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Mutual Fund Wholesalers

History

A Dutch merchant and broker named Adriaan van Ketwich launched the first mutual fund in 1774 in Holland. In the United States, the first mutual fund—the Massachusetts Investors Trust—was introduced in Boston in 1924. It was the first “open-end” mutual fund, allowing for the continuous issue and redemption of shares by the company. The number of mutual funds grew from 125 funds in 1955 to 361 by 1970. Two developments—the enactment of the Employee Retirement Income Security Act in 1974, which created individual retirement accounts for workers not covered by employer-sponsored plans, and the Revenue Act of 1978, which created 401(k) retirement plans—fueled growth in the industry. By 1980, there were 654 funds (but only 4.6 percent of U.S. households owned mutual funds), according to the Investment Company Institute. In the ensuing years, fund companies greatly expanded their menu of fund offerings and increased their marketing activities. By 1990, there were 3,079 funds (and 23.4 percent of U.S. households owned funds). In 2015 there were 9,520 funds and U.S. household ownership of mutual funds increased to 53.6 percent.

Throughout the decades, but especially since the 1970s and 1980s, wholesalers have played a major role in marketing funds to investment advisors. As more information about funds has become available through the Internet (including at mutual fund Web sites), the number of registered investment advisors, financial planners, and others that use wholesalers as their primary resource for fund-related research has declined. In response, wholesalers have had to offer value-added resources such as white papers, sponsor continuing education opportunities, and provide company- and market-centered advice to investment advisors to stand out in this highly competitive industry.