From: Casey Cleveland [mailto:CCleveland@royalaa.com] 

Sent: Wednesday, March 16, 2011 2:51 PM 

To: EBSA, E-ORI - EBSA 

Subject: Public Hearing on Definition of Fiduciary

This is to express my grave concern over the potential unintended consequences of the proposed 

changes to Individual Retirement Accounts.

  

As I understand it, under the new ruling, commissions and 12b1 training compensation could not 

be paid in IRA accounts. My concern is this ruling would block access to quality advice for 

millions of small investors. And also may encourage churning of accounts. IRA’s make up a 

significant percentage of most investment advisor client’s accounts and therefore will dramatically 

impact the investment advisors business. 

12b1 fees, while initially not intended to, are a source of ongoing compensation to the advisor to 

pay for continued support and monitoring of the account. If this is eliminated from IRA accounts 

this would have an enormous impact on the financial services industry. In our firm we try to 

provide the best advice we can to our clients we can both at the time of initially investing the 

funds, but also (and probably more importantly) throughout the clients lives. 

It is my belief that if 12b1 fees are eliminated advisors will be forced to drop many clients who 

do not have large enough accounts to be economically feasible to manage. The clients are hurt 

in that they now are in situation where they must invest on their own. In an increasingly volatile 

world this may have dire consequences to these investors and their ability to retire (and it is also 

possible that volatility could be increased further by having more inexperienced investors making 

decisions on their own). 

I also believe that there will be a portion of advisors that will be searching for a way to stay in 

business and may end up looking for additional commissions to compensate and churning 

accounts may become even more of a concern. Churning and additional commissions would 

have a significantly larger impact to the investors bottom-line than 12b1 fees currently have. 

Investors who want advice need to have the ability to find advisors to help them. Those advisors 

need to have the ability to earn a living so that they may continue to provide this service to their 

clients. And having several different business models to work from including fee only, fee based, 

commission (and that would include the ongoing income of 12b1 fees) provide advisors the 

ability to provide their clients a valuable service at a reasonable fee. 

I therefore implore you to either allow 12b1 fees to continue in their present form or allow for 

investment companies (mutual fund firms) to compensate advisors on an ongoing basis in a 

similar fashion as has been done for years. The potential consequences of no advice to 

Americans given the state of the markets worldwide, complex rules involved as well as the 

condition of state, federal and corporate pension plans is too great to overstate. 

Sincerely,

Casey Cleveland, CFP®, ChFC® 

Partner

CGC Financial Services LLC 

5 Centerpointe Dr Suite 270 

Lake Oswego, OR 97035 
(503) 670-1958 

ccleveland@royalaa.com

  

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