Mutual funds
Through our national network of registered representatives, Commonwealth offers a broad selection of more than 13,000 mutual funds. Companies for some of the mutual funds we sell participate in activities that are designed to help facilitate the distribution of their products by making our advisors, we believe, more knowledgeable about those companies’ funds, such as marketing activities and educational programs (including, but not limited to, attendance by fund representatives at Commonwealth conferences, one-on-one marketing, and due diligence presentations to our advisor).

In return for assistance in facilitating the activities described above, Commonwealth receives additional compensation, called revenue sharing, from these funds. These revenue sharing payments are in addition to commissions, annual service fees (known as 12b-1 fees), and other fees and expenses disclosed in a fund’s prospectus fee table. These revenue sharing payments, however, are paid out of the investment advisor’s or other fund affiliate’s assets—not from the fund’s assets—and therefore would not appear as an item in a fund’s expense table. No portion of these revenue sharing payments to Commonwealth is made by means of brokerage commissions generated by the fund.

It is important to understand that none of the revenue sharing payments received by Commonwealth are paid or directed to any advisor who sells these funds. Commonwealth advisors do not receive a greater or lesser commission for sales of mutual funds for which Commonwealth receives revenue sharing payments. Because Commonwealth’s advisors receive no direct increase or change in compensation from selling shares of one fund over another, we do not believe that they are subject to a conflict of interest based on the amount of compensation each advisor receives when recommending one fund’s shares over another’s. The marketing and educational activities paid for with revenue sharing, however, could lead our advisors to focus more on those funds that make revenue sharing payments to Commonwealth—as opposed to funds that do not make such payments—when recommending mutual fund investments to their clients.

Commonwealth does not maintain a "preferred" list of mutual fund families based on participation in revenue sharing that it promotes (exclusively on its website or through its advisors), but offers a selection of many funds.

The mutual fund families that participate in the revenue sharing programs described above are:

While the revenue sharing arrangements with each fund family may vary, each fund family may pay either a) up to 30 basis points (0.30%) of the gross amount of each sale; or b) up to 10 basis points (0.10%) of the gross amount of each sale, plus up to 6 basis points (0.06%) annually of the assets held at the fund family. For example, on a $10,000 transaction with a participating fund family, Commonwealth would receive a one-time $30 payment, or a one-time $10 payment, plus a $6 annual payment for the period during which the assets remain at that fund family.

Participating fund families may also be subject to certain minimum payments each year in conjunction with the program if minimum amounts of sales or assets are not met, and they may also make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year.

Some of the mutual funds we sell may also offset certain transaction costs that would otherwise be borne by a registered representative for those clients who choose to custody their assets with our clearing firm, National Financial Services LLC (NFS)—a wholly owned subsidiary of Fidelity Investments. These transaction charges are usually $15 per transaction in connection with each purchase of a mutual fund by a client, depending on the account and/or transaction type. We believe that this offset does not compromise the advice your advisor gives you.

Additionally, NFS offers a "No Transaction Fee" program with more than 1,200 no-load mutual funds. Participating mutual fund sponsors pay a fee to NFS to participate in this program, and a portion of this fee is shared with Commonwealth. None of these additional payments are paid to any advisors who sell these funds.

Variable insurance programs
Commonwealth also offers hundreds of variable insurance options and assists insurance sponsors with conducting marketing activities and educational programs designed to increase the distribution of these products. Commonwealth also receives revenue sharing payments from certain insurance sponsors. None of these additional payments, however, are paid or directed to any advisor who sells these products. In addition, Commonwealth advisors do not receive a greater or lesser commission for sales of variable insurance products from which Commonwealth receives revenue sharing payments.

Because Commonwealth’s advisors receive no direct increase or change in compensation from selling one product over another, we do not believe that they are subject to a conflict of interest based on the amount of compensation each representative receives when recommending one product over another. The marketing and educational activities paid for with revenue sharing, however, could lead our advisors to focus more on those insurance products that make revenue sharing payments to Commonwealth—as opposed to insurance sponsors that do not make such payments—when recommending insurance products to their clients.

While the revenue sharing arrangements with each insurance company may vary, each insurance company may pay either a) up to 30 basis points (0.30%) of the gross amount of each sale; or b) up to 10 basis points (0.10%) of the gross amount of each sale, plus up to 5 basis points (0.05%) annually of the assets held at the insurance company. For example, on a $10,000 transaction with a participating insurance company, Commonwealth would receive a one-time $30 payment, or a one-time $10 payment, plus a $5 annual payment for the period during which the assets remain at that insurance company.

Participating insurance companies may also be subject to certain minimum payments each year in conjunction with the program if minimum amounts of sales or assets are not met, and they may also make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year.

The following variable insurance companies participate in this revenue sharing program:

Variable universal life, universal life, and long-term care insurance programs
Commonwealth also offers variable universal life (“VUL”), universal Life (“UL”), and long-term care (“LTC”) insurance products and assists insurance sponsors with conducting marketing activities and educational programs designed to increase the distribution of these products. Commonwealth, in addition to receiving commissions on the sale of these insurance products, receives payments from certain insurance sponsors for marketing, training, and distribution support. None of these additional payments, however, are paid or directed to any advisor/insurance agent who sells these products. In addition, Commonwealth advisors/insurance agents do not receive a greater or lesser commission for sales of these insurance products from which Commonwealth receives revenue sharing payments.

Because Commonwealth’s advisors/insurance agents receive no direct increase or change in compensation from selling one product over another, we do not believe that they are subject to a conflict of interest based on the amount of compensation each advisor/agent receives when recommending one life insurance product over another. The marketing, educational, and distribution activities paid for with revenue sharing, however, could lead our advisors/insurance agents to focus more on those insurance products that make revenue sharing payments to Commonwealth—as opposed to insurance sponsors that do not make such payments—when recommending insurance products to their clients.

While the arrangements with each insurance company may vary, each VUL and UL insurance company may pay up to 6% on target premiums and each LTC carrier may pay up to 6.5% of the gross amount of each sale based on annual production.

The following insurance companies participate in this revenue sharing program:

Non-publicly traded products
Commonwealth, through its advisors, also offers several non-publicly traded products, including non-listed real estate investment trusts (“REITS”), limited partnerships (“LPs”), and 1031 exchange programs; hedge fund of funds; managed futures; tax credit programs; oil and gas programs; venture capital funds; and private equity funds. Consistent with prudent product approval practices, Commonwealth conducts or causes to be conducted a due diligence analysis of these products prior to making them available to the public through its advisors. In addition to receiving commissions on the sale of these products, Commonwealth receives due diligence and/or marketing allowance payments from certain sponsors. While the arrangements with each sponsor may vary, each product sponsor may pay a due diligence or marketing allowance fee of either a) up to 35 basis points (0.35%) annually on assets held at the sponsor or b) up to 200 basis points (2.00%) on the gross amount of each sale, depending on the product. None of these additional payments, however, are paid or directed to any registered representative who sells these products. In addition, Commonwealth advisors do not receive a greater or lesser commission for sales of these products from which Commonwealth receives revenue sharing payments. Because Commonwealth’s advisors receive no direct increase or change in compensation from selling one product over another, we do not believe that they are subject to a conflict of interest based on the amount of compensation each representative receives when recommending one non-publicly traded product over another.

Investment Adviser/Asset Management Programs
Commonwealth and/or its Advisors may receive reimbursements, marketing and distribution allowances, due diligence fees or other compensation based on deposits and/or assets under management directly from third-party asset manager program sponsors (collectively “Program Sponsors”) for the costs of marketing, distribution, business and client development, educational enhancement, and/or due diligence reviews incurred by Commonwealth and/or the Advisor relating to the promotion or sale of the Program Sponsor’s products or services.

Payments to Commonwealth Advisors
In addition to receiving asset-based fees in their capacity as an investment adviser or Solicitor, Commonwealth Advisors receive reimbursements or marketing allowances for marketing expenses and due diligence trip costs incurred by the Advisor.

Payments to Commonwealth Only
Consistent with prudent product approval practices, Commonwealth conducts or causes to be conducted a due diligence analysis of these Program Sponsors in making them available to the public through its Advisors. Additionally, Commonwealth receives distribution allowances, due diligence fees and other payments from certain Program Sponsors. While the arrangements Commonwealth has with each sponsor varies, a Program Sponsor may pay Commonwealth additional compensation for marketing expenses, distribution allowances, due diligence or other compensation of up to 13 basis points (0.13%) annually on deposits or assets held at the Program Sponsor. These additional payments are retained by Commonwealth, and none of these additional payments are paid or directed to any Commonwealth Advisor. In addition, Commonwealth Advisors do not receive a greater or lesser asset-based fee for providing investment advice or referrals of these Program Sponsors’ services as a result of Commonwealth’s receipt of these additional payments. Because Commonwealth’s Advisors receive no direct or indirect differential compensation for selecting one advisory program over another, we do not believe Commonwealth Advisors are subject to a conflict of interest when selecting a particular asset management program that makes additional payments to Commonwealth over a program that does not.

In all cases, such reimbursements, marketing allowances or other compensation will be paid to Commonwealth and/or the Advisor from the Program Sponsor’s own resources and not from client funds or assets. Such arrangements will have no impact on the fees being charged to clients by Commonwealth, the Advisor or the Program Sponsor. Depending upon the specific arrangement, payments may be based upon an annual, flat or level fee arrangement. Program sponsors may also opt to pay Commonwealth a quarterly fee based upon deposits or assets under management and/or some combination thereof on an annual basis based upon certain allowable assets.