October 21, 2010
I am an independent financial advisor as is my wife, Kim George. Our small business is located in RI which has one of the highest double-digit unemployment rates in the country. We see many of our own clients being hit hard by this statistic. This makes our job even more difficult as our clients become more reliant on their savings and investments for fiancial stability. Do our clients think we should be compensated for our hard work? Absolutely; unfortunately, even we can not afford to work without compensation.
Many of these hard hit clients have accounts with values of less than 50k making them too small for actively managed fee based platforms so we invest them in traditional mutual funds, often times in C shares. As you know, compensation on a C shares pays the advisor 1% annually in 12b-1 fess. Is this considered unreasonable? Certainly, we don`t think so. Our clients are fully aware of the 12b-1s as we disclose them upon purchase and again during account reviews. If they thought it unreasonable, then they would not be doing business with us. As an Eagle Scout, I never frown upon small sized accounts and often take them on becuase they need the most help. As a business owner, I have expenses to meet also and the 12b-1 fee compensation makes it possible to do both. As part of the solution why not call the 12b-1 what it really is, advisor compensation. This term is transparent and clear. Then the client can decide which advisors are worth paying for. Even the small investor deserves a great financial advisor. We do not want to be in a position where we can not afford to have these small investors as part of our business because they do not even cover their expenses with us. People who are willing to go it alone can always buy no-load funds, but many are looking to work with experienced advisor and are more than willing to pay for it. Thank you for your consideration.