Subject: File No. S7-15-10
From: Cherril L. Brown
Affiliation: Financial Advisor and CFP

August 20, 2010

COMMENTS ATTACHED: I think the 12b-1 fee is very fair for clients to pay to maintain an ongoing relationship with their financial consultant/advisors/CFP/etc. Keep in mind this fee goes down as the client's value goes down but in fairness increases if the client's value increases. If one works for a major institution, the company keeps a major portion of the 12b-1 fee and pays its financial advisors only a portion of this fee. One has to have a whole bunch of clients in order to have any sizeable 12b-1 fee being paid out to them for continuing service each year.
In my opinion, the institutions that levy a management fee on these accounts are the fees the SEC should be looking at, not the 12b-1's. When the institution collects the 12b-1 and a management fee they are doing a disservice to clients. The 12b-1 fee is part of the operating expenses of a mutual fund and is relative in amount to the performance of the fund. The "management fee" many of the institutions now charge is just an "add-on" for the institution to collect over and above a majority of the 12b-1 fee offered FAs by mutual funds. Also when an institution charges clients to just have an account is also a disservice to the client and certainly cuts into a mutual fund's total return for the client. Elimination of these "account fees" to just have a client account should be big on the list of SEC concerns. These "account fees" are not shared with FAs for client advice, but only add to the company's earnings for the year. It's a real "freebie" that should be forbidden. Example: Beginning investor invests $3000 into mutual fund Class A, pays a sales charge of 5.75% of which 5% goes to big institution, about 32% of that is paid to the FA. The institution then charges $60 to have an account, another $25 due to account being below $10,000 in size for a total charge of $85 per year. Some institutions now throw in a management fee of another 1% on up to 3%.....That's year 1. Year 2,3,4 and thereafter, the account charges occur again even if the mutual fund makes money or loses in value, but the FA who holds hands with the client when the market goes down and celebrates with the client when the market goes up, hears of the rest of the financial successes and failures, offers other financial/investment advise throughout the years thereafter is paid about 32% of the total 12b-1 fee of .25% for the year for services offered. That's a pretty small retainer. I know I'm "on call" for clients concerning anything to do with the mutual fund(s) the client owns and I'm more than happy to be there for them....that's my job even if it pays no more than around 32% of the 12b-1 fee of .25.