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Recently, many public funds such as Huaxia, Huabao, and Bosera have successively lowered the subscription and redemption fees of their related funds. Some funds have lowered their subscription fees from 0.30% to 0.10%, and some funds have directly reduced their redemption fees to 0. Industry insiders said that the reduction of subscription and redemption fees by related funds indicates that the fee reform of the fund industry is about to move from the second step to the third step. Compared with management fees, the fee reform of fund sales will bring more obvious benefits to investors. Relevant fee reform measures in this regard are expected to be introduced soon.

Data shows that in the full year of 2023, fund management fees, custody fees, and transaction commissions have all decreased compared to 2022, while sales service fees have increased. At present, the fund industry is discussing sales service fees on the point that fund sales themselves are a one-time behavior, so should sales service fees be higher than fund management fees?

Funds intensively lowered their fees

Generally speaking, the redemption rate of a fund is inversely proportional to the holding period, and the subscription rate is inversely proportional to the subscription amount. Judging from the adjustment plans recently released by fund companies, the subscription rates of relevant funds will drop significantly.

Let's first look at the redemption fee. According to the announcement of Huabao Fund on August 24, the company will implement a preferential redemption fee rate for investors who redeem relevant funds through direct sales counters from August 26, 2024 to February 26, 2025. The redemption fee rate for investors with a holding period of more than 7 days and less than 30 days will be reduced from 0.10% to 0.025%, and the discounted redemption fee will be fully included in the fund assets.

According to the announcement made by China Asset Management in mid-August, the China Asset Management Asia Bond China Index Fund, which has a scale of over 10 billion yuan, plans to hold a general meeting of holders (voting time is from August 23 to October 14) to review the proposal to adjust the redemption fee rate. When investors redeem A shares and C shares, if they hold them for 7 days (including 7 days), the redemption fee is 0. Before the revision, the redemption fee was 0.1% for holding them for 7 days (including 7 days) but less than 30 days, and the redemption fee was 0 for holding them for more than 30 days (including 30 days). In addition, according to the resolution of Haifutong Shanghai-Hong Kong-Shenzhen Hybrid Fund that took effect on August 22, when investors redeem the fund, the redemption fee is 0 for holdings of not less than 180 days. Previously, the redemption fee was 0 for holdings of more than 2 years.

In addition, the proposal of the Western Profit Plus Short-term Bond Fund, which took effect on July 10, shows that the redemption fee of the fund is 0 for holdings of more than 7 days. Previously, the redemption fee rate was 0.1% for holdings of more than 7 days but less than 30 days, and 0 for holdings of more than 30 days (inclusive). In addition, Tianhong Tongli Bond Fund recently held a holder meeting to review the proposal to lower the redemption rate of E shares. According to the proposal, the redemption fee of the fund is 0 for holdings of more than 7 days. Previously, the redemption fee rate was 0.1% for holdings of more than 7 days but less than 30 days, and 0 for holdings of more than 30 days (inclusive), but the meeting ultimately failed to meet the statutory conditions for convening.

In terms of subscription fees, most of the adjustments are "halved". Taking Bosera Fund as an example, the proposal reviewed by the Bosera Fuhua Pure Bond Fund's recent holder meeting (voting time is from August 19 to September 17) shows that the subscription fee rate for holdings less than 1 million yuan will be reduced from 0.8% to 0.4%, the subscription fee rate for holdings less than 3 million yuan and greater than or equal to 1 million yuan will be reduced from 0.5% to 0.2%, the subscription fee rate for holdings less than 5 million yuan and greater than or equal to 3 million yuan will be reduced from 0.30% to 0.10%, and the subscription fee rate for holdings greater than or equal to 5 million yuan will be reduced from 1,000 yuan per transaction to 500 yuan. In addition, according to the resolution of the holder meeting previously passed by Bosera Fund, the threshold for 0 redemption fees for Bosera Yucheng Pure Bond Fund A shares will be reduced from "holding period greater than 2 years" to "greater than 30 days" from July 12.

Sales rate reform is expected to start

In the view of fund industry professionals, the successive reductions in subscription and redemption fees by relevant funds not only indicates that the overall fee rate of the public fund industry is steadily decreasing, but also indicates that the fee rate reform of the fund industry is about to move from the second step to the third step.

The fee reform of the public fund industry was officially launched, marked by the "Work Plan for the Reform of Fees in the Public Fund Industry" (hereinafter referred to as the "Plan") issued by the China Securities Regulatory Commission in July 2023. The first step of the management fee reform mainly adjusts the management fees and custody fees of active equity funds, and investors will benefit by lowering the fees of these two types of funds to below 1.2% and 0.2% respectively. The second step of the transaction fee reform is to adjust the public offering commission reform. Marked by the "Regulations on the Management of Securities Trading Fees for Publicly Offered Securities Investment Funds" issued by the China Securities Regulatory Commission on April 19 this year, all the second phase of the fee reform measures for the public fund industry have been implemented.

"This round of comprehensive fee reductions in the fund industry mainly includes three parts, namely management fees, transaction fees, and sales fees, which involve fund companies, custodial banks, securities firms, and third-party Internet channels. As of now, the reductions in fund management fees, custody fees, transaction commissions, etc. have basically been in place. The next step is to adjust the fees on the sales side, including fund subscription fees." A public fund executive in South China told Securities China reporters.

According to statistics from Tianxiang Investment Consulting, in 2023, fund management fees, custody fees, transaction commissions, and sales service fees were 133.346 billion yuan, 28.496 billion yuan, 16.466 billion yuan, and 24.455 billion yuan, respectively. Compared with 2022, the adjusted rates of the first three items have dropped significantly, with the decreases being 10.897 billion yuan, 1.960 billion yuan, and 1.775 billion yuan, respectively. The sales service fee, which has not yet been fully adjusted, has increased by 2.751 billion yuan compared with 2022.

Investors will feel more comfortable with the benefits

In terms of specific classification, fund sales expenses include not only fund subscription (purchase) fees and redemption fees, but also sales service fees. Sales service fees usually include the costs of providing investors with investment consulting, account management, trading services and other related services.

A senior fund product researcher told a reporter from Securities China that compared with the reduction of management fees, the reform of fund sales fees will bring more obvious benefits to investors. "For example, the fund subscription fee of some bank channels is 1.5%, but the subscription fee of some third-party Internet platforms can be discounted by 10%, which is equivalent to buying a fund with 100 yuan, and the subscription fee will drop from 1.5 yuan to 1.5 yuan." According to the person, the reform measures on fund sales fees are expected to be introduced soon.

"According to relevant estimates, the 'bulk' of the fund's sales service fees goes to channel institutions, and fund companies only get the 'small head'. The channel institutions here include traditional institutions such as banks and securities firms, as well as third-party Internet fund sales institutions. This means that the fee reform of the fund sales environment will have a greater impact on channel institutions." said the above-mentioned fund product researcher.

The fund product researcher also said that the current discussion point of the fund industry on sales service fees is how much service content this fee actually has? Fund sales itself is a one-time behavior, should the sales service fee be higher than the fund management fee? Compared with fund sales, the "management" of fund products by fund companies or fund managers is actually a continuous behavior. "From my observation, as of now, the sales service fees of a considerable number of funds are higher than the management fees. If the fee reform in this environment is launched next, this part of the fee rate should have a lot of room for adjustment."

According to iFinD data from Tonghuashun, as of August 23, there were nearly 650 fund products in the market whose sales service fees were higher than the management fees. Among them, the sales service fee rate of some fund products was as high as 1.5%, 0.9 percentage points higher than its own management fee of 0.6%.