An unlikely industry segment is throwing momentum behind fee transparency and fiduciary advice. Namely, active managers.

In January, American Funds, a subsidiary of Los Angeles-based Capital Group, received regulatory clearance to launch a “clean share” class of its mutual funds stripped of distribution and marketing fees.

“We filed for an ‘F-3’ class a few months ago that has embedded in it fees associated for paying the investment manager for their services, and a small fee for administrative services, but no distribution fees,” says Matt O’Connor, head of North American distribution at Capital Group. “This is the direction we see the industry moving—a fully transparent share class that could be used by any advisory-based or fee-based platform.”

Investors will pay no commissions, 12b-1 or sub-transfer agent fees embedded within clean shares costs.

American Funds and Denver-based Janus Capital appear to be the first active managers to launch completely stripped-down products created to fit any distribution channel.

For Janus, which simultaneously introduced clean “Z” shares and a “P” share class with sharply lower, clearly disclosed fees (similar to what most firms deem a “T” share class), the decision was about better serving advisors and their clients during a period of regulatory uncertainty.

“We wanted to give intermediaries more choices as to how they will access our strategies,” said Drew Elder, Janus executive vice president, head of distribution. “This is about skating to where the puck is moving.”

According to Morningstar editor John Rekenthaler, a proponent of moving to a single “clean” share class in all funds, active managers have sought to separate investment expenses from distribution costs to create cleaner comparisons between themselves and index-based products.

“The only way active funds can be fully competitive with passive products would be if their expense ratios were the same,” Rekenthaler says. “They won’t be the same without those distribution costs, but they’ll be a lot closer. Active managers get hammered by the distribution fees.”

Clean shares products could be priced competitively with many smart-beta and multi-factor ETFs. Certain American Funds products, for example, would be available for 30 basis points.

Ostensibly, fee-conscious consumers will gravitate toward the lowest-cost methods to access funds, says Rekenthaler. Thus the clean shares movement, if it catches on, could have major repercussions for the advice and investment industries.

If brokers sell clean shares, they will have to directly charge investors for their own distribution costs—a scenario once thought to be forbidden by law.

“What this means is that the industry needs to evolve,” O’Connor says. “This isn’t going to be a simple flip of the switch … we’re going to have to deal with the practicalities of changing business practices and models as we go.”

It was previously thought that Section 22(d) of the Investment Advisers Act of 1940, which requires that fund prices be established by the funds themselves, prevented distributors such as brokers from assigning their own commissions. However, a recent “no action” letter from the SEC to American Funds has cleared the way for brokers to attach their own clean shares commissions.

Yet to be determined is the impact of clean share classes on no-transaction-fee mutual fund platforms, where companies such as TD Ameritrade and Charles Schwab receive an asset-based fee for listing a manager’s funds on their NTF platforms. Rekenthaler says NTF platforms would have to assign some sort of fee to the investor to monetize transactions.

“I don’t think [NTF platforms] will survive,” Rekenthaler says. “With clean shares, those costs can’t come out of the funds anymore.”