It is one of the most used universal marketing strategies by almost all kinds of businesses to promote expensive products and services compared to the economic ones. This multiplies their income in terms of sales as well as a commission for the services. For example, if you approach a stockbroker for advises regarding investing in shares or mutual funds, it is apparent that he will persuade you to go for an expensive one. You put in more money in the hope that you will get more, but that is just one of the probabilities. The sure outcome is that the broker will get a higher commission.

To keep a check on this malpractice made by a majority of the retail brokers, the federal laws have introduced this relatively new form of mutual fund shares known as Clean Shares Mutual Funds.

Why are they clean?

Clean shares have a uniform platform for pricing across all markets and therefore put a constraint on the unprofessional behavior of advisors to encourage their customers to invest in expensive shares. With expensive shares, the advisors get a higher commission and their interest prevails more than that of the customer. The advisors have to vouch in for recommending their investors to select affordable shares when you decide to buy clean shares.

Clean shares also bring in a high degree of transparency in the mutual fund market. Unlike other forms of shares, they do not levy additional charges like marketing fees, distribution fees like 12b-1, front-load or back-load fees. For example, if you invest in the hugely popular Class A shares, you will be charged 0.5% or more as the front-load fees by the advisors. In addition to this are other fees like marketing fees, handling charges etc. These wolf down a major chunk out of your returns and sometimes, your losses get escalated in the process.

On the other hand, when you invest in a clean share, you are not paying any of these charges, and the amount extracted from you is purely the commission of your advisor. You know what you were charged and the advisor is also aware of that. The money flowing is clear like water to you.

Another positive change brought by clean shares is that when your interest is to invest in an affordable share and get good returns and the aim of the advisor is to give you good profits on economical clean shares, there is no conflict of interest. The interests of both the parties are aligned concurrently towards the same clear objective.