American Funds Won’t Buy You What?

A sandwich. “American Funds won’t even buy you a sandwich. Ha ha ha ha.”

Back around 2005 I heard these words uttered by a financial products wholesaler. These are guys that go around and try to promote packaged investment products to financial advisors. Their goal is to convince the advisor to then sell these products to their own clients.

A thin sheen of sleaze

It was a lunchtime presentation in a medium size hotel conference room. The sales guy’s fake tan and slicked back hair gave him the thin sheen of sleaze usually reserved for television car salesmen. The investment product he was pushing was a strategy that packaged together many mutual funds into one offering. Supposedly these would be a collection of the top mutual funds selected by experts.

Then one advisor at the presentation raised his hand and asked, “Why aren’t there any American Funds in there?”

American Funds is one of the better and more reputable mutual fund companies out there. I don’t happen to use them heavily because I think there are others that are even better. But American Funds is still very good, and they are the type of fund you would have expected in a product like this.

The presenter then said with a laugh, “American Funds won’t even buy you a sandwich.” He was trying to laugh off the obvious implication. About half the advisors in the room laughed. The other half shifted uncomfortably in their chairs.

Exiting on the back door

In other words, American Funds wasn’t willing to pay enough back-door money in order to be included in this product. There was some minimal amount that the mutual fund companies had to pay to jam their fund down this distribution channel, and American Funds wasn’t willing to do this. Apparently American Funds had some crazy idea that people should use their mutual funds based on merit. Weird, huh.

Photo by TimWilson