Subject: File No. S7-25-99
From: John S Putnam
Affiliation: Registered individual

September 21, 2004

The following comments are my own opinions and not the opinions of my firm or of any association I may be a member of.
I began in this business in 1967. At that time one firm was offering a wrap fee of 3. I felt that it was the most appropriate way to charge for the services of a broker and began a program to do that at that time in my own firm. Later when negotiated rates came into being it again became reasonable to experiment with different ways for charging for the multitude of services, handholding, financial planning and advice that one gives to a client. An investment advisory fee as I understand it under the Advisory Act is a separate fee for providing just investment advice.
Many RIAs have little knowledge of or feel they need to pay any attention to the other emotional, economical, and long term planning needs of an individual. They feel their job is merely to run the money in accordance with the objectives they have been given by the client or the broker introducing the account. Having the ability to charge for our services with a negotiated fee allows the client and the registered representative to determine just what those services are worth and pay for them rather than rely on how active the market happens to be during a period of time. It also dispels any issues of whether trades are being done merely to create commissions.
While some have questioned whether people actually earn their fees, I would say that the fees are clearly known by both sides and if the client does not believe he is getting value for what he is paying then he has the right to cancel or change the agreement, not unlike the retainer arrangements that attorneys have in place.
Therefore, I think the arguments for retaining this alternative method of charging for a brokers services are persuasive. To remove this alternative would lessen the competition in our industry and make it more difficult for a client to have a clear sense of what he is going to pay for the services he receives.