E*Trade Financial Ends Rebates of 12B-1 Fees
August 16, 2007
For the past few years E*Trade has promoted the 50% rebates of 12B-1 fees they had earned from mutual fund companies. 12B-1 fees are paid annually out of a mutual fund's assets and directly effect the return to investors. Although 12B-1 fees are typically associated with "loaded funds", no-load funds can charge a 12B-1 fee of 0.25% or less and still be marketed as a no-load fund. While the offer by E*Trade was certainly better than that offered by most brokerage firms on mutual funds for funds with 12B-1 fees, studies have shown that investors are still better off in a true no-load fund or a fund in which 0.00% of the assets go to 12B-1 marketing and distributuion fees.
The e-mail to customer of E*Trade reads in part:
Thank you for participating in the E*TRADE Mutual Fund Cashback Program.
The original version of this program started back in 2003, and since then we have been able to provide our customers with over $8,481,528.74 in cash rebates.
No other brokerage company in the industry has ever done anything like it and we're very proud of what we were able to achieve.
But now it's time to develop new and even better ways to provide value to our customers. So we will be ending the program as of November 30, 2007.
All of your eligible mutual fund positions will continue to accrue rebates for the period June 1, 2007 through November 30, 2007. The final payment from the Program will be made by December 31, 2007
E*Trade customers will be anxiously awaiting the new ways that they will see value and if it could possibly be better then cash rebates. The bigger question for brokerage firm customers though is - Will fees, commissions, and hidden expenses increase further eroding brokerage firm investor returns?
