DISCLOSURE: REVENUE SHARING

Information on Revenue Sharing, Commonwealth's Mutual Fund and Insurance Programs, and Related Compensation

MUTUAL FUNDS

Through our national network of registered representatives and financial advisors (together, "advisors"), Commonwealth offers a broad selection of more than 19,000 mutual funds. Some of the companies that advise or distribute the mutual funds that we offer engage in activities that are designed to help facilitate the distribution of their products; some of these companies assist our advisors in becoming more knowledgeable about their funds by engaging in marketing activities and offering educational programs (including, but not limited to, attendance by fund representatives at Commonwealth conferences and events, one-on-one marketing, and due diligence presentations).

In return for assistance in facilitating the activities described above, Commonwealth receives additional compensation, called revenue sharing, from the funds’ advisers or distributors. These revenue-sharing payments are in addition to commissions, annual service fees (known as 12b-1 fees), and other fees and expenses disclosed in the fee table in a fund’s prospectus. These revenue-sharing payments, however, are paid out of the investment adviser’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 is paid or directed to any of our advisors who sell mutual funds to their clients, and our advisors do not receive additional compensation for sales of mutual funds whose affiliates make revenue-sharing payments to Commonwealth. Because Commonwealth’s advisors receive no direct increase or change in compensation for selling shares of mutual funds whose affiliates make revenue-sharing payments to Commonwealth, we do not believe that they are subject to conflicts of interest arising from revenue-sharing payments to Commonwealth. The marketing and educational activities paid for with revenue sharing, however, could lead our advisors to focus more on those funds whose affiliates make revenue-sharing payments to Commonwealth—as opposed to funds whose affiliates do not assist advisors in becoming familiar with their funds—when recommending mutual fund investments to their clients.

Commonwealth does not maintain a "recommended" list of mutual fund families based on participation in revenue-sharing arrangements, but offers a selection of many funds.

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

  • AB
  • Allianz Global Investors
  • American Funds
  • BlackRock
  • Columbia
  • Deutsche Asset
  • Eaton Vance
  • Federated
  • Fidelity Advisor
  • Franklin Templeton
  • Goldman Sachs
  • Invesco
  • Ivy
  • John Hancock
  • J.P. Morgan
  • Legg Mason
  • Lord Abbett
  • MainStay
  • MFS
  • Natixis
  • Nuveen
  • Oppenheimer
  • Pioneer
  • Principal
  • Prudential Investments
  • Putnam
  • Thornburg
  • Virtus Investment Partners
  • Wells Fargo

While the revenue-sharing arrangements that Commonwealth has entered into with mutual fund complexes vary, each fund family pays Commonwealth a fixed annual fee of up to $2,800,000. The amount of the fixed annual fee is determined by Commonwealth and the particular fund family in advance and is paid quarterly during or after the period covered by the arrangement. Revenue-sharing payments are not based on assets under management or sales that occur during the period covered by the revenue-sharing arrangements with fund families. Some of the participating fund families 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 an advisor 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 4,000 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 is paid to any advisors who sell these funds.

Variable insurance programs

Commonwealth also offers many variable insurance products. Some of the insurance sponsors of the variable insurance products that we offer engage in activities that are designed to help facilitate the distribution of their products; some of these sponsors assist our advisors in becoming more knowledgeable about their products by engaging in marketing activities and offering educational programs (including, but not limited to, attendance by sponsor representatives at Commonwealth conferences and events, one-on-one marketing, and due diligence presentations).

In return for assistance in facilitating the activities described above, Commonwealth receives additional compensation, called revenue sharing, from certain insurance sponsors. These revenue-sharing payments are in addition to commissions and other fees and expenses disclosed in the variable annuity’s prospectus and Statement of Additional Information (“SAI”). These revenue-sharing payments, however, are paid out of the sponsor’s assets—not from the variable insurance product’s assets—and therefore would not appear as an item in a product’s expense table. No portion of these revenue-sharing payments to Commonwealth is made by means of brokerage commissions generated by the variable annuity.

It is important to understand that none of the revenue-sharing payments received by Commonwealth is paid or directed to any of our advisors who sell variable insurance products to their clients, and our advisors do not receive additional compensation for sales of variable insurance products whose sponsors make revenue-sharing payments to Commonwealth. Because Commonwealth’s advisors receive no direct increase or change in compensation for selling variable insurance products whose sponsors make revenue-sharing payments to Commonwealth, we do not believe that they are subject to conflicts of interest arising from revenue-sharing payments to Commonwealth. The marketing and educational activities paid for with revenue sharing, however, could lead our advisors to focus more on those products whose sponsors make revenue-sharing payments to Commonwealth—as opposed to products whose sponsors do not assist advisors in becoming familiar with their products—when recommending variable insurance products to their clients.

Commonwealth does not maintain a “recommended” list of variable insurance products.

The following variable insurance sponsors participate in this revenue-sharing program:

  • Allianz Life
  • AXA Distributors
  • Brighthouse Financial
  • Global Atlantic
  • Great West
  • Jackson National Life
  • Lincoln National
  • Minnesota Life
  • Nationwide
  • Pacific Life
  • Symetra

While the revenue-sharing arrangements that Commonwealth has entered into with insurance sponsors vary, each sponsor pays Commonwealth a fixed annual fee. The amount of the fixed annual fee is determined by Commonwealth and the particular insurance sponsor in advance and is paid quarterly during the period covered by the arrangement. Revenue-sharing payments are not based on sales that occur during the period covered by the revenue-sharing arrangements with insurance sponsors. Some of the participating insurance sponsors may also make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year. 

VARIABLE UNIVERSAL LIFE AND UNIVERSAL LIFE INSURANCE PROGRAMS

Commonwealth also offers variable universal life ("VUL") and universal life ("UL") insurance products. Some of the insurance sponsors of the VUL and UL insurance products that we offer engage in activities that are designed to help facilitate the distribution of their products; some of these sponsors assist our advisors/insurance agents in becoming more knowledgeable about their products by engaging in marketing activities and offering educational programs (including, but not limited to, attendance by sponsor representatives at Commonwealth conferences and events, one-on-one marketing, and due diligence presentations).

In return for assistance in facilitating the activities described above, Commonwealth receives additional compensation, called revenue sharing, from certain insurance sponsors. These revenue-sharing payments are in addition to commissions and other fees and expenses disclosed in the insurance product’s prospectus, SAI, and/or contract. These revenue-sharing payments, however, are paid out of the sponsor’s assets—not from the insurance product’s assets—and therefore would not appear as an item in a product’s expense table. No portion of these revenue-sharing payments to Commonwealth is made by means of commissions generated by the insurance product.

It is important to understand that none of the revenue-sharing payments received by Commonwealth is paid or directed to any of our advisors/insurance agents who sell the insurance products to their clients, and our advisors/insurance agents do not receive additional compensation for sales of insurance products whose sponsors make revenue-sharing payments to Commonwealth. Because Commonwealth’s advisors/insurance agents receive no direct increase or change in compensation for selling insurance products whose sponsors make revenue-sharing payments to Commonwealth, we do not believe that they are subject to conflicts of interest arising from revenue-sharing payments to Commonwealth. The marketing and educational activities paid for with revenue sharing, however, could lead our advisors/insurance agents to focus more on those insurance products whose sponsors make revenue-sharing payments to Commonwealth—as opposed to insurance products whose sponsors do not assist advisors/insurance agents in becoming familiar with their products—when recommending insurance products to their clients.

While the arrangements with each insurance sponsor may vary, each VUL and UL insurance sponsor may pay between 10% and 25% of target VUL and UL premiums. Some of the participating insurance sponsors may also make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year.

The following insurance sponsors participate in the revenue sharing program:

  • Midland National Life Insurance
  • Pacific Life
  • Penn Mutual
NONPUBLICLY TRADED PRODUCTS

Commonwealth, through its advisors, also offers several nonpublicly traded products, including nonlisted real estate investment trusts ("REITs"), limited partnerships ("LPs"), business development companies ("BDCs"), closed-end funds, 1031 exchange programs, hedge funds and fund of funds, managed futures, tax credit programs, oil and gas programs, venture capital funds, and private equity funds. Some of the issuers of the nonpublicly traded products that we offer engage in activities that are designed to help facilitate the distribution of their products; some of these issuers assist our advisors in becoming more knowledgeable about their products by engaging in marketing activities and offering educational programs (including, but not limited to, attendance by sponsor representatives at Commonwealth conferences and events, one-on-one marketing, and due diligence presentations). 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 return for assistance in facilitating the activities described above, Commonwealth receives due diligence fees as well as additional compensation, called revenue sharing, from certain product issuers. These revenue-sharing payments are in addition to commissions and other fees and expenses disclosed in the product’s private placement memorandum and other offering documents.

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 70 basis points (0.70%) 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, is paid or directed to any advisor who sells these products. 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 conflicts of interest arising from the due diligence and/or revenue-sharing payments to Commonwealth. The marketing and educational activities paid for with revenue sharing, however, could lead our advisors to focus more on those products whose sponsors make revenue-sharing payments to Commonwealth—as opposed to products whose sponsors do not assist advisors in becoming familiar with their products—when recommending nonpublicly traded products to their clients.

INVESTMENT ADVISER/ASSET MANAGEMENT PROGRAMS

Commonwealth, through its advisors, offers several Investment Adviser/Asset Management Programs. Some of the third-party asset manager program sponsors (collectively, "Program Sponsors") of the asset management programs ("Programs") we offer engage in activities that are designed to help facilitate the distribution of their programs; some of these Program Sponsors assist our advisors/solicitors in becoming more knowledgeable about their programs by engaging in marketing activities and offering educational programs (including, but not limited to, attendance by program sponsor representatives at Commonwealth conferences and events, one-on-one marketing, and due diligence presentations).

In return for assistance in facilitating the activities described above, Commonwealth may receive additional compensation from certain Program Sponsors. These payments are in addition to the asset-based fees disclosed in the client agreement received by Commonwealth or its advisors in their capacity as investment adviser or solicitor.

Consistent with prudent product approval practices, Commonwealth also conducts or causes to be conducted a due diligence analysis of these Program Sponsors in making them available to the public through its advisors. While the arrangement Commonwealth has with each sponsor varies, a Program Sponsor may pay Commonwealth a fixed annual fee for marketing expenses, educational distribution allowances, or due diligence.

It is important to understand that none of these payments received by Commonwealth is paid or directed to any of our advisors/solicitors who promote these Programs to their clients, and Commonwealth advisors/solicitors 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/solicitors receive no direct or indirect differential compensation for selecting one advisory program over another, we do not believe Commonwealth advisors/solicitors are subject to conflicts of interest when selecting a particular asset management program that makes additional payments to Commonwealth over a program that does not.

For revenue-sharing information about a specific fund family or sponsor, please contact Commonwealth at 800.237.0081.

Last Updated: 04/24/2017