From: Rick G. Wentz |
Dear Ms. Morris: I am a licensed insurance professional and mutual funds salesperson. I, along with many of my friends and family, are also mutual fund owners. I am extremely concerned with your current thoughts on eliminating 12b-1 renewals related to Mutual Funds and Variable Annuities. If your thoughts are actually enacted, there are sure to be more “Fee for Services” Representatives who will gladly assess far greater “Costs” to the public should your ideas become reality. I believe, due to personal observations of other Representative’s practices, that the 12b-1 fees reduce or eliminate “Churning” and other practices that may have tarnished the past reputation of this great industry. However well intentioned your thoughts, even if the original purpose for the fees has changed, the enactment of this new rule (or elimination of it) will hurt the investor personally and surely financially. I personally (ALWAYS) explain the fees and charges to each Mutual Fund and Variable Annuity client before a transaction ever takes place. I have always been taught, through Continuing Education classes and my N.A.I.F.A. membership, that this was the law, and a “Best Management Practice”. My client meeting and related discussion is always documented and the client signs/dates an acknowledgement of that meeting and the details of our discussion. I believe that is the route that would best protect the public; Full disclosure of all aspects of selling a securities product. If there is a problem that you see, and I am left unaware of, I believe the industry is already overregulated. I feel that perhaps more vigorous enforcement of offenders, with stiffer penalties, would be in order. I personally feel frustrated that every time there is any problem, the “regulators” increase the regulatory/paperwork burden on the Representatives that are already doing their job the way they are trained, educated, and licensed to do. If that is the case, I would prefer a zero tolerance policy for the practices causing the problem, and reward financially the representatives who choose the correct path in this industry. In my local area many Representatives are already “Fee-Based” as the 12b-1 renewals didn’t cover the cost of the annual reviews that clients want and need to stay on top of their portfolios, especially in a constantly changing economy and investment marketplace. Please don’t hurt the few remaining Registered Representatives, like myself, who choose to survive solely on the meager 12b-1 renewals offered to us by this rule. I do not want to be forced to consider charging my clients, who have become friends to me and my family, additional fees to continue providing quality service and sound advice as I have always done in the past. I would like you to consider the following: In return for providing ongoing service and continuing advice to my clients regarding their investments, I receive trailing compensation much in the same way that insurance agents receive renewal commissions on the life insurance policies they sell. This trailing compensation is typically paid under a written plan adopted pursuant to SEC Rule 12b-1. The amount of this compensation is relatively modest; on a $10,000 investment in a mutual fund's "A" shares, the annual "12b-1 fee" that is paid for providing ongoing service equals 25 basis points, or $25. Investors receive substantial value for these fees--in exchange for a small annual payment, they have access to a financial services expert to answer their questions and address their concerns. Without their advisor, investors would have nowhere to turn to (except for perhaps a stranger at the end of a 1-800 phone number) when they needed some reassurance in a shaky market or assistance in rebalancing their portfolios, understanding their investments and the investment choices available. I believe the elimination of 12b-1 fees would do considerable harm to those investors who need and want ongoing investment planning advice and counsel. A significant majority of my clients expect our office to be available and to respond quickly to a variety of questions regarding their investments. I have never received complaints from my clients about the small amounts they are charged for the services I provide to them. My clients expect me to be compensated for helping them achieve their long-term financial goals. If 12b-1 fees were eliminated, while the client might save a small amount in 12b-1 fees he or she would end up paying a much larger amount in hourly or asset-based fees to receive the same service. For these reasons, I urge the SEC to reject any proposal to eliminate or restrict the payment of 12b-1 fees to registered representatives for providing continued service to their clients. Thank you for your consideration of my views on this subject. If you would like to personally discuss this with me, please call me at (920) 457-1575. Thank you in advance for your help on this issue! Rick G. Wentz, FICF |