March 1, 2004
I have been reading that you are considering doing away with 12b-1 fees in mutual funds. Those fees are what pays for my ongoing reviews and meeting with my clients. While I charge an hourly fee to people just seeking financial advice, and have some clients paying 1 of assets to manage no load funds, most of my work is done with funds paying a 12b-1 fee. I find it cheaper for my clients to pay an up front sales charge with a good breakpoint and then never to have to pay another sales charge or outside fee again.
Most of my clients are in American Funds where the internal fees run .60 to .80 including the 12b-1. The 12b-1 pays for me to review their accounts and meet with them several times a year. If I use no load funds and charge 1 of assets to manage the account their fees run much higher yearly. If I hire an independent money manager who usually charges my clients 1 of assets and charge an additional .50 for my fee, the fees run 1.5 of assets.
You might consider getting these fund companies to lower their internal fees. If the American Funds can charge such low fees, other funds can do likewise.
Thank you,
Marilyn S. Steinmetz, CFP