From: Anthony D. Miller
Sent: July 10, 2007
Subject: File No. 4-538

Nancy M. Morris, Secretary
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C.20549-1090.
Re: File No. 4-538

Dear Ms. Morris:

I am an investment advisor representative, registered representative, and licensed insurance agent.

My practice focuses primarily on retirement income distribution planning for already retired individuals. I meet with my retirement income distribution planning clients as often as quarterly to assist them with their cash flow planning, income tax planning, and asset allocation needs. We also work on estate and long term care planning as needed with these clients.

When I discuss investment and financial product options with my clients, they learn about wrap accounts, managed accounts, mutual funds that include 12b-1 fees, and other financial products. Many of my clients choose mutual fund products with 12b-1 fees because for smaller accounts, they tend to be less expensive over time than wrap or managed accounts, and the fees paid via 12b-1 fees are more tax efficient than fees in a wrap or managed account.

Mutual funds with 12b-1 fees are more tax efficient because the fees are netted from the gross return when calculating taxable income. Whereas, since most of my retired clients claim the standard deduction on their income tax return, an annual retainer or wrap/managed account fee would not provide them a tax deduction.

If 12b-1 fees are eliminated, I will need to charge an annual retainer or transition many clients’ investments to wrap/managed accounts to be able to continue to provide the same degree of ongoing service.

I believe that when prospective clients approach financial advisors for the first time, they seek long-term relationships, with long-term direction and advice. Mutual funds with 12b-1 fees help to establish an incentive to financial advisors to provide long-term service, direction and advice.

Rather than eliminate 12b-1 fees, please consider expanding their definition to include compensating registered representatives for ongoing service, direction, and advice.

Some mutual fund companies, in interest of full disclosure, itemize 12b-1 fees on their statements. Rather than eliminating 12b-1 fees, why not create a deadline of 36-60 months in which broker dealers and mutual fund companies must disclose the amount of 12b-1 fees paid by a particular mutual fund account holder in a given quarter.

I fear that if the SEC eliminates 12b-1 fees, consumers will take the brunt of it. Unscrupulous financial advisors will be tempted to churn accounts more frequently. Ethical financial advisors who truly provide ongoing service and advice to their clients will be forced to transition their client’s assets to wrap/managed accounts or hourly/annual retainer arrangements. This move to almost exclusively fee-based arrangements will cost more and be less tax friendly to consumers with smaller accounts.


Anthony D. Miller, MSFS, CFP®
Financial Adviser*
Anthony D. Miller Financial Group