Most mutual funds have an underwriter that has exclusive rights to distribute shares to investors. Mutual funds are generally marketed to the public either directly by the fund underwriter or indirectly through brokers acting on behalf of the underwriter. Direct marketed funds are sold through the mail, various offices of the fund, over the phone, and, increasingly, over the Internet. Investors contact the fund directly to purchase shares. For example, if you look at the financial pages of your local newspaper, you will see several advertisements for funds, along with toll-free phone numbers that you can call to receive a fund’s prospectus and an application to open an account with the fund.
A bit less than half of fund sales today are distributed through a sales force. Brokers or financial advisers receive a commission for selling shares to investors. (Ultimately, the commission is paid by the investor.) In some cases, funds use a "captive" sales force that sells only shares in funds of the mutual fund group they represent.
The trend today, however, is toward "financial supermarkets, " which sell shares in funds of many complexes. This approach was made popular by the OneSource program of Charles Schwab & Co. Schwab allows customers of the OneSource program to buy funds from many different fund groups. Instead of charging customers a sales commission. Schwab splits management fees with the mutual fund company. The supermarket approach seems to be proving popular. For example, Fidelity now sells more than 800 non-Fidelity mutual funds through its FundsNetwork even though many of those funds compete with Fidelity products. Like Schwab, Fidelity shares a portion of the management fee from the non-Fidelity funds it sells.
