January 23, 2008
I am writing to express my concerns about the SEC's ongoing review of Rule 12b-1. Middle class Americans need the continuing service, guidance and support that are provided by independent financial advisors to achieve their stated investment goals. In a mature financial planning practice like ours, 12b-1 fees provide a tax efficient means to support the continuing service which these clients require for successful investing. We use these 12b-1 fees as an alternative to advisory fees for our clients. We also find that these 12b-1 are often lower than those charged by Investment Advisors.
Looking at this from a consumer standpoint, my opinion is that complete disclosure of ALL fees should be documented in a simple format that our clients can understand. They will then be able to determine whether the fees that we charge are worth it. If not, they then have the choice to manage their affairs on their own, or seek the advice of another advisor.
We also provide ongoing service to nearly all of our clients. We spend the time to develop relationships with them so we can better advise them for their long-term financial planning. The end result is that we do not actively pursue new clients. Instead, we (including our staff) spend nearly all of our day meeting with and helping our clients achieve their goals. We tend to use commission options that continue to pay us in the future as an alternative to fee-based planning.
Independent financial advisors like us offer our investment clients a variety of additional services including: investment planning, financial planning, estate planning, long-term care planning, consolidated account statements, periodic portfolio review meetings, quarterly newsletters, cost basis research, preparation of tax returns, and consulting on other financial decisions. These important services are made possible by the subsidy 12b-1 fees provide. The alternative to this is moving our practice to a fee-based planning practice which may not fit all of our clients' financial situations.
In conclusion, while it is reasonable to review the investor benefits of 12b-1 fees, it is obvious that the repeal of 12b-1 has the potential to cause great harm to thousands of individual investors who need the support and service of a trained financial advisor. As a result, I urge the SEC to allow Rule 12b-1 to continue to support my efforts to provide needed financial services to middle class American investors pursuing their financial goals.
Sincerely,
Mr. Paul Marrella
J.D., CFP, CLTC
Raymond James Financial Services, Inc.