August 27, 2007
As a financial advisor with 14 years experience, I service and provide financial advice to over 600 households. I have read all of the arguments both for and against 12b-1 fees and although they are not being used as orginally intended, they are an extremely important , if not vital part of my profession. In my office, I explain 12b-1 fees to clients as "service fees". Service fees are my compensation for continuing to advise clients, for my staff people to answer their questions year in-and-year out, and so on. I use C shares in my practice for smaller accounts. Without C shares, there would be very little economic justification to service these clients.
HERE IS MY SUGGESTION: Why not leave all service fees (12b-1) as they are? Just require firms to disclose them on a brokerage statement like they would a standard commission. My clients understand the fee and are more than happy to pay it. They know I am providing them an important service. By requiring full disclosure, you are reminding clients that the fee exists. It then becomes up to the client if they feel they are getting their "money's worth". Remember, clients have a choice on who they do business with. They also have a right to know how much it costs. Just disclose the fees and be done with it.....
Sincerely,
Marc Tomberg