All right, then, thanks for the feedback. I'm really not trying to sound important, but from experience I know I can be too abstract sometimes. So thanks.

My educational background is pretty unique and specialized, it might be giving too much personal info for an internet forum - that personal info accretes, you know.

But I'm serious about my point. I was reading Nick Murray years ago and have heard him lecture - while I don't personally like the man, he is the main force for some bigger picture thinking in this industry.

And while it may be fun to argue, how many times can you make a case for or against annuities?

A small metaphor to the obsession with investment vehicle mechanics and advisory platforms: if you turn off your car a/c, you won't save the earth from global warming, you are just capturing wasted energy (as long as the windows are rolled up to cut wind resistance).

I just like to shake up the playing field a little for discussion - a big interest in this industry right now is us, advisors, as " life coaches". Duh. What does that have to do with the price of a mutual fund, especially since we can all offer ETFs or whatever alongside whatever we want?

Part of this involves the primacy and power of the relationship with Mr. client - a great untapped dynamo of energy and creativity for us here.

Okay, I'm going to lighten up and just go now to keep my tee time with him. Practice what you preach.

[quote=GolFA]

And while it may be fun to argue, how many times can you make a case for or against annuities?

[/quote]

That's the beautiful part about this business, to use an annuity largely depends on the situation of our client.  They work in some instances and do not in others.  That's why we have the 405 rule.  Part of the problem is that banks tend to ONLY use annuities for ALL solutions.  That's like only having a screwdriver in your toolbox.  The net effect is that everyone will get screwed, regardless if they need it.

[quote=GolFA]I get your technical points, that stuff is pretty obvious
and been hashed over quite a bit here. A lot of reps forget that we are
first and most importantly in the personal service business. We the
reps should stick together more as professionals, since the profit of
service and product providers is extracted from our labor, yet we
continuously joust each other about relatively unimportant technical
issues which divide us further and support the sectarian interests of
entities that don’t even have personal relationships with (our)
clients. [/quote]



Great post!  We all want too succeed.  There is room for
everyone.  But it the fire in our passion dies we will become
CPA’s, and make 50% less per year for our families and charities. 
Lets keep it up, but be objective!!!

Thanks for reflecting and building on that. At the risk of sounding sentimental, you could say our industry is a diaspora controlled by self interested (manufacturers) and reinforced by compulsive thinking (reps) - but the power unleashed from a single atom ( the bond between advisor and client) could change our world. It's just a problem of raising awareness.

Yep, there is room for everyone, even Bobby.

12b1 fees are not expected to go away or materially change any time soon.

12b1 fees are not expected to go away or materially change any time soon.

Thank you for that..

Those who believe 12b-1 fees will be preserved should not, perhaps, feel so comfortable.

A possible fatal blow occurred to 12b-1 fees at the June 19, 2007 SEC Roundtable Discussion on 12b-1 Fees. With all five commissioners looking on, Consumer Federation of America’s long-time consumer advocate, Barbara Roper, raised the issue as to whether payment of 12b-1 fees to broker-dealer firms and their registered representatives violated the Investment Advisers Act of 1940 (IAA).  After many speakers during the day discussed the ongoing advice provided by broker-dealers to customers, funded by 12b-1 fees, Ms. Roper noted that such advice appeared to not be "incidental advice" permitted under the broker-dealer exclusion from the definition of "investment adviser" found in the IAA. Moreover, payment of 12b-1 fees looked very much like payments to broker-dealers under fee-based accounts, and hence "special compensation," which payment arrangement was recently struck down by the District of Columbia U.S. Court of Appeals.  Furthermore, some forum participants observed Ms. Roper briefly discussing the issue with three commissioners immediately following the forum's conclusion.

Written comments submitted to the Commission by this commentator on June 18, 2007, and available on the SEC's website, explain why payment of 12b-1 fees to broker-dealer firms often violate the IAA. Brokers and dealers are not subject to the "fiduciary status," comprehensive disclosure, and other requirements of the Investment Advisers Act ("IAA") where their investment advice is (1) "solely incidental to the conduct of [their] business as a broker or dealer," and (2) the broker or dealer "receives no special compensation therefor." 15 U.S.C. § 80b-2(a)(11)(C) (2000).  However, as was made clear from many comments submitted from securities industry representatives and individual registered representatives, 12b-1 fees are often utilized to compensate broker-dealer firms for a wide range of ongoing advisory services which are not directly connected to a securities transaction. Even the NASD recently acknowledged that 12b-1 fees were not "transactional sales charges," but rather ongoing "assets under management" relationship compensation, in a comment letter dated April 19, 2007 to the SEC regarding Regulation R. While some 12b-1 fees may be utilized for legitimate purposes, to compensate broker-dealers for the actual costs of service (acting as custodians, providing prospectuses and annual reports to clients, etc.), it was clear from the many comments submitted that many broker-dealers utilized a substantial portion of both the (NASD-maximums) 0.25% annual "service fee" and the 0.75% annual "asset-based sales charge" to compensate registered representatives for ongoing "investment advisory" services – which are only permitted under the IAA.

Will powerful advocates such as the Financial Planning Association, Consumer Federation of America, Fund Democracy, the Public Investors Arbitration Bar Association, and state securities regulators (through the North American Securities Administrators Association), again band together to challenge certain 12b-1 fee payments as impermissible under the IAA? These organizations successfully challenged the SEC’s broker-dealer fee-based accounts rule (a.k.a. the "Merrill Lynch Rule") in court, and the SEC recently decided not to appeal the U.S. Court of Appeals decision which overturned that rule.  Broker-dealer firms are struggling to adjust to the elimination of fee-based brokerage accounts (which now possesses an October 1, 2007 deadline under an extension granted by the U.S. Court of Appeals.  Hence, given all of the current disruption in the broker-dealer industry, these associations are likely to wait for SEC action on 12b-1 issues.  However, any rulemaking which either preserves, curtails or eliminates 12b-1 fees is likely to be very closely scrutinized.

Should the SEC repeal 12b-1 fees, or limit them substantially, industry observers hope for a very long transition period.  Noting that thousands and thousands of registered representatives depend upon 12b-1 fee income for a substantial portion of their personal income, a hoped-for transition period of at least a year, if not longer, would be desireable.

I would like to stress that no one wants to put good financial advisors out of business.  However, change is occurring within the financial services industry.  Fiduciary status is being applied more and more - if not by the SEC, than under state law (several recent court decisions apply fiduciary status to "financial planners" and others who represent themselves as "investment experts" or who actually undertake financial advisory activities.)  Prudent RRs, who rely upon 12b-1 fees as a source of compensation, may desire to proactively undertake efforts to change their business model.  For example, if the RR has not already achieved IAR status (investment adviser representative), and is not a CFP (or one of the other handful of designations, the attainment of which negates taking an exam), then perhaps studying for the Series 66 exam is in order.

I hope this added perspective helps.  Good luck.

ROn don’t you think they will just change the name to shareholder servce fee and put it on the statement as a cost or fee. I do. I am fine with it too.

In reply to "Bankrep1" - whatever "12b-1 fees" may be called, it does not matter.  If 12b-1 fees are utilized to compensate registered representatives for providing ongoing advice to the client, then they constitute "special compensation" for "non-incidental advice" - and the BD exclusion from the application of the IAA does not apply.

In other words, if it walks like a duck, talks like a duck, quacks like a duck ...

No, I don't think the SEC will just rename 12b-1 fees as "service fees" and require more disclosures.  The SEC has suffered a lot of black eyes recently.  The language of the FPA vs. SEC decision on fee-based brokerage accounts provides added clarity to the limited scope of the BD exclusion.  Also, when Consumer Federation of America spokesperson Barbara Roper raised this issue at the June 19th forum on 12b-1 fees, one commissioner is reported to have leaned over to another and said, "It looks like she caught them (BDs) speeding."

I suggest that RRs who rely heavily on 12b-1 fees start considering another business model.  Change is coming.  It's hard to ignore the duck quacking.  If you don't like the fact that change may occur, or are in denial, I suggest the short read, "Who Moved My Cheese?" as a starting point.  Good luck in the future, as you endeavor for a good business model in which to serve clients and provide a good living for you and your family.

[quote=Ron A. Rhoades]

In reply to “Bankrep1” - whatever “12b-1 fees” may be called, it does not matter. If 12b-1 fees are utilized to compensate registered representatives for providing ongoing advice to the client, then they constitute “special compensation” for “non-incidental advice” - and the BD exclusion from the application of the IAA does not apply.

In other words, if it walks like a duck, talks like a duck, quacks like a duck …

No, I don’t think the SEC will just rename 12b-1 fees as “service fees” and require more disclosures. The SEC has suffered a lot of black eyes recently. The language of the FPA vs. SEC decision on fee-based brokerage accounts provides added clarity to the limited scope of the BD exclusion. Also, when Consumer Federation of America spokesperson Barbara Roper raised this issue at the June 19th forum on 12b-1 fees, one commissioner is reported to have leaned over to another and said, "It looks like she caught them (BDs) speeding."

I suggest that RRs who rely heavily on 12b-1 fees start considering another business model. Change is coming. It’s hard to ignore the duck quacking. If you don’t like the fact that change may occur, or are in denial, I suggest the short read, “Who Moved My Cheese?” as a starting point. Good luck in the future, as you endeavor for a good business model in which to serve clients and provide a good living for you and your family.

If Mr. Rhoades is accurate in his letter to the SEC, it makes sense why EDJ is asking all reps to get their 66.

Change is coming. It might be a year or two, but it seems likely we will all be fee based, if the regulators have their way.