From: Gary B. Roth |
Dear Sirs/Madam: As a long time advisor (over 23 years), it concerns me that there are suggestions that the 12B-1 fees should be altered or even eliminated. I service over 500 individual retail investment accounts from all walks of life. Some are quite wealthy while many are average investors just trying to save for their future. The average investors are the ones who will ultimately suffer from this proposed change. They are the ones that I typically spend much time with to guide and help them in the financial planning process. I typically don’t charge a fee for that service but I am compensated for the on going service with 12B-1 fees. This pays me and makes it at least somewhat worth my time to help them on an ongoing basis. I think that the 12B-1 fees should more accurately be called “service fees” as that is what I’m doing to earn that compensation. It also concerns me when the suggestion is made that I as an advisor, am not doing anything to even earn that fee. I am providing ongoing service and my years of experience to help these clients. If the fee was to be abolished, advisors like myself would have to be compensated in some other way or simply not help these clients. The most common other option would be to charge the client an on-going “wrap fee” which a lot of planners already do, on average around 1%. Now, who is really better off then? I would be getting paid four times as much as the 25 basis points 12B-1 fee and the client is now paying four times as much! It burns me when advisors say that they are “rebating the 12B-1 fee back to the client”. They can say that and promote that because in reality they are charging an ongoing advisory fee of 1%! What a deal to the client, save 25 basis points to pay the advisor 1%. Now who is really better off there? In conclusion, there are many advisors like myself that are focused on helping people who really need our services. We don’t feel it is appropriate to charge a typical “wrap fee of 1%” but we do need to be compensated for our time and efforts. I think the 25 basis point 12B-1 fee is appropriate for all parties involved. It would be a serious error in judgement to do away with this. Regards, Gary B. Roth |