined mix of investments. The fund launches come after American Funds shareholders yanked a net $239 billion of AUM over three years. The sum would be enough to fund the nation's sixth-biggest mutual fund family.

Lipper's numbers show that June will mark the three-year anniversary of the last time that American Funds had a month of positive net flows. American Funds AUM has dropped from $1.2 trillion to a little more than $900 billion.

"These prepackaged deals are great for the do-it-yourselfer," Eric Toya, vice president of wealth management at Trovena LLC told Kephart. "But advisers would prefer to advise."

Even a Morningstar calls the move a "surprise".

Whether or not the funds are a good idea, that advisors are wondering whether the mutual fund firm has changed course is significant.

The Los Angeles-based mutual fund firm is planning the launch of eight funds of funds next month and a series of college savings, target-date funds this fall. In the past, Kephart points out that the mutual fund firm has based its product lineup on the premise that advisers prefer to assemble their own asset allocation models -- as opposed to investing in funds that do it for them.

"In the past, we've let advisers work with their clients to decide the best allocation, based on their time horizon and risk," American Funds spokesman Chuck Freadhoff reportedly told the publication.

Freadhoff added that advisors "want to be able to make just one decision, as long as it fits with the client's goals.

Steve Rudolph, managing director of HW Financial Advisors, also went on the record wondering about the decision to launch the new funds.

"We're going to do best-of-breed and try to find the best managers. The days of the proprietary-driven strategies are over. It seems like American Funds is catching on very late; it's like they're not listening to advisers. They're out of touch."

Freadhoff's rebuttal is that they are "simply giving them more tools." 

Edited by: Sean Hanna, Editor in Chief


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