The Deception Series, Part 10--What SAM Portfolio Shareholders Can Do to Recapture a Portion of their APF

Part 10--What SAM Portfolio Shareholders Can Do to Recapture a Portion of their APF

If you are now or were ever a shareholder in any one of the five WM Strategic Asset Management (SAM) Portfolios, or its successor funds, the Principal Strategic Asset Management (SAM) Portfolios from 1990 to the present (June 2009), you can argue that a portion of the Advisor Paid Fee (APF) paid to your investment adviser during the time you owned these funds should have been paid to you.

The five funds which generated the APF fee were sold by the WM Group of Fund and the Principal Funds from 1990 until March 1, 2006. The specific funds which generated the APF were the following:

The Principal Strategic Asset Management Flexible Income Fund
The Principal Strategic Asset Management Conservative Balanced Fund
The Principal Strategic Asset Management Balanced Fund
The Principal Strategic Asset Management Conservative Growth Fund
The Principal Strategic Asset Management Strategic Growth Fund

This APF fee rate changed over the years it has been in effect, however, for a long period it was based on 1.50% of the assets held specifically in any of the SAM Portfolios. The APF fee was paid quarterly to your investment professional and/or their broker-dealer.

To determine how much money your SAM investment generated in APF fees, you should first contact your investment adviser. They are the person who represented your financial interests and commonly made the final selection of the SAM Portfolios for your personal account. They are also the person who knew about the existence, specifics of the APF, and who actually often received the APF checks.

If your adviser cannot provide this information, you can contact the president of the Principal Funds, Inc., Nora Everett, (pictured above)at 1-800-986-3343 or by e-mail at everett.nora@principalfunds.com. The Principal Fund's Fund Accounting Department should be able to provide the amount paid to your investment adviser during the period the APF was in effect and during the time you had an investment in these funds.

Note: The APF is Legal
It is important to note that the APF was perfectly legal. According to a number of class action lawsuits which specifically challenged the legality of this revenue sharing agreement, the courts have taken the narrow definition of the term “disclosure” to rule that this APF arrangement was evident to all affected shareholders. While I disagree, the courts have ruled that the APF was legal. No one has engaged in any legal wrongdoing.

As a result, if you want to arrange a meeting with your investment adviser to negotiate a refund of some, or all, of the APF fee, it should be done with the full knowledge that the payment of the APF was legal.

At the meeting with your adviser, I suggest the following:

1.--Do not go alone. Get a friend, family member or a beneficiary to accompany you. Feel free to start the discussion by asking the simple question: “Do you think this APF arrangement was made clear to me?” You can then ask if the APF arrangement at any time made them less objective about determining which mutual fund investments were in your best interests?

2.--Ask that your investment adviser’s supervisor or branch office manager attend the meeting. This will send a message to the broker-dealer’s senior management that you are a concerned investor.

3.--Keep in mind, the APF was considered legal, but in my opinion, it was highly unethical and compromised a financial professional’s fiduciary duties to their clients. You can ask if the APF compromised their objectivity.

4.--You may want to ask whether this experience strengthens or weakens your professional relationship with your investment adviser.

4.--Above all, remain calm during any discussions with your investment adviser. This should be considered a learning experience.