Ask a broker why 12b-1 fees exist and there will be a variety of answers: they cover marketing and distribution costs; processing and record-keeping costs in a 401(k) plan; payment for brokers; and sale of fund shares.

The word brokers often leave out is: profit.

"The purpose of these fees is to offset the marketing and distribution costs incurred by mutual fund companies," said William T. Baldwin, the chairman of the National Association of Personal Financial Advisors, a professional association of fee-only financial advisers, in a press release. "However, when you peel back the layers, you see that some mutual fund companies are making a profit on 12b-1 fees. Fees associated with investments must be treated like an 'open book' that is easily understood by all potential investors. Without clearer disclosure, consumers may not be able to make the most educated decision possible."

"Distribution fees," the regulatory term used to describe 12b-1 fees, "actually pay for a grab bag of services — not just distribution," said Mercer Bullard, the president and founder of the mutual fund shareholder advocacy organization Fund Democracy, and senior adviser for the financial planning firm Plancorp Inc., in a recent commentary for Morningstar.

Another issue that has arisen, Bullard said, is that funds that are closed to new investors are still being charged distribution fees even though no new shares are being distributed.

This is partly because there are administrative services on funds even after a fund is closed. In addition, 12b-1 fees are "service fees," which pay brokers for their ongoing relationship with shareholders.

Critics of 12b-1 fees say the reasons for the fees should be clearly stated, and it should also be clear whether or not fees are being charged. As it stands now, some no-transaction fee, or NTF, funds are misleading. "Schwab, Fidelity and other supermarket sponsors advertise fund options as no-transaction fee funds, in contrast with funds available through their supermarkets that trigger a charge with every purchase of fund shares," Bullard said.

The reason supermarket investors do not pay transaction fees on these no-fee funds, though, is because Schwab and Fidelity are paid by the funds through 12b-1 fees.

"These fees are paid by fund shareholders, of course, so they are ultimately paying the same fees as shareholders who buy transaction-fee funds," said Bullard, who once was assistant chief counsel at the Securities and Exchange Commission.

"An NTF fund is actually a transaction-fee fund whose transaction fees are buried in the fund's 12b-1 fees. Nonetheless, the SEC allows supermarkets to use the NTF label and the confusion of 12b-1 fees to persist."

Supporters of 12b-1 fees say these charges, like the annual fees of registered investment advisers, prevent abuse in the industry.

"The brokerage industry needs 12b-1 fees just as RIAs need their annual fees," said Richard Bryant, the president of Capital Investment Cos. of Raleigh, in a recent phone interview.

"If brokers don't get paid through 12b-1 fees, I have a feeling that a broker will figure out a way to get paid."

Bryant said that 12b-1 fees allow the broker to get paid for his supervision and constant advice. If 12b-1 fees are eliminated, there would be a lot more churning, he said, referring to the practice of charging per transaction, which encourages moving clients' money even when it's not best for the client.

"Churning can breed an unhealthy environment," Bryant said. "I think the 12b-1 fees helped curtail this practice."

Those pushing for greater transparency might soon be helped by a key player in Washington.

For months SEC Chairman Mary Schapiro has been talking about tackling 12b-1 fees. In a February speech in Washington, Schapiro said there should be more transparency around what the fees, which can be as high as 1%, are actually being used for. NAPFA agrees.

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