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. However, I feel it is warranted in that my clients who are mutual fund investors and have mutual fund accounts rely on me continually to review their investments and make sure they are invested properly with their risk tolerance and are invested in funds which are performaing optimally. This exercise - reviewing, redistribution, communication with clients - is very time consuming. So from my perspective I believe the compensation for this advice and time is warranted! I also believe if you were to poll investors - they understand that services their financial advisors perform does not mean "free". I believe if polled or asked they would not - as a whole - indicate a problem with their financial advisor receiving compensation for their time and advice.
However, I can understand the SEC wanting to make sure investors are properly informed about these fees. This is an issue with other investments - such as annuities - which the SEC has already passed rulings on and rightly so. Over communicating is never a bad thing.
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.