From: Bernard Smit |
I am writing to express my concerns about the SEC's ongoing review of Rule 12b-1. Middle class Americans need the continuing service, guidance and support that are provided by independent financial advisors to achieve their stated investment goals. 12b-1 fees provide a tax efficient means to support the continuing service which these clients require for successful investing. I can not afford to service 30 year old mutual fund accounts if I am not being compensated to do so. Meeting with clients, processing account registration changes when a spouse dies, mailing reviews, calling them on the phone, guiding them through all kinds of economic and tax logistics. All of that takes time and costs me money. If you eliminate my compensation, how does that serve mutual fund investors? Would you prefer that financial advisors make poor recommendations to generate commissions? Would you prefer that financial advisors recommend other types of products or platforms that pay them to service clients. We have over 800 mutual fund accounts that have been on the books for over 20 years. These clients have paid ZERO in commissions, sales charges or transaction fees since their original purchases over 20 years ago. I would say this has been a big win for the clients. I'm scratching my head as to why you'd consider alterning this winning format. Should you eliminate 12b-1 fees, I will not service any of these clients unless they pay me by the hour. How do they win there? Do you really think that the mutual fund companies will reduce their management fees by the amount of the 12b-1? Not likely. So then the clients pay me hourly fees and STILL PAY THE FUND COMPANIES THE SAME FEES. Please think about this issue. It Does not and will not benefit investors. The benefits of 12b-1 fees are numerous and include: .Expanding Investor Choice - The multiple share classes made possible by Rule 12b-1 give investors choices by providing them with options in how they pay their financial advisor. The flexibility offered by Rule 12b-1 allows financial advisors to tailor a portfolio to their client's specific needs. .Supporting Financial Literacy - Mutual funds send their investors monthly statements, confirmations, prospectuses, annual reports, and other materials. Financial advisors serve the vital role of educators by helping investors to make sense of these essential materials. 12b-1 fees are the compensation financial advisors receive for these efforts. .Managing Client Expectations - We all know the common mistakes investors make; buying high and selling low, chasing past performance and harboring unrealistic expectations. 12b-1 fees provide financial advisors with compensation to manage their client's expectations and protect them from falling into this common investor traps. .Insuring Small Accounts Receive Service - Investment advisory services are simply out of the reach of many small account holders. Financial advisors must have another means of being fairly compensated for servicing these accounts. 12b-1 fees provide the mechanism to insure small investors receive the support and service they need to achieve their financial goals. .Subsidizing Additional Services - Independent financial advisors offer their mutual fund clients a variety of additional services including: consolidated account statements, periodic portfolio review meetings, quarterly newsletters, cost basis research, preparation of tax returns, and consulting on other financial decisions. These important services are made possible by the subsidy 12b-1 fees provide. In conclusion, while it is reasonable to review the investor benefits of 12b-1 fees, it is obvious that the repeal of 12b-1 has the potential to cause great harm to thousands of individual investors who need the support and service of a trained financial advisor. As a result, I urge the SEC to allow Rule 12b-1 to continue to support my efforts to provide needed financial services to middle class American investors pursuing their financial goals. Sincerely, Mr Bernard Smit
|