Layered Fees

Finance a la shmoop.. what is a 12b1 fee what a clever name like why don't they give

normal names to these things like fund admin expense fee or just name it Bob [Document with Bob written at the top]

but they don't so you just have to memorize what they mean anyway

mutual funds had to bear enormous communications related expenses in the

pre computer-internet everyone has an email address era delivering gobs of [Mail man arrives at house]

paperwork snail mail to its customers it was enough expense to them that well

they frankly just hated doing it and did more or less anything they could to [Man licking envelopes]

avoid having to deliver you know dead trees so along came the investment

advisors act of 1940 which basically recognized that mutual funds did in fact

have expenses that were more than bonuses to the senior partners the 12b1

fee system allowed a fairly set and standard amount of fees to be charged to

customers so that a given mutual fund could recoup the money it had to spend [Fund statement document appears]

mailing annual reports and performance data and tax information and all kinds

of other things to its customers the 12b1 system was basically a

pass through set of charges such that the customer paid for her own paperwork

incentivizing mutual funds to actually do a good job communicating with their [Woman receiving a trophy on stage]

constituency and it let the little guy mutual funds compete against the big guy

mutual funds who already had all that infrastructure of course the biggest

winner out of this entire deal yeah it was the trees especially the ones who [Tree given a first prize award]

got in early on Google