Rights of Accumulation - ROA

See: Rights Offering.

It’s basically the right to count cumulative mutual fund purchases toward discounted volume price breaks as they relate to commissions. That is, you get to accumulate your volume discount over time.

Consider the whole mutual fund breakpoint thing. Like...from $250 to $2,500, the commission on The “Best Things in Life Are Fees” Fund is 5%. Then, on $2,500 to $10,000, its 3%. And on $10k to $100k, it’s 1%. Blah blah. Something like that. Breakpoints in fees, i.e. you get a break at $2,500 and $10,000 and $100k.

So...say you invested 5 grand and got the 3% rate. If you had the right of accumulation, then you could invest, say, another $2,500 a year for 2 years, and then receive retroactively (if that’s how this fund’s indentures described it) a reduction in your commission from that 5% to 3%.

Why would funds do this? Well, remember that mutual funds charge investors a percentage of the assets they manage, year after year after year. The commission upfront is kind of a small number when compared with total revenues to the mutual fund over decades of happy clients continuing to hold that fund.

So pretty much anything a fund can do to bring a client in the door (and then have them hold on to the money for long periods of time) is smart business for the fund.

So giving an investor the right to accumulate volume...and then giving that customer volume price breaks along the way...makes a lot of sense financially. The real dough is made by the management company collecting its annual management fee year after year after year.