From: Penny K Righthand [mailto:prighthand@ft.newyorklife.com] Sent: Thursday, April 29, 2004 12:22 PM Subject: s7-09-04

Sirs

When I buy a car I know I am going to have to pay for service to keep it working right. I would never expect to get free service for the life of the car. Even when the dealer tells me I'm getting "free" service for a while, we all know that service cost is built into the price of the car or warranty. The dealer is compensated for providing the service.

Most investors need ongoing advice about their mutual fund purchases. They expect to be able to turn to the person who led them to their mutual funds. As their representative, I need to be compensated for this ongoing service. 12-b-1 fees are one way to compensate me.

For some reason, life insurance agents and registered reps are expected to provide lifetime service for free to people who buy their product. These products, contrary to popular belief, require a lot of service over the years. It is entirely proper to have a way to compensate those of us who provide that service.

I believe your concern with "directed brokerage" is slightly off the mark.

Consider that there are hundreds of fund families available to the public.

The average consumer doesn't know how to pick a fund or what's different from one to the other. It is our job to direct our clients to appropriate investment vehicles. It is also impossible for every representative to be intimately knowledgeable about every fund and fund family. So everyone becomes familiar with a few of these, and tends to use them more frequently than others, as long as they perform well. This can be beneficial to the client.

The fund families also encourage the rep to keep large sums of a client's funds in one family by offering discounts on loads, the more money that stays with a particular family. THIS can be a problem because, as a representative, I need to provide diversification for my client. One fund family may not provide the best fund in every category, yet if I put $1m of a client's money in one family, he can pay NAV for A Class funds. If I put $750,000 in one family and $250,000 in another, the client will have to pay a bigger load.

To make it easier for me to better serve my clients, I should be able to divide their funds appropriately without their being penalized, and I should be compensated for doing a good job for my client.