July 19, 2007
I am a licensed insurance professional and mutual funds salesperson.
In return for providing ongoing service and continuing advice to my clients regarding their investments, I receive trailing compensation much in the same way that insurance agents receive renewal commissions on the life insurance policies they sell. This trailing compensation is typically paid under a written plan adopted pursuant to SEC Rule 12b-1.
The amount of this compensation is relatively modest; on a $10,000 investment in a mutual fund's "A" shares, the annual "12b-1 fee" that is paid for providing ongoing service equals 25 basis points, or $25. Investors receive substantial value for these fees--in exchange for a small annual payment, they have access to a financial services expert to answer their questions and address their concerns. Without their advisor, investors would have nowhere to turn to (except for perhaps a stranger at the end of a 1-800 phone number) when they needed some reassurance in a shaky market or assistance in rebalancing their portfolios, understanding their investments and the investment choices available.
I believe the elimination of 12b-1 fees would do considerable harm to those investors who need and want ongoing investment planning advice and counsel. A significant majority of my clients expect our office to be available and to respond quickly to a variety of questions regarding their investments. I have never received complaints from my clients about the small amounts they are charged for the services I provide to them. My clients expect me to be compensated for helping them achieve their long-term financial goals. If 12b-1 fees were eliminated, while the client might save a small amount in 12b-1 fees he or she would end up paying a much larger amount in hourly or asset-based fees to receive the same service.
For these reasons, I urge the SEC to reject any proposal to eliminate or restrict the payment of 12b-1 fees to registered representatives for providing continued service to their clients.
Thank you for your consideration of my views on this subject. One final point I wish to make. The SEC is rather disengenuious when it comes to this subject. You have in the past paid your chairman an unGodly amount of money for his services, yet you think it is ok to ding a poor rep who may not make 50,000 a year. Where do you people get off with your assertions of protecting the consumer? Who is protecting us?
We are all about helping people and doing an honest days work for an honest day's pay. We rarely get rich or make the millions that your Board or its officers make, so why go after the little guy like you are some type of savior. You should all be ashamed of yourselves.
I have been appalled at the thinking that is going on in our industry. You should be terrified that you are not causing honest decent people to leave the industry and say to heck with all of it. We are in a major crisis in this country. We have an un funded, SS administration, Medicare, Medicaid and the interest on the national debt is outragious! We will see taxes go up and we will see benefits go down. Who is going to actually do something for these people? You? I doubt it.
These people need financial services representatives that can offer support, knowledge and some hope. Not a bunch of empty promises from politicians and quasi government bureacrats. Sorry to sound so upset, but I actually believe in our industry and believe in our ability to help the clients. You won't get people to do that for free.