July 19, 2007
I am a licensed insurance professional and mutual funds salesperson. I have my series 63, 65, 66 and 7. I have 900 clients in 7 years of business. I take pride in the Great service I extend to my clients. Based on their needs, I meet quarterly, annually or at least every 3 years(I insist face to face at least every 3 so we can update their financial plan). Although, I talk to them more often.
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. If you wanted to add a disclosure(we already have about 10 items they must sign as it is) letting them know that the 12b-1 fees is for the ongoing service provided by advisor--that would be great....I explain this to them when I talk about how I get compensated and how I am able to service them.
Thank you for your consideration of my views on this subject.