From: Chris Freeman
To Whom it May Concern,
It is a truth that all manners of compensation will have pros and cons.
I have been a Registered Representative for over 20 years, a CFP for 15 years and have just completed my Master in Financial Planning and feel strongly that the 12B-1 plays an important part in my practice for the benefit of the client.
* They provide for an ongoing service fee that encourages the continued involvement of the RR.
* It allows the RR to provide additional complimentary services that may not pertain directly to the mutual fund position (For example a client may have a question regarding a savings bond which is not an area that a RR can receive compensation on. However because there is an ongoing service fee the RR is in a way being compensated to perform this service .)
* The 12B-1 aligns the clients interest with the RR in that when the client does well the RR compensation increases and opposite is true . It therefore is in the best interest of the RR to continually make suggestion that will increase the performance of the clients investment.
* As an RR I am also more inclined to accept an account from a client who may want to change their RR. This may occur if a RR leaves the business or just performs poorly. I can say as a busy RR that I would not accept the service on a new account where the charges may have been paid all up front and therefore had no trail to pay me for my services.
All this being said in favor of the 12B-1 continuing I do believe they should be clearly disclosed and that client understand that they are not for marketing but for future service.