July 19, 2007
I am a financial professional who sells mutual funds (among other products).
12b-1 fees should not be eliminated. The math is simple: The majority of my sales are in A shares, so the bulk of compensation comes up front. The $25 on a $10,000 mutual fund account paid yearly to compensate me for addtional advice is minimal. If it is eliminated, I will have no incentive to provide post-sale service. Further, replealing the 12b-1 fees will actually increase the odds of some advisors moving a client to a new fund family to gain ongoing compensation. Think of the law of unintended consequences -- to save an investor $25, they may have to pay a lot more to either receive fee-based service or a new 5% load to go to an new family. It makes no sense.