Subject: File No. S7-15-10
From: Brian Rayfield

August 12, 2010

As an advisor who provides ongoing financial advice and support to clients on all of their financial needs, in many cases I am compensated for my time and effort by the '12b-1' fees from mutual funds. This guidance is critical to many clients to keep them on track with their financial plans. If we expect individual investors to place their savings in volatile investments like our equities markets, many will need ongoing support and advice to stay on track. Many surveys and studies have confirmed that investor behavior often thwarts sound investment decision making and long-term planning. Steady ongoing guidance by an advisor helps keep clients on-track. I choose not to charge up-front commissions or commissions on transactions so that clients will have flexibility in their investments. I make it very clear to clients when clients are paying '12b-1' fees on an ongoing basis and that this is my compensation for providing continuing support. Also, this method of compensation best aligns the client's interests with the advisor. If the client's assets increase, the advisor's income can increase commensurately. Conversely, if the client's assets decrease, the advisor's income decreases. Mutual funds with up-front commissions put the advisor and the client at odds since the advisor is only compensated to 'Make the sale'.
If these '12b-1' fees were terminated or curtailed, advisors would be required to find other sources of revenue that were not aligned with client needs or would have to use different mutual fund share classes that have larger up-front commissions. Either way, advisors would not be able to afford to provide the invaluable ongoing support and guidance to clients that they currently offer.