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Sales Promotions Signal Start of Tax Season

It's beginning to look a lot season.

About 80% of all IRA sales happen between March 15 and April 15, according to Halle Conway, a principal with MarkeTech Systems International, a consulting firm in Raleigh, N.C., that specializes in developing retail products and delivery system strategies for the financial services industry. As a result, some fund firms have stepped up their IRA sales promotion efforts.

Earlier this month OppenheimerFunds filed with the Securities and Exchange Commission to offer A.G. Edwards sales reps an increased commission for IRA sales from February 1 to April 15. During that period, the firm's advisers will get the full sales commission on sales of class A shares, and Oppenheimer will add .5% to B share sales and .25% to C share sales, according to the filing.

"It's common to pay out an extra commission during...IRA season," said Greg Stitt, a spokesman for Oppenheimer. "It's something we've done in the past."

First Investors is also taking advantage of tax season to push its IRAs by waiving the front-end load on its funds in education IRAs. The offer, only available for A shares and for investors who are moving assets from another firm's education IRA, began last week, according to statements filed with the SEC. Investors must keep the assets in the First Investors IRA in order to avoid a deferred 1% sales charge.

And in the fourth quarter of 2001, Raymond James began a major internal marketing campaign to promote its IRAs to its own advisers. The firm started aggressively marketing its IRAs to attract investors as early as possible, said Larry Silver, director of marketing for Raymond James.

"It's really an awareness campaign," Silver said. "We've really expanded our communications and materials given to our sales force. And we've developed an extensive section on our Intranet site dedicated solely to IRAs."

Firms may want to go after IRA sales especially early this year because earnings are at a premium, said Robert Fleisher, a consultant for the wealth management industry who specializes in product development. Because of that, firms may have increased pressure to book sales in the first quarter, he said.

Franklin Templeton is going after IRA assets on all fronts. Like Oppenheimer, the firm has boosted sales commissions to reps until April 15. Also, last week, Franklin launched a new external IRA marketing campaign aimed at the brokerage community, said Dan Reinhold, director of retirement plans for the firm. The campaign, which will try to garner new IRA accounts, will feature mailings to brokers highlighting IRAs in general and note the time of year as an especially good time to sell them and the benefits of Franklin's IRAs specifically.

Then in March, Franklin will add the more aggressive part of the campaign, which will be geared primarily to rollovers, Reinhold said. In addition to new marketing and communications materials that will be disseminated, the firm will send out a menu of support services, including information on its new retirement class shares. The R shares, which were launched on January 1, 2002, are meant to retain qualified dollars already in Franklin funds, Reinhold said. Prior to their launch, the firm did not pay out anything to sales reps for rollovers because they had already paid a commission on the original sale. As a result, much of the rollovers coming out of Franklin's funds were going to competitors, Reinhold said. The R shares offer sales reps a 1% front-end commission followed by a 35 basis point monthly trail beginning on the 13th month or a 50 basis point monthly trail with no up-front commission.

"We can't pay the full commission both times around, but now the broker has some incentive to rollover the assets to us through the retirement shares," Reinhold said.