Subject: File No. S7-15-10
From: Dominick Riolo, CFP

September 17, 2010

I am CFP and financial advisor that sells C shares. The vast majority of account in C shares are under $100,000.

When I offer mutual funds, clients are fully aware of A shares, and wrap fees as an alternative to C shares.

100 out of 100 times, these smaller accounts choose the C share. Why? They don't want to pay a four or five percent front load since they don't see themselves remaining in the same fund or fund family for more than three or four years. They perceive the flexibility of being able to move out of a C share fund after 12 months as a benefit to them.

Why not wrap accounts? The small investor can't tolerate writing a check out each quarter, or having it deducted from their account.... especially in a down market. As an advisor, I would constantly have to defend a quarterly fee with every down market. To avoid this, I am likely to put clients in very conservative (perhaps unsuitable) investments to reduce the risk of a negative quarter, or, if the end of a negative quarter is approaching, I might be inclined to take on more risk to try and erase a loss.
This is human nature at work

At the very least, I urge you to grandfather existing C share 12b-1 fees. Existing clients bought understanding the fee structure and are comfortable with it. Would they like to pay less... who wouldn't. But, you get what you pay for. All the work I do for "free" because of trails,
(i.e., settle an estate, review their 401(k), guide them through a mortgage application, help their kids fill out a FASFA college form, review shopping bags full of old statements telling them what to keep and what to shred, etc.) I would have to charge by the hour. Existing clients will balk at this because they've never been charged for all these ancillary services before.

Second, letting 12b-1 fees disappear after five years will also lead to churning clients accounts. It's bound to happen. Then what will this new rule solve?

Respectfully submitted by,
Dominick J Riolo, CFP