August 8, 2007
Nancy,
Dear Ms. Morris:
For the last 26 years I have been a licensed insurance and mutual funds representative.
For providing my advice and service to my clients regarding their investments, I receive a trail commission in the same way that I receive renewal commissions on the life insurance policies I sell. This trailing compensation is typically known as 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 a representative’s help, clients would have no personal contact who knows their goals or their individual situation in a volatile market.
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 me 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. While the client might save a small amount if 12b-1 fees were eliminated, they 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.
Sincerely,
David Hellman
Ozark National Life
NIS Financial Services