Morningstar  has joined the chorus calling on the Securities and Exchange Commission to abolish 12b-1 fees. The “distribution” charge, as I pointed out in Wednesday’s column, was originally intended to help struggling funds cover their postage and advertising costs, but it has evolved into a back-door way of compensating brokers.

A better system, Morningstar’s Andrew Gogerty  says, would be to bill shareholders directly for their broker’s services, or for the costs of listing a given fund in a “supermarket” like the one run by Charles Schwab.  Gogerty writes:

 The 12b-1 fee is standard percentage-of-assets calculation, and it is not a monumental leap to transfer this calculation from the fund level to the shareholder-account level. In fact, fund investors already pay for some services at the account level, such as annual IRA fees. We don’t think it’s unreasonable that brokerage and supermarket service fees couldn’t be charged to investors in a similar fashion. Not only would it provide a more direct link between fees paid and services provided, but it would also increase the clarity of fund costs for investors.