Get Our Blog
  • Eric Hahn

Measured Use of 12b-1 Fees Will Continue

Advisers will certainly have heard questions from clients about the use of 12b-1 fees moving forward under the new DOL fiduciary rule; what are the experts saying?

Some experts believe retirement plan sponsors shouldn’t offer any mutual funds with 12b-1 revenue-sharing fees in their investment lineups; on the other hand, other experts maintain that by crediting revenue back to the plan, funds with 12b-1 fees can actually cost less than those without such fees.

In either case, given their strict fiduciary responsibility, defined contribution (DC) plan sponsors have a duty to compare funds with these fees to those without—and to decide which fits best for their participants’ individual circumstances.

According to data from the Investment Company Institute, retirement plans have been moving away from funds with 12b-1 fees; in 2015, 16% of plans offered funds with 12b-1 fees, down from 29% in 2010.

The trend towards the levelizing of compensation, combined with the 2012 fee disclosure rules and the pending fiduciary rule make a strong case for why plan sponsors should not offer funds with 12b-1 fees, believes Chad Parks, CEO and founder of Ubiquity Retirement and Savings in San Francisco. “Adviser fees should be known and signed off contractually, not paid through the mutual fund,” Parks says. “Third-party administrator and recordkeeping fees should also be known and negotiated as hard-dollar costs. I see no reason why a plan sponsor would use a 12b-1 fee.”

Eric Endress, vice president and senior investment consultant at CBIZ Retirement Services in Cleveland, agrees. Even prior to the Department of Labor’s (DOL’s) 2012 fee disclosure rules, there was a trend among retirement plans to move towards funds with institutional share classes with no revenue-sharing, he says. “We are seeing a best practice among our clients to move to all institutional share classes and add on the fees for outside services such as recordkeeping and advisory services separately, so that there is clear transparency to the participants,” Endress says.

Brian Menickella, managing partner and head of the financial services division at The Beacon Group of Companies in King of Prussia, Pennsylvania, is adamantly opposed to retirement plans using funds with 12b-1 fees. “The current system under fire by the Department of Labor and its fiduciary rule is a system created by the broker/dealer establishment to disguise how and how much they get paid,” Menickella says. “There is no reason for revenue sharing. There are simpler methods for 401(k) plans to display costs as line items for every vendor. If, following the fiduciary rule, a plan sponsor elects to work with a broker/dealer on a commission-based 12b-1 revenue-sharing platform under a best interest contract (BIC) exemption, they face additional risks from the DOL.”

#repost #12b1

Portfolio &
Money Management


Contact Us

4 Landmark Square - Suite 315
Stamford, CT 06901





ADV Part 2 | ADV Part 3 (CRS) Privacy Policy | Cyber Security Policy | Business Continuity Plan Client Secure Upload


Check the background of this firm on FINRA’s BrokerCheck.           


NS Capital LLC is a Registered Investment Adviser. NS Capital and its representatives are in compliance with the current filing requirements imposed upon registered investment advisers by those states in which NS Capital maintains clients. NS Capital may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. NS Capital’s web site is limited to the dissemination of general information pertaining to its advisory services, and through the NS Blog access to additional investment-related information, publications, and links.  Accordingly,  NS Capital’s web site on the Internet should not be construed by any consumer and/or prospective client as NS Capital’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.  Any subsequent, direct communication by NS Capital with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of NS Capital, please contact the SEC or the state securities regulators for those states in which NS Capital maintains a notice filing.  A copy of NS Capital current written disclosure statement discussing NS Capital’s business operations, services, and fees is available from NS Capital upon written request. NS Capital does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to NS Capital’s web site or incorporated herein, and takes no responsibility such content.  All such information is provided solely for convenience purposes only and all users should be guided accordingly.


Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by NS Capital), will be profitable or equal any historical performance level(s).


Certain portions of NS Capital’s web site (i.e. newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, NS Capital (and those of other investment professionals) positions and/or recommendations as of a specific prior date.  Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s).  Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from NS Capital, or from any other investment professional. NS Capital is neither an attorney nor an accountant, and no portion of the web site content should be interpreted as legal, accounting or tax advice. 


Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if NS Capital is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of NS Capital by any of its clients.  Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Each client and prospective client agrees, as a condition precedent to his/her/its access to NS Capital web site, to release and hold harmless , NS Capital’s officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from NS Capital.

© 2020-2025 NS Capital LLC. All Rights Reserved.