August 8, 2007
Dear Ms. Morris:
For the last 26 years I have been a licensed insurance and mutual funds representative.
For providing my advice and service to my clients regarding their investments, I receive a trail commission in the same way that I receive renewal commissions on the life insurance policies I sell. This trailing compensation is typically known as 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 a representative’s help, clients would have no personal contact who knows their goals or their individual situation in a volatile market.
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 me 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. While the client might save a small amount if 12b-1 fees were eliminated, they 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.
Ozark National Life
NIS Financial Services