April 9, 2004
Comments in Three Areas - review of proposed rules, need for disclosure, and elimination of 12b1 fees:
Review of Proposed Rules - I feel these rules demand more time for review, as they easily exceed 50-100 pages, and I feel the deadline should be extended
Need for Disclosure - I support all forms of disclosure, and I have required my clients to sign written disclosures regarding fees, sales charges, etc for nearly 20 years -- disclosures, however, should be kept SIMPLE -- so that the average person can easily understand them -- if disclosure rules are TOO complex, it actually lessens the chance that the average investor will READ AND UNDERSTAND them.
12b1 Fees - under NO circumstances should these fees be eliminated These fees, while very small for each individual client, are the only means of compensation which allow me to provide ongoing support to those clients who have not invested in many years.
When one of my clients recently passed away, I assisted his 73-year old surviving spouse to re-register accounts, do a complete tax plan including planning for increased taxes now that she will be filing as Single, met with her grown children to review her plans, etc, etc, etc. All told, I invested 12 hours AT NO CHARGE for a client who has not invested money with me in six years.
The 12b1 fees I receive from her accounts would not pay for one hour of my time, but I always offer these services at no charge because the 12b1 fees I earn from ALL clients allow me to provide WHATEVER support ANY of my clients need.
If 12b1 fees were eliminated, financial planners would be forced to charge unaffordable fees for the services that everyday people like my clients need, or restrict their services to only upper-income clients who have many more options for financial advice.
By the way, the client I refer to above is a partially blind housewife. Her deceased spouse used to drive a street cleaning machine for a local city govenment at what many people would consider to be very low wages. The last thing she needs, right after her husband passes away, is to have her financial advisor abandon her, or charge her 500-1500, to help her cope with the compexities of financial planning, income planning or tax planning.
What she needs is what I gave her -- someone who would drop everything and help her take care of EVERYTHING -- without charging her 75-200 per hour for the privilege.
12b1 fees are absolutely essential to allow competent financial planners to provide a high level of ongoing services to the people that need it most.