March 3, 2004
Putting a clamp on ABUSIVE fees that agrandize those already reaping huge benefits at the top of the mutual fund company food chain may be appropriate. However, the 12b1 fees, to the extent that they are used to compensate many of us who struggle to survive financially with 5, not 6-10 figure earnings while doing the front-lines work of interfacing with and making personalized recommendations for the mom--pop clients of the investment world, are probably not the source of abuse you should want to be attacking. Maybe the structure needs to be changed to provide more transparency, i.e. right now the 12b1 fees collected may be being used to compensate financial reps, to pay for other marketing, or to enrich the fund company. The catch-all nature of the program does leave it as a source of potential abuse. However, as a professional doing my honest best to bring my intelligence, integrity, experience, and ethics to bear in a positive way to benefit my clients, and as one who struggles to make mortgage payments and kids college payments, etc., I DONT think taking away MY compensation is really what you want to be doing.
Clarity and disclosure on the compensation issues is a commendable goal. However, if the scions of do-it-yourself-via-mail-and-800#-and-internet succeed in making it financially impossible for in-the-flesh professionals who actually get to meet and know mom--pop clients to service them any longer, I dont see how its to their benefit. If we face-to-face financial professionals are not in the picture, these clients are left to their own devices to educate themselves to make appropriate decisions on their investments. Some will not even make the effort - this proposal wont help them. For that percentage who ARE willing to make the effort, taking their advice from regulators, columnists and other authors, and web-masters, none of whom are subject to the financial/compensation or educational/licensing/qualification disclosures we are, all without getting the individualized attention we provide, does not stike me as something that will be to clients benefit. If you drum we educated and licensed professionals out of the market and foster non-personal advice from a writer who has no qualification requirement in this electronic age, not even the de-facto requirement of having convinced a publisher to hire him or her and no oversight as to the advice being rendered or disclosure on compensation any possibilities for abuse HERE?, do you think that will really help the individual investor?