How to Avoid These 15 Retirement Account Fees and Save Money

12b-1 Fees

Here’s one of the most important things to know before investing in mutual funds: 12b-1 fees are the annual marketing or distribution fees on some mutual funds, and they’re typically included in a fund’s expense ratio. Initially, 12b-1 fees were introduced to help investors by marketing a mutual fund to yield higher assets and lower expenses. However, some experts argue that 12b-1 fees can bring down your returns instead of improving your fund’s performance.

In September 2015, the Securities and Exchange Commission filed proceedings against First Eagle Investment Management, an asset management company that allegedly used investors’ mutual fund assets improperly for payments to cover “marketing and distribution of fund shares.” According to the Wall Street Journal, “First Eagle dipped deeper into funds’ assets than allowed under a plan known as the 12b-1 plan.”

First Eagle had to pay $25 million to reimburse shareholders, plus interest and a penalty of $12.5 million, Reuters reported.