Question : Why are mutual fund companies steering away from B-shares these days?
I just want to know what the problem is with them.
mutual fund companies

Best answer:

Answer by muncie birder
Franklin Templeton has indeed eliminated them, I believe. The problem with the B shares is that the investor was getting a royal screwing with them. Instead of paying the 5.75% commission up front and then a low expense ratio, he instead was offered a high expense ratio and a declining sales charge when he sold his shares. The bottom line was that it tended to lock in the investor for many years, it made load funds easier to sell, and it increased the profits of the mutual fund companies. Federal and state regulator began to take a very dim view of the practice and began to exert presure upon the industry.

With out this pressure I am certain that the B shares would still be a very popular sales tool.

For an example of what I mean:

American Mutual Fund A shares has an expense ratio of 0.55%. The B shares an expense ratio of 1.34%. Now if you work this out over 7 years you will find that it equals 5.5% slightly less than the 5.75% up front sales charge, but it does tend to lock the investor in for a nice long time.

Frankly, if investors wish to buy the B shares rather than the A or C shares, that should be up to the investor and not a concern of government regulators. But alas if the regulators are fussing about this, then they can ignore the really abusive practices and still be seeming to earn their keep.