Mutual funds

Through our national network of registered representatives and financial advisors (together, "advisors"), Commonwealth offers a broad selection of more than 9,000 mutual funds, many of which offer multiple share classes. Some of the companies that advise or distribute the mutual funds we offer engage in activities designed to encourage the distribution of their products. Some mutual fund affiliates assist our advisors in becoming more knowledgeable about their mutual 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 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 advisors who sell mutual funds to their clients. Further, 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 the 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 advisors to focus more on the funds whose affiliates make revenue-sharing payments to Commonwealth—rather than on funds whose affiliates do not assist advisors in becoming familiar with their funds—when recommending mutual fund investments to their clients.

While Commonwealth maintains a "recommended" list of specific mutual funds, the list is not based on participation in revenue-sharing arrangements but offers a selection of many funds. In determining what funds are 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 or its agents and employees. Because many product sponsors included on Commonwealth's recommended list are among the largest and most widely used product sponsors in the industry, it is not uncommon for Commonwealth or its agents and employees to receive additional compensation from these product sponsors. Under no circumstances are the products or services provided by sponsors considered for inclusion on Commonwealth's recommended list because of, or in any way in relationship to, the additional compensation Commonwealth or its agents and employees receive from product sponsors.

The following retirement plan recordkeepers and investment managers participate in this revenue-sharing program:

AllianceBernstein

Allianz Global Investors

American Funds

Amundi Pioneer

BlackRock

Columbia

DWS

Eaton Vance

Federated Hermes

Fidelity Advisor

Franklin Templeton

Goldman Sachs

Hartford Funds

Invesco

Ivy

John Hancock

J.P. Morgan

Legg Mason

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 mutual 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 amount 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 level of payments in any given year varies and represents 2 basis points (0.02 percent) of customer assets. 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 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 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 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

CUNA Mutual Group

Global Atlantic

Jackson National Life

Lincoln National

Nationwide

New York Life

Pacific Life

Securian Financial

Symetra

While the revenue-sharing arrangements 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 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 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 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 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 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 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 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 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.

Retirement plan programs

Commonwealth also offers services to retirement plans. Some retirement plan recordkeepers and investment managers engage in activities to promote their products and services. 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 retirement plan recordkeepers and investment managers. These revenue-sharing payments are in addition to commissions and other fees and expenses otherwise payable to Commonwealth. These revenue-sharing payments, however, are paid out of the sponsor's assets—not from any securities 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 any products.

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 retirement plan products to their clients, and our advisors do not receive additional compensation from sponsors that make revenue-sharing payments to Commonwealth. Because Commonwealth's advisors receive no direct increase or change in compensation from sponsors 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 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 advisors in becoming familiar with their services.

Commonwealth does not maintain a "recommended" list of retirement plan recordkeepers or investment managers.

The following retirement plan recordkeepers and investment managers participate in this revenue-sharing program:

American Funds Distributors, Inc.

Empower Retirement

Franklin Templeton Distributors, Inc.

Janus Capital Group, Inc.

Legg Mason Investor Services, LLC

Lord, Abbett & Co. LLC

MassMutual Life Insurance Company

PayChex

Principal Funds Distributors, Inc.

Thornburg Investment Management, Inc.

TransAmerica Life Insurance Company

T. Rowe Investment Services, Inc.

The retirement revenue-sharing program Commonwealth has in place with retirement plan recordkeepers and investment managers 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 retirement plan recordkeepers or investment managers. Some of the participating sponsors also make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year.

Revenue sharing 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 both a platform through which no-transaction-fee ("NTF") mutual fund share classes and institutional NTF ("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. A number of the mutual funds that have share classes that are available on the platforms that NFS operates make payments to NFS for performing certain shareholder services, which would otherwise be performed by the mutual funds. The revenue-sharing payments made by mutual funds 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. As Commonwealth performs certain shareholder services with respect to its clients who hold positions in mutual funds that make revenue-sharing payments, NFS shares a considerable amount of the revenue-sharing payments it receives from mutual funds 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 revenue-sharing payments to NFS. As a result, Commonwealth does not receive revenue-sharing 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 revenue-sharing payments to NFS. Also, certain mutual funds that make revenue-sharing payments to NFS with respect to certain share classes offer other share classes for which revenue-sharing payments are not made to NFS. Commonwealth's advisors are free to and do select mutual funds and mutual fund share classes for which revenue-sharing payments are not made. Further, the revenue-sharing payments Commonwealth receives from NFS are not paid or directed to any of our advisors.

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

For 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: 03/2020

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