From: Tom E. Burns |
Dear SEC, You should consider what will happen to all the advisors and reps who use these 12b-1 fees as their only ongoing compensation. What is going to happen if they eliminate the 12b-1 fee. I recieve a large amount of my compensation from these .25% trails. I put people into breakpointed loaded A share mutual funds and then use the trails to pay me for my ongoing service. For example, $500K w/ industry standard 12b-1 fee @.25%= $1,250 year. I do not use separately managed accounts nor do I use WRAP accounts because both cost the investor or client more over time, hands down. You should be controlling or putting a cap on these high cost accounts as to how much the investor can pay in total costs. I would suggest it be no more than the 1.25% total expense ratio on the average mutual fund. Some clients come into me from other firms and the are paying a 1.75% WRAP Fee plus fund expenses for a total overal annual expense of 2.5 - 3.0% (that's a rip off in my mind) If the 12b-1 fee is eliminated I will have to charge them some other way to continue to pay for my ongoing service and cost of business. If the right steps are not in place it could cost the clients more and that will not be easy to transition. Is their a way to lower overall fund expenses without changing the 12b-1. For example, the average mutual fund has a total expence ratio of about 1.25%. Can't the other fund expenses be changed. I don't think it is the fund expenses you need to be worried about. You need to worry about the WRAP and Separately managed account fees that need to be controlled. Thanks, Tom _______________ Ameriprise Financial Services, Inc. |