July 19, 2007

I am a licensed insurance professional, mutual funds salesman and long-time member of the National Association of Insurance Financial Advisors.

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 I receive renewal commissions on the life and property/casualty insurance I sell. This trailing compensation is typically paid under a written plan adopted pursuant to SEC Rule 12b-1 which we are bound by contract and proper business practices to disclose.

The amount of this compensation is very 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%, or $25. Investors receive substantial value for these fees--in exchange for a small annual payment, they have access to me-- to answer their questions and address their concerns. Without me, my clients 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 don't believe this is your intention.

I understand this ruling was established in the 1980's to stimulate savings (still an important focus for lawmakers and all of us) and to help the newly-emerging mutual fund marketplace. While this investment vehicle is now a a clear success (!) I believe the elimination of 12b-1 fees would not be in the best interest of our nations' 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. And, of course, 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 these fees, I fear they would end up paying a much larger amount in other (hourly or asset-based) fees to receive the same service. Again, probably not your intent, but do you foresee another result?

Thank you for your consideration of my views on this subject.