From: Robert Keenan
Our firm's income from 12b-1 fees is 35% of our gross revenue.
Without these 12b-1 fees, for our clients, we would be forced to either (1) provide no service whatsoever or, (2) transfer the accounts to RIA accounts, where a much higher fee is charged, or (3) churn the account. None of these options are desirable.
On accounts requiring re-balancing only when the client goals change, 12b-1 fees are the most cost efficient option available to both us and the client.
Without 12b-1 fees, every time a change was needed in a client account, we would sell the fund and purchase another fund from a different fund family. This would generate a commission, rather than having a commission free exchange within the same fund family.
Doing away with 12b-1 fees is a very bad idea.