Investment Company Securities

Through our national network of registered representatives and investment advisor representatives (together, "financial advisors"), Commonwealth offers a broad selection of 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 or their affiliates (together, “Core Partners”) engage in activities designed to encourage the distribution of their products. Some Core Partners assist our financial advisors in becoming more knowledgeable about their funds through marketing activities and by offering educational programs including, but not limited to, direct access to Commonwealth’s senior leadership, research, and product support staff; invitations to Commonwealth-sponsored meetings and events, which include direct access to financial advisors; ability to post product marketing and educational materials to Commonwealth’s internal web portal used by financial advisors; access to Commonwealth’s proprietary investment models, research, and analysis; and contact information for financial advisors.

In return for our assistance in facilitating the activities described above, Commonwealth receives payments, called revenue-sharing, from Core Partners. 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 the purchase of any specific investment.

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 direct compensation in connection with transactions in shares of those funds when revenue-sharing payments are made to Commonwealth. In some instances, financial advisors receive reduced or waived transaction costs on products offered by core sponsors. The marketing and educational activities paid for with revenue sharing allow a financial advisor to become familiar with a fund or fund family (e.g., through educational meetings and access to marketing materials). This creates a conflict of interest because your advisor is more likely to recommend or promote the products of Core Partners that make such payments to Commonwealth over those product sponsors that do not.

Commonwealth’s receipt of these payments from Core Partners creates a conflict of interest for Commonwealth because Commonwealth has a greater incentive to make available, recommend, or make investment decisions regarding investments for your account that provide additional compensation to Commonwealth over other investments that do not provide additional compensation to Commonwealth. However, 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 which 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 Core Partner 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 Core Partners.

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

Commonwealth's revenue-sharing arrangements, including the amounts paid by the Core Partners listed above, vary and are a substantial financial benefit to Commonwealth. Generally, Commonwealth and Core Partners determine the amount of revenue-sharing payments in advance. Payments are made quarterly during or after the period covered by the arrangement. Some Core Partners make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year. Except for the arrangement with Capital Client Group, Inc., formerly known as 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 Capital Client Group 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 Capital Client Group provides that Commonwealth will receive 2 basis points (0.02 percent) on Commonwealth client assets invested in Capital Client Group’s 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 Capital Client Group. Assets invested in retirement or qualified investment advisory accounts play no role in determining the amount of payments made by Capital Client Group.

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.

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. However, the marketing and educational activities paid for with revenue sharing allow a financial advisor to become familiar with the sponsor’s variable insurance products (e.g., through educational meetings and access to marketing materials). This creates a conflict of interest because your advisor is more likely to recommend or promote the products of product sponsors that make such payments to Commonwealth over those product sponsors that do not.

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

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

While the revenue-sharing arrangements Commonwealth has entered with insurance company sponsors vary, each sponsor pays Commonwealth a fixed annual fee. These payments are a substantial financial benefit to Commonwealth. 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 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.

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. However, the marketing and educational activities paid for with revenue sharing allow a financial advisor to become familiar with the sponsor’s insurance products (e.g., through educational meetings and access to marketing materials). This creates a conflict of interest because your advisor is more likely to recommend or promote the products of product sponsors that make such payments to Commonwealth over those product sponsors that do not.

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. These payments are a substantial financial benefit to Commonwealth. Participating insurance sponsors 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, tender funds, 1031 exchange programs, hedge funds and fund of funds, feeder funds, managed futures, tax credit programs, oil and gas programs, venture capital funds, and private equity funds. Some of the issuers and product sponsors of the nonpublicly traded products we offer (together "product sponsors") engage in activities that are designed to encourage the distribution of their products; some of these product 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 product 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, distribution allowances, marketing fees, shareholder servicing fees, revenue sharing, and other compensation (collectively "Additional Compensation") from certain product sponsors.

Additional Compensation 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 product sponsor vary, each product sponsor pays Additional Compensation 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. This Additional Compensation is a substantial financial benefit to Commonwealth. Some of the participating product sponsors also make additional payments to Commonwealth for attendance at various educational meetings hosted by Commonwealth throughout the year.

None of these additional payments, however, are 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 Additional Compensation. However, the marketing and educational activities paid by the product sponsors allow a financial advisor to become familiar with the sponsor’s products and services (e.g., through educational meetings and access to marketing materials). This creates a conflict of interest because your advisor is more likely to recommend or promote the products of product sponsors that make such payments to Commonwealth over those product sponsors that do not.

The following product sponsors pay Commonwealth Additional Compensation:

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 retirement plan recordkeepers and investment managers 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 recordkeepers and investment managers to assist with training and educating financial advisors who conduct business through the RPCP. These revenue sharing payments are not directly tied to the sales of any products or client assets in the products.

Commonwealth’s receipt of these payments from retirement plan recordkeepers, investment managers, and fund distributors creates a conflict of interest for Commonwealth because Commonwealth has a greater incentive to make available, recommend, or make investment decisions regarding investments for your account that provide additional compensation to Commonwealth over other investments that do not provide additional compensation to Commonwealth.

However, while Commonwealth 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 not based on participation in revenue-sharing arrangements. While some companies submit funds to the list for consideration, the list is created and maintained independently of any participation in the RPCP revenue-sharing arrangements.

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. However, the marketing and educational activities paid for with revenue sharing allow a financial advisor to become familiar with a retirement plan recordkeeper and investment manager’s services (e.g., through educational meetings and access to marketing materials). This creates a conflict of interest because your advisor is more likely to recommend or promote the products of retirement plan recordkeepers and investment managers that make such payments to Commonwealth over those that do not.

The following retirement plan recordkeepers, investment managers and fund distributors, or their affiliates, participate in the RPCP revenue-sharing program:

The RPCP revenue-sharing program Commonwealth has in place with retirement plan recordkeepers and investment managers is a fixed fee payable annually. These payments are a substantial financial benefit to Commonwealth. 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 retirement plan recordkeepers and investment managers 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 majority of Commonwealth’s clients maintain accounts with National Financial Services LLC ("NFS"), Commonwealth’s clearing firm. NFS is a broker dealer of Fidelity Investments, which serves as the custodian for Commonwealth's clients' assets. Commonwealth receives compensation from NFS as described below, which creates a significant conflict of interest with clients because Commonwealth has a substantial economic incentive to use NFS as its clearing firm for trade execution and custody over other firms that do not or would not revenue share with Commonwealth.

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 mutual funds (i.e., both no-transaction-fee and transaction-fee share classes) that have share classes that are available on the platforms that NFS operates, payments are made to NFS by the mutual fund, the investment advisor to the fund, or other fund affiliates. The payments made to NFS by the mutual fund, the investment advisor to the fund, or other fund affiliates are generally based upon the amount of assets or positions invested or held in such mutual funds by clients maintaining accounts with NFS.

Because Commonwealth performs certain shareholder services with respect to its clients who maintain assets or positions in mutual funds for which payments are made to NFS, NFS shares a considerable amount of the revenue it receives from mutual funds and/or their affiliates with Commonwealth. Commonwealth’s receipt of a substantial portion of the fees associated with the NTF, iNTF and TF platform creates a conflict of interest because Commonwealth has an incentive to make available or to recommend the various share classes of mutual funds that provide this additional compensation to Commonwealth over other mutual fund share classes of the same fund that do not make such payments to NFS to share with Commonwealth.

It is important to note that certain mutual funds with share classes 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 or share classes. 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.

Commonwealth receives revenue sharing from NFS based on different types of criteria. This criteria include: (i) client assets in non-Fidelity NTF Assets; (ii) client assets invested in non-Fidelity funds that participate in NFS’s TF Program; (iii) client assets invested in non-Fidelity funds that participate in NFS’s iNTF Program; (iv) customer accounts that generate short sale interest payments; (v) balances in customer accounts invested in certain Fidelity Money Market Sweep Funds, when money market funds with lower expenses are available to be selected as sweep options; (vi) interest payments made by banks on customer assets held on deposit at a bank; (vii) client assets invested in the Core Account Sweep Program (see https://www.commonwealth.com/for-clients/disclosure/core-account-sweep-programs for more information); (viii) margin interest earned in customer accounts; (ix) cash balances in customer accounts that do not elect a sweep option; and (x) customer cash debits in customer non-retirement accounts.

In addition, Commonwealth receives revenue sharing from lending customer-fully paid securities through NFS. Commonwealth also receives volume discount on transactions in certain types of securities including listed and over-the-counter (OTC) equities for which NFS charges no clearance fee or charges an asset-based fee instead of a per-trade clearance fee, and Commonwealth marks up certain fees that are charged to customers, including the maintenance fees paid by certain Health Savings Account (HSA) and IRA customers.

In addition to the types of continued revenue sharing described above, in 2022, Commonwealth received a one-time renewal credit as compensation for continuing to use NFS as its clearing firm.

For additional information on payments Commonwealth receives, revenue sharing, fees, and transaction charges, see Commonwealth’s Form ADV Part 2A Brochure. In determining the reasonableness of any advisory fees charged by Commonwealth, you should consider the payments received by Commonwealth from third parties such as the Core Partners and NFS.

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

Donor-Advised Funds

Commonwealth also offers donor-advised funds ("DAFs"), which are administered by an affiliated entity of the sponsoring charity ("DAF Administrator"). Some DAF Administrators engage in activities that are designed to help encourage the distribution of their affiliated DAF; some assist our financial advisors in becoming more knowledgeable about their DAF by engaging in marketing activities and offering educational programs (including, but not limited to, attendance by DAF Administrator representatives at Commonwealth conferences and events and one-on-one marketing).

In return for our assistance in facilitating the activities described above, Commonwealth receives a share in the compensation paid by DAF sponsor charities to their affiliated DAF Administrator. This payment is intended to assist with training and educating financial advisors who conduct business with the affiliated DAF. These payments are paid out of the administrative fees collected by the charity sponsor on your account. These payments are in addition to commissions, annual service fees (known as 12b-1 fees), and other fees and expenses collected by Commonwealth on the DAF account.

None of the revenue-sharing payments received by Commonwealth is paid or directed to any of our financial advisors who sell to or purchase DAFs for their clients. However, the marketing and educational activities paid for with this compensation allow a financial advisor to become familiar with a sponsor charity’s products and services (e.g., through educational meetings and access to marketing materials). This creates a conflict of interest because your advisor is more likely to recommend or promote the products of charity sponsors that make such payments to Commonwealth over those that do not.

Commonwealth does not maintain a "recommended" list of DAFs.

Renaissance Charitable Foundation, the charitable fund that offers the Commonwealth Charitable Fund, has an affiliated administrative entity that participates in this compensation-sharing program. The arrangement provides that Commonwealth receives compensation of at least 5 basis points (0.05 percent) on Commonwealth client assets invested in the Commonwealth Charitable Fund. The payments made during any given year will vary depending on the amount of Commonwealth client assets invested in the Commonwealth Charitable Fund.

See the Revenue Sharing from Commonwealth’s Clearing Firm section below for more information on the various revenue-sharing arrangements and benefits Commonwealth receives from NFS on the sale of mutual funds through the NFS platform.

Third-Party Asset Managers

Commonwealth offers clients the ability to access various Third-Party Asset Manager (“TPAM”) programs, which are managed by one or more unaffiliated third-party portfolio managers on a discretionary basis.

Commonwealth provides marketing support to TPAM sponsors that is designed to help encourage referrals to the TPAM by assisting our financial advisors in becoming more knowledgeable about their advisory offerings. Marketing support includes but is not limited to direct access to Commonwealth’s senior leadership and product support staff; ability to post product marketing and educational materials to Commonwealth’s internal web portal used by financial advisors; and contact information for financial advisors.

In the case of one of the TPAM sponsors, AssetMark, Inc., Commonwealth receives a fixed annual flat fee for providing marketing support. The payment is in addition to any referral fees disclosed to the client, or advisory fees paid by the client and split between the TPAM sponsor and Commonwealth. Commonwealth’s receipt of these payments creates a conflict of interest because Commonwealth has a greater incentive to make available or recommend TPAMs that provide additional compensation to Commonwealth over TPAMs that do not.

While advisors do not receive the marketing support fee paid by a TPAM sponsor, the fee creates a conflict of interest because advisors are more likely to recommend a TPAM sponsor that makes such payments to Commonwealth over those TPAM sponsors that do not make a payment. Advisors are more likely to recommend a TPAM or promote the products of a TPAM that they are educated about and understand how to use, rather than TPAMs that do not have the direct access to provide such support. There is a conflict of interest present for those TPAMs listed within this section who pay Commonwealth because advisors are given greater access to these TPAMs and their products through educational meetings, marketing materials, etc. than those TPAMs who do not make payments.

Nonpurpose Loan Program

Commonwealth offers a nonpurpose loan (“NPL”) program that enables clients to collateralize certain accounts to obtain secured loans through NFS or banking institutions that participate in the program, including Tri-State Bank and Goldman Sachs Bank (collectively, “Program Participant”). Commonwealth is compensated by the program bank ranging from 0 to 50 bps of the interest paid to the Program Participant by the borrower. Interest is based on the amount of the outstanding loan. This compensation to Commonwealth varies; therefore, Commonwealth can earn more or less depending on the Program Participant selected by the client/borrower. This compensation is a conflict of interest because Commonwealth has a financial incentive for the client to select a Program Participant that pays Commonwealth more. Commonwealth does not share this compensation with its advisors; therefore, an advisor does not have a financial incentive if one Program Participant is selected over another. Clients are not required to use the Program Participants in the NPL program and can work directly with other banks to negotiate loan terms or obtain other financing arrangements.

Last Updated: 07/2024