In an attempt to jump start the newly crafted exchange traded managed fund space, Eaton Vance Corp will help brokerages pay for technology costs, an industry first.
Showing Eaton Vance’s commitment to the new ETMFs offerings, Tom Faust, Eaton’s chief executive officer, said that the company will help some brokerages pay costs to make the new breed of funds readily available to investors, and brokerage firms may also share in the revenues from the sale of the funds, reports Jessica Toonkel for Reuters.
“The biggest challenge we see at this stage of the game is getting broker dealers,” Faust told Reuters. “If we are looking to launch before the end of the year, we need the broker dealers to start making systems changes and otherwise preparing themselves to offer this to clients.”
Because ETMFs are breaking new ground, brokerages would have to take a new kind of order from investors. Consequently, Eaton Vance hopes to cover some of the technology costs of distributors to better facilitate trades.
“This is the first time I have ever heard of a firm offering to pay some brokerage costs for a new product,” Ben Johnson, an ETF analyst at Morningstar, said in the Reuters article.
Nevertheless, due to ETMF’s unique and unfamiliar concept, many brokerage firms and industry consultants are wary about investor demand and how they will receive compensation for selling the new investment tool. For instance, Fidelity Investments and TD Ameritrade have stated they will not sell the funds until there is sufficient demand. While Eaton Vance has started to promote the new funds, many still do not know about the products.