Investment Company Securities

Through our national network of registered representatives and investment advisor representatives (together, "financial advisors"), Commonwealth offers a broad selection Investment Company Securities, which includes open and closed-end mutual funds, Exchange Traded Funds ("ETFs"), and Unit Investment Trusts ("UITs"), many of which offer multiple share classes. Some of the companies that advise or distribute Investment Company Securities (together "funds”) we offer engage in activities designed to encourage the distribution of their products. Some fund affiliates assist our financial advisors in becoming more knowledgeable about their funds through marketing activities and by 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 our assistance in facilitating the activities described above, Commonwealth receives payments, called revenue-sharing, from the funds' advisors 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. The 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 the revenue-sharing payments to Commonwealth is made by means of brokerage commissions generated by funds whose affiliates make revenue-sharing payments.

None of the revenue-sharing payments received by Commonwealth is paid or directed to any of our financial advisors who sell to or purchase funds for their clients. Further, our financial advisors do not receive additional compensation in connection with transactions in shares of those funds whose affiliates make revenue-sharing payments to Commonwealth. Because the compensation of Commonwealth's financial advisors is not increased or changed as a result of selling or purchasing shares of funds whose affiliates make revenue-sharing payments to Commonwealth, we do not believe that the financial advisors are subject to conflicts of interest arising from revenue-sharing payments made to Commonwealth. The marketing and educational activities paid for with revenue sharing, however, could lead our financial advisors to focus more on the funds whose affiliates make revenue-sharing payments to Commonwealth—rather than on funds whose affiliates do not assist financial advisors in becoming familiar with their funds—when selling or purchasing fund investments for their clients.

While Commonwealth maintains a "recommended" list for its financial advisors which provides Commonwealth's recommendations with respect to specific funds and share classes, the list is not based on participation in revenue-sharing arrangements. In determining what funds are included on the recommended list, Commonwealth's Investment Management and Research team uses independent, quantitative, and qualitative criteria in its selection process, without regard to whether a particular product sponsor has made or makes additional compensation payments to Commonwealth. Because many of the funds and share classes included on Commonwealth's recommended list are among the largest and most widely used funds in the industry, it is not uncommon for Commonwealth to receive additional compensation from the sponsors of these funds and share classes. Under no circumstances are funds and share classes considered for inclusion on Commonwealth's recommended list because of, or in any way in relationship to, the additional compensation Commonwealth receives from the sponsors of the funds.

The following fund families participate in this revenue-sharing program:

AllianceBernstein

American Funds

Amundi Pioneer

BlackRock

Columbia

Delaware Funds

Eaton Vance

Federated Hermes

Fidelity Advisor

First Trust Advisors

Franklin Templeton

Goldman Sachs

Hartford Funds

Invesco

John Hancock

J.P. Morgan

Lord Abbett

MainStay

MFS

Natixis

PIMCO

Principal

PGIM Investments

Putnam

Thornburg

Virtus Investment Partners

 

 

 

 

Commonwealth's revenue-sharing arrangements, including the amounts paid by affiliates of the funds listed above, vary. Generally, Commonwealth and fund affiliates determine the amount of revenue-sharing payments in advance. Payments are made quarterly during or after the period covered by the arrangement. Except for the arrangement with American Funds Distributors, the revenue-sharing payments are fixed and not based on assets under management or sales that occur during the period covered by the revenue-sharing arrangements.

The arrangement with American Funds Distributors provides that the receipt of revenue-sharing payments will be based upon a number of factors set forth in American Funds' prospectuses and statements of additional information ("SAIs"), including an assessment of the quality of the relationship with Commonwealth during the period covered by the arrangement. The arrangement with American Funds Distributors provides that Commonwealth will receive 2 basis points (0.02 percent) on Commonwealth client assets invested in American Funds Distributors' mutual funds. The level of payments during any given year will vary depending on the amount of Commonwealth client assets invested in mutual funds from American Funds Distributors. Assets invested in retirement or qualified investment advisory accounts play no role in determining the amount of payments made by American Funds Distributors.

Some participating fund families may make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year.

See the Revenue Sharing from Commonwealth's Clearing Firm section below for information on the various revenue-sharing arrangements and benefits Commonwealth receives from National Financial Services LLC ("NFS") on the sale of mutual funds through the NFS platform.

Variable insurance programs

Commonwealth also offers many variable insurance products. Some of the insurance company sponsors of the variable insurance products we offer engage in activities that are designed to help facilitate the distribution of their products; some of these sponsors assist our financial 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 company sponsors. These revenue-sharing payments are in addition to commissions and other fees and expenses disclosed in the variable insurance product's prospectus and 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 sale of variable insurance products.

It is important to understand that none of the revenue-sharing payments received by Commonwealth is paid or directed to any of our financial advisors who sell variable insurance products to their clients, and our financial advisors do not receive additional compensation for sales of variable insurance products whose sponsors make revenue-sharing payments to Commonwealth. Because Commonwealth's financial 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 financial advisors to focus more on those products whose sponsors make revenue-sharing payments to Commonwealth—as opposed to products whose sponsors do not assist financial 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

Athene

Brighthouse Financial

CUNA Mutual Group

Delaware Life

Equitable Financial

Global Atlantic

Jackson National Life

Lincoln National

Nationwide

New York Life

Pacific Life

Prudential

Securian Financial

Symetra

 

While the revenue-sharing arrangements Commonwealth has entered into with insurance company sponsors vary, each sponsor pays Commonwealth a fixed annual fee. The amount of the fixed annual fee is determined by Commonwealth and the 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 programs

Commonwealth also offers variable universal life ("VUL") and universal life ("UL") insurance products. Some of the insurance company sponsors of the VUL and UL insurance products we offer engage in activities that are designed to help encourage the distribution of their products; some of these sponsors assist our financial 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 company 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 policy. 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 financial advisors/insurance agents who sell the insurance products to their clients, and our financial advisors/insurance agents do not receive additional compensation for sales of insurance products whose sponsors make revenue-sharing payments to Commonwealth. Because Commonwealth's financial 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 financial 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 financial 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 percent and 25 percent 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.

Pacific Life participates in the revenue-sharing program.

Nonpublicly traded products

Commonwealth, through its financial advisors, also offers several nonpublicly traded products, including nonlisted real estate investment trusts ("REITs"), limited partnerships ("LPs"), business development companies ("BDCs"), closed-end funds, interval 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 we offer engage in activities that are designed to help encourage the distribution of their products; some of these issuers assist our financial 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 financial advisors.

In return for assistance in facilitating the activities described above, Commonwealth receives due diligence fees, marketing fees, shareholder servicing fees, as well as 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.

Although the arrangements with each sponsor may vary, each product sponsor may pay a due diligence, stockholder servicing, or marketing allowance fee of either a) up to 70 basis points (0.70 percent) annually on assets held at the sponsor; or b) up to 200 basis points (2 percent) on the gross amount of each sale, depending on the product. None of these additional payments, however, is paid or directed to any financial advisor who sells these products. Commonwealth's financial advisors do not receive a greater or lesser commission for sales of these products from which Commonwealth receives revenue-sharing payments. Because Commonwealth's financial 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 financial advisors to focus more on those products whose sponsors make revenue-sharing payments to Commonwealth—as opposed to products whose sponsors do not assist financial advisors in becoming familiar with their products—when recommending nonpublicly traded products to their clients.

The following nontraded product sponsors participate in due diligence fee, marketing fee, stockholder service fee, as well as revenue sharing programs:

 

AEI

Alkeon

Altegris

Black Creek Group

Blackstone

Brookwood

Central Park Group

Dearborn Capital

Eaton Vance

Goldman Sachs

Goodnow

Graham

Griffin Capital

Harbourvest

Hines

Inland

LaSalle Investment Management

LoCorr

Mewboune Energy Next Play Capital

Partners Group

Resource America

Steben

Retirement plan consulting program

Commonwealth, through its Retirement Plan Consulting Program (RPCP), offers investment advisory and other services to retirement plans and their plan participants. Some of the companies that Commonwealth makes available to its financial advisors engage in activities designed to encourage the distribution or use of their products. Some assist our financial advisors in becoming more knowledgeable about their products and services through marketing activities and by offering educational programs, including, but not limited to, attendance by representatives at Commonwealth conferences and events, one-on-one marketing, and due diligence presentations.

In return for our assistance in facilitating the activities described above, Commonwealth receives revenue sharing paid directly from retirement plan product sponsors to assist with training and educating advisors who conduct business through the RPCP. These revenue sharing payments are not tied to the sales of any products or client assets in the products.

The Commonwealth RPCP maintains a "recommended fund" list, which provides Commonwealth's recommendations with respect to specific funds and share classes available to retirement plans. The list is created and maintained entirely independent of any participation in the RPCP revenue-sharing arrangements.

It is important to understand that none of the revenue-sharing payments received by Commonwealth is paid or directed to any of its financial advisors who advise on retirement plans, and our financial advisors do not receive additional compensation from the companies that make revenue-sharing payments to Commonwealth. Because Commonwealth's financial advisors receive no direct increase or change in compensation from companies that make revenue-sharing payments to Commonwealth, we do not believe that they are subject to conflicts of interest arising from these payments to Commonwealth. The marketing and educational activities paid for with revenue sharing, however, could lead our financial advisors to focus more on those retirement plan recordkeepers and investment managers that make revenue-sharing payments to Commonwealth—as opposed to retirement plan recordkeepers and investment managers that do not assist financial advisors in becoming familiar with their services.

The following retirement plan product sponsors participate in the RPCP revenue-sharing program:

American Funds Distributors, Inc.

Empower Retirement

Franklin Templeton Distributors, Inc.

Invesco

Lord, Abbett & Co. LLC

Pimco

Putnam

 

Principal Funds Distributors, Inc.

The Standard

Thornburg Investment Management, Inc.

TransAmerica Life Insurance Company

T. Rowe Investment Services, Inc.

The RPCP revenue-sharing program Commonwealth has in place with product sponsors is a fixed fee payable annually. The amount of the fixed annual fee is determined in advance and is not based on sales that occur during the period covered by the revenue-sharing arrangements with product sponsors. Some of the participating sponsors also make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year.

Payments from Commonwealth's clearing firm

A large percentage of Commonwealth’s clients maintain accounts with National Financial Services LLC ("NFS"), Commonwealth’s clearing firm. NFS is an affiliate of Fidelity Clearing & Custody Solutions ("FCCS"), which serves as the custodian for Commonwealth's clients' assets. In addition to executing and clearing transactions for Commonwealth’s advisory and brokerage clients, NFS operates a platform through which no-transaction-fee ("NTF") mutual fund share classes and institutional no-transaction-fee ("iNTF") share classes are available, as well as a platform for transaction fee ("TF") mutual fund share classes.

Transactions involving NTF and iNTF share classes may be executed without the imposition of transaction charges, while transactions involving TF mutual fund share classes are assessed such charges. With respect to the mutual funds that have share classes that are available on the platforms that NFS operates, payments may be made to NFS by the mutual fund, the investment advisor to the fund, or other fund affiliates. The payments made by the mutual fund, the investment advisor to the fund, or other fund affiliate's assets to NFS are based upon the amount of assets invested (or, on occasion, a per-position fee) in such mutual funds by clients maintaining accounts with NFS. Because Commonwealth performs certain shareholder services with respect to its clients who maintain positions in mutual funds for which payments are made, NFS shares a considerable amount of the revenue it receives from mutual funds and/or their affiliates with Commonwealth.

It is important to note that certain mutual funds with share classes that are available on the TF platform operated by NFS do not make payments to NFS. As a result, Commonwealth does not receive payments from NFS with respect to its clients' holdings in such mutual funds. In particular, mutual funds sponsored by Fidelity Investments, which directly or indirectly owns NFS, do not make payments to NFS. Certain mutual funds which offer share classes for which payments are made to NFS also offer share classes for which payments are not made to NFS. Commonwealth's financial advisors are free to and do select mutual funds and mutual fund share classes for which payments are not made. Further, the revenue-sharing payments Commonwealth receives from NFS are not paid or directed to any of our financial advisors.

For additional information on payments Commonwealth receives, revenue sharing, fees, and transaction charges, see Commonwealth’s Form ADV Part 2A Brochure.

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

*Fidelity Clearing & Custody Solutions® (FCCS) is an independent company, unaffiliated with Commonwealth. FCCS is a service provider to Commonwealth and provides clearing, custody, and other brokerage services to Commonwealth through National Financial Services LLC (NFS), member NYSE, SIPC. 

Last Updated: 08/2021

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