At LPL Financial Corporation ("LPL Financial"), we receive compensation from the mutual fund families, variable and group annuity issuers and retirement plan product sponsors that are available to our brokerage customers. These payments are made in connection with programs that support our marketing and sales force education and training efforts, such as our annual national sales and education conference and other conferences (referred to here as "Sponsorship Programs").The mutual fund families, retirement plan product sponsors, and variable annuity issuers that participate in the Sponsorship Programs are listed below. The payments made under the Sponsorship Programs are calculated based upon the assets that are held at the participating sponsor, including any 529 college savings plan assets, but excluding assets held in fee-based advisory programs at LPL Financial. LPL Financial may receive compensation of up to 0.15 percent of the assets held at the mutual fund family or participating variable annuity sponsor. For example, if you held $10,000 dollars with a participating sponsor for one year, LPL Financial could receive a payment of up to $15 from that sponsor. LPL Financial advisors do not receive any part of these payments.
LPL Financial also assesses financial advisors a $30 ticket charge for automated purchases of mutual funds. Generally, the mutual fund families that participate in the Sponsorship Programs subsidize some of these ticket charges. As indicated on the chart below, in some cases the ticket charge is waived completely, and in other cases it is discounted. Every mutual fund offered by LPL Financial also may be purchased without a ticket charge by processing the transaction with a check and application sent directly to the mutual fund company. We believe that these programs do not compromise the advice your financial advisor gives you.
Purchases of mutual funds offered by the mutual fund families above are subject to reduced ticket charges.
American Funds Distributors, Inc. may provide compensation to LPL in accordance with the terms of our letter of understanding. These payments are made at the discretion of American Funds Distributors, Inc. and will vary in any given year, but will not exceed the sum of (a) 0.10 percent of the previous year's American Funds sales by LPL and (b) 0.02 percent of the assets of the American Funds. The actual payment to LPL in any given year will depend on LPL's sales, assets and redemption rates, and our relationship with American Funds.
At LPL Financial, we receive compensation from issuers of fixed annuities that are available to our brokerage customers. The compensation includes commissions and trailing commissions, and may include payments for administrative services that we provide and payments made in connection with our marketing and sales-force education and training efforts, including our annual national sales and education conference and other conferences. The payments made by fixed annuity sponsors include payments that are based on sales or that are based upon assets held at the sponsor, excluding assets held in fee-based advisory programs at LPL Financial. LPL Financial may receive compensation of up to 0.25 percent of the assets held at the fixed annuity sponsor. For example, if you held $10,000 dollars with a sponsor for one year, LPL Financial could receive a payment of up to $25 from that sponsor. These payments do not affect your premiums, and LPL Financial advisors do not receive any portion of these payments.
At LPL Financial, we receive compensation from issuers of life insurance contracts (universal, variable universal, whole life, and term) that are available to our brokerage customers. The compensation includes commissions and trailing commissions, and may include payments for administrative services that we provide and payments made in connection with our marketing and sales-force education and training efforts, including our annual national sales and education conference and other conferences. LPL Financial may receive compensation in a range of 5 to 10 percent of first-year commissionable premiums for marketing, training, and supporting distribution of life products offered through LPL Financial as a broker/dealer, and of 10 - 25 percent of first-year commissionable premiums to support the additional case-management services that LPL Financial provides for products offered through the LPL Financial general agency. LPL Financial may also receive additional compensation from carriers whose aggregate sales exceed premium thresholds specified in selling agreements. These payments do not affect your premiums, and LPL Financial advisors do not receive any portion of these payments.
Money Market Mutual Fund Automatic Cash Sweep Program
For accounts that are ineligible for the Insured Cash Account ("ICA") program as the automatic cash sweep vehicle, LPL Financial offers an automatic cash sweep money market mutual fund program. The money market mutual fund automatic cash sweep program sweeps uninvested cash daily into taxable and tax-exempt money market funds offered by DWS Scudder Investments, J.P. Morgan Asset Management, and Federated Services Company. LPL Financial may receive compensation of up to 0.16 percent of the assets invested in DWS Scudder Investments and J.P. Morgan Asset Management money market funds and up to 0.35 percent of the assets invested in Federated Services Company money market funds. LPL Financial advisors do not receive any portion of these payments.
High Cash Balance Options Program
LPL Financial also offers a High Cash Balance Options ("HCBO") program for ICA-eligible accounts with large amounts of cash to invest (non-ICA eligible accounts may participate on an exception basis). ICA-eligible accounts with a $250,000 minimum in cash for investment may purchase any one of four money market funds and retain the ICA sweep on the account (the $250,000 minimum applies to the amount of the cash trade). LPL Financial may receive compensation of up to 0.06 percent of the assets invested in the HCBO program money market funds. LPL Financial advisors do not receive any portion of these payments.
Optimum Funds
LPL Financial serves as a sub-services agent to the Optimum Funds, providing sub-accounting and shareholder recordkeeping with respect to Optimum Fund shares. LPL Financial receives compensation of 0.25 percent on assets held at LPL Financial for these services. As an investment consultant to Delaware Investments, the investment advisor to the Optimum Funds, LPL Financial also provides investment consulting services to the advisor of the Optimum Funds. As compensation for these services, LPL Financial receives an investment consulting fee of up to 0.25 percent on all Optimum Fund assets. LPL Financial advisors do not receive any portion of these payments. For more information regarding our investment advisory activities, please consult the firm's Form ADV.
Marketing and Sales Support for Optimum Annuity Portfolios (OAP)
LPL Financial provides marketing and sales support for OAP products and receives a marketing support services fee (as well as an asset-based fee). LPL Financial advisors receive a portion of this fee, so your financial advisor may receive greater compensation for selling this product than for selling other variable annuity products.
Third-Party Investment Advisors
LPL Financial may enter into marketing services agreements with independent third-party investment advisors, pursuant to which LPL Financial provides marketing services on behalf of the third-party investment advisor and receives compensation for such services. Third-party investment advisors that have engaged LPL Financial to provide such marketing services have greater access to LPL Financial advisors. LPL Financial advisors do not share in this marketing services compensation. Also, in some cases, the third-party investment advisors may pay additional marketing payments to LPL Financial and/or LPL Financial advisors to cover fees to attend conferences or reimbursement of expenses for workshops or seminars.
Invest in Others Charitable Foundation, Inc.
In 2006, LPL Financial created a public charity to directly support, among other things, our financial advisors' local charitable interests. The charity was established by LPL Financial Holdings, Inc., our parent company, and accepts contributions from LPL Financial employees and product sponsors. Some contributing sponsors also participate in our marketing and sales-force education programs. LPL Financial advisors can make donations to the charities of their choice and submit a request for a matching contribution from the Invest in Others Charitable Foundation, up to $350 per year per advisor. Charities receiving donations must be 501(c)(3) non-profit organizations under the Internal Revenue Code. Contributing sponsors are recognized at our conferences but do not otherwise receive any gifts or services from the contribution. LPL Financial advisors do not receive any gifts or services from the contribution.