A new survey conducted by the Investment Company Institute, the mutual fund industry's main trade group, shows that 12b-1 fees have grown significantly since 1980, when the Securities and Exchange Commission instituted them. The fees, which funds charge investors to compensate financial advisers who provide investors with financial advice, have overtaken front-end sales loads.

As of 2004, 12b-1 fees totaled $10 billion. "Over the past 25 years, as fund assets have grown 60-fold, total 12b-1 fees have registered strong growth," said Brian Reid, ICI chief economist. Compared to this, the typical front-end sales load has dropped from 8% in 1980 to 5% in 2004, Reid noted.

Among its key findings, the ICI study found that 92% of 12b-1 fees that mutual funds charge investors go towards compensating financial advisers and other intermediaries for assisting investors before and after purchasing funds. Only a small fraction of the fees are allocated to advertising and promotion, according to the study.

"For the vast majority of investors to reach their long-term investment goals, the advice and ongoing services of professional financial advisers is of great value," said ICI President Paul Schott Stevens."

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