ShmoopTube

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

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

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

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mutual funds had to bear enormous communications related expenses in the

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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got in early on Google

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