(Dow Jones) A proposal to limit and shed more light on mutual-fund distribution charges could help rein in advisors who've been pushing higher-priced funds on clients. But some advisors say smaller investors may wind up unable to afford advice.

"It won't be particularly positive for the small investor, and I think that's pretty much universally the opinion of the people I've spoken to on this side of the desk," said John Bacci, president of Linthicum, Md.-based Foundation Financial Advisors Inc. The independent registered investment advisor has assets of about $75 million under management, and works with broker-dealer Commonwealth Financial Network.

The charges, known as "12b-1" fees, are deducted from a fund's assets to pay third-party advisors and other intermediaries for maintenance, sales and distribution. A recent proposal by the Securities and Exchange Commission would limit the cumulative sales charges, or sales loads, an investor pays and require clearer disclosure of them.

It would also enable broker-dealers to compete by charging fund sales charges they set themselves rather than uniform rates set by the funds.

A new limit on what advisors can be compensated through 12b-1 fees would encourage more of them to migrate clients from commission-based accounts, in which they're charged per transaction, to fee-based accounts, in which they're charged an annual fee, Bacci said. That's a direction that many advisors have already been moving.

The proposal will likely mean better communication of the fees and help rein in some advisors who've been "slinging C shares," or fund shares that typically charge higher distribution fees, Bacci said. "If this squeezes those kind of advisors a bit, then I think we're all cheering."

But some accounts are just too small to make the fee-based model practical, he said, adding that it's become steadily harder in recent years to service small accounts.

The average account size at his firm has doubled over the past five or six years, Bacci said. "I could manage 500 accounts at $150,000 or 250 at $300,000, and a large part of what we've been doing is tightening up that lower end, knowing that there would be a day when an advisor couldn't have 500, 600 or 700 accounts with lower balances like they did in the old days."

That's meant gently telling some smaller investors that "they'd be better off going in another direction," a difficult thing to do, he said.

Nonetheless, consumer advocates say some investors are now confused by fund distribution charges and that, with the proposed changes, they'd better understand what they're paying for.