Purchasing mutual funds and 529 plans through Ameriprise Financial

Ameriprise has agreements with nearly 300 mutual fund firms, which allows us to offer clients a broad range of more than 3,500 mutual funds. The financial advisors' goal is to select suitable investments that help clients achieve their financial goals. The following sections describe important information relating to the availability of mutual funds offered through Ameriprise and factors that may influence the mutual funds financial advisors recommend.

Payments from product companies

Ameriprise receives a variety of payments for selling the products of proprietary and non-proprietary product companies. These include payments for marketing support, recordkeeping and other client account services, startup costs, technology and related expenses, conferences and client events. The most significant payments are marketing support payments.

Mutual fund and 529 plan marketing support payments

Mutual fund and 529 plan marketing and sales support payments are received from certain mutual fund firms (described below as "full" and "limited" participation firms) within the nearly 300 mutual fund firms ("firms") Ameriprise offers.

The goal at Ameriprise Financial is to offer a wide range of mutual funds using the following criteria:

  • Marketing payments to support the cost of distribution
  • Financial strength of the firm
  • Product breadth and strong performing funds
  • Ability to provide wholesaling and training to our financial advisors
  • Tax benefits offered by individual states (specific to 529 plans)
  • Overall quality of the 529 plan (specific to 529 plans)

Financial advisors may offer, and clients are free to choose, mutual funds from nearly 300 firms. However, certain aspects of the Mutual Fund Program ("Program") may create a conflict of interest or incentive if Ameriprise promotes, or financial advisors recommend, the mutual funds offered by a firm participating in the Program vs. mutual funds offered by nonparticipating firms. In addition, among firms participating in the Program, financial advisors generally have a greater incentive to offer mutual funds from Full Participation firms than mutual funds from Limited Participation firms. As further described below, these conflicts and incentives may arise from the marketing and sales support provided to our financial advisors by, as well as the payments Ameriprise receives from, firms participating in the Program, and with other relationships with firms, including our affiliation with Columbia Management Investment Advisers and the Columbia-branded mutual funds, in addition to other fund brands (the "Affiliated Columbia Funds") – see the section titled "Columbia and other affiliated mutual funds" below

Marketing and sales support

The firms in the Program that are Full Participation firms provide education, training, marketing and sales support to financial advisors. These firms may reimburse Ameriprise, or financial advisors, for client/prospect education events and financial advisor sales meetings, seminars and training events consistent with Ameriprise policies; Ameriprise Financial Services may also receive nominal non-cash benefits from time to time. Limited Participation firms pay marketing support at a lower level than Full Participation firms; therefore, Limited Participation firms may not provide some services, or the same level of services, to financial advisors. As a result, financial advisors may have a greater familiarity with Full Participation firms and an incentive to sell funds and 529 plans of Full Participation firms.

Marketing support payments

To be included in the Program, firms have agreed to pay Ameriprise a portion of the revenue generated from the sale and/or management of mutual fund shares. Full Participation firms pay marketing support at a higher level than Limited Participation firms. Each year a client holds shares of a particular mutual fund, the mutual fund's financial adviser or distributor may pay to Ameriprise an amount based on the value of the collective mutual fund shares held in clients' accounts (asset-based payment). In addition, a mutual fund's financial adviser or distributor may pay a fee to Ameriprise for the mutual fund shares purchased during a given period (sales-based payment). As of December 2012, Ameriprise received an asset-based payment (up to 0.22% per year for mutual funds and 0.16% per year for 529 plans) on some or all of Ameriprise Financial clients' assets managed by the participating firms and a sales-based payment (up to 0.25% for mutual funds and 0.20% for 529 plans) on some or all of the participating firms' gross sales made through Ameriprise.

Limited Participation firms generally limit by prospectus the amount of marketing support their affiliates may pay on mutual funds.

Ameriprise receives up to 0.62% of money fund deposits for its money market fund sweep program. The amount that Ameriprise Financial receives may be reduced based on fee waivers that are imposed by the money market fund firm.

Specific marketing support payments are detailed in this guide (see the tables below). These arrangements vary between firms and may be subject to change or renegotiation at any time. If a firm ceases to pay marketing support or other fees, Ameriprise Financial may remove the firm from the Program and may cease to offer that firm's mutual fund shares and/or 529 plan(s).

Full Participation firms

As of Dec. 31, 2012, twenty-five firms fully participate in the Program. These firms include: Allianz Global Investors, American Century, BlackRock, Calvert, Columbia Management, Delaware Investments, Dreyfus, DWS Investments, Eaton Vance, Federated, Fidelity, Goldman Sachs, Invesco, Ivy, Janus, John Hancock, J.P. Morgan, Legg Mason, MFS, Nuveen, Oppenheimer, Prudential, Putnam, Virtus and Wells Fargo. These firms are referred to as "Full Participation firms."

We offer 529 plans from 22 firms. Of those 22 firms, 14 are Full Participation firms. These fund firms include: Allianz Global Investors, American Century, BlackRock, Calvert, Columbia Management, DWS Investments, Fidelity, Ivy, J.P. Morgan, John Hancock, Legg Mason, MFS, Oppenheimer and Putnam. Each of these firms is referred to as a Full Participation firm.

Limited Participation firms

Three firms participate in the Program at a limited level. These firms include: AllianceBernstein, Franklin Templeton and PIMCO. These firms are Limited Participation firms.

529 plan Limited Participation firms include: AllianceBernstein and Franklin Templeton.

Distribution support relationships

Ameriprise also has arrangements with firms for distribution support services. These firms make payments of up to 0.18% on sales and 0.10% on assets to Ameriprise for these services, which support the distribution of the fund's shares and 529 plans by making them available on one or more Ameriprise platforms, commonly known as "shelf space." These mutual fund firms do not provide marketing and sales support to financial advisors and do not participate in the Mutual Fund List (as described in the next section).

Ameriprise sells 529 plans from three firms that neither have wholesaling access to financial advisors nor pay marketing or distribution support. Moreover, the plans are available for sale primarily to in-state residents. These firms are: American Funds, First National Bank of Omaha and Union Bank & Trust.

The total amount received from all distribution support firms in 2012 was $7,289,227. The firms that paid more than $500,000 were First Eagle Funds, which paid $1,657,209, and NATIXIS, which paid $621,586. The remaining firms paid amounts ranging from $2 to $489,511.

Mutual Fund List

Financial advisors may make mutual fund recommendations based on a group of funds that appear on an Ameriprise Financial Mutual Fund List ("List"). The List is developed by the Ameriprise Financial Investment Research Group. Approximately 1,600 mutual funds are eligible for inclusion on the List, which includes only mutual funds deemed "Full Participation firms" in the Ameriprise Financial Services Mutual Fund program described above.

In developing the List, the Ameriprise Financial Investment Research Group applies a quantitative and qualitative evaluation process that includes an analysis of a fund's returns, risk and expenses; the tenure of its portfolio managers; and the consistency of its performance and style. Certain mutual funds that would have otherwise been included on the List were excluded due to their high investment minimums.

Client suitability must be considered when trading mutual funds, including breakpoint discount eligibility and NAV transfer availability. The funds on the List are subject to change periodically, however, changes to the List should not be the sole reason to prompt trading.

This List is developed by evaluating the characteristics of each fund's Class A share. As a result, clients for whom another share class may be more advantageous may be unable to purchase a fund on the List if that fund does not offer that particular share class. In addition, the List was developed using those funds currently available through SPS Advisor, Strategic Portfolio Service (SPS) Advantage or Ameriprise Brokerage. As a result, clients may not be able to purchase a fund on the List if that fund is not available through the service in which the client invests.

Ameriprise Financial Services, Inc. receives payments for the services we provide to the Full Participation firms (including Columbia Management) and to other funds available for sale at Ameriprise. The amount of fees Ameriprise receives from funds eligible for inclusion on the List is not considered in the selection process for inclusion on the List, and no fund pays Ameriprise to be on the List. Clients may choose to follow the recommendations provided by their financial advisor or may select from any of the other funds offered through Ameriprise regardless of whether that fund appears on the List.

Other financial relationships

In addition to sales charges, 12b-1 fees and marketing support payments Ameriprise receives, the mutual fund's financial adviser, distributor or affiliate may also make other payments to Ameriprise for client services and other account maintenance activities provided. All of the mutual funds sold by Ameriprise pay Ameriprise networking and/or omnibus services fees for operational support. In addition, some mutual fund firms may pay Ameriprise to participate in a conference or may reimburse permitted expenses of Ameriprise financial advisors. Information about these charges and fees may be viewed in this guide or in the mutual fund prospectus. Ameriprise receives up to 0.40% per year on some, or all, Ameriprise clients' assets managed by participating mutual fund firms.

Ameriprise provides clients with access to other firms through its relationship with Charles Schwab & Co., Inc. ("Schwab") and Schwab's mutual fund program. Schwab passes to Ameriprise certain payments it receives from firms accessed through its program.

American Enterprise Investment Services, Inc., an affiliate of Ameriprise Financial and its clearing firm, receives payments from some firms for client and other account services. American Enterprise Investment Services, Inc. shares a portion of that fee with Ameriprise for providing distribution support services, which is sometimes referred to as shareholder support services.

Ameriprise Financial and its affiliates may have other relationships with firms whose mutual funds Ameriprise offers. These relationships may include affiliates of firms acting as a sub-financial adviser to Columbia Management, Columbia Management acting as a sub-financial adviser to a third party firm, or affiliates of a firm managing an investment portfolio within another Ameriprise or affiliated product, such as a RiverSource® Variable Annuity. Firms may use Columbia Management Investment Advisers as an underlying investment option in products offered through the program.

Ameriprise has marketing support agreements with BlackRock Advisors, LLC, and J.P. Morgan Chase & Co., with respect to mutual fund positions held by Ameriprise Financial customers. BlackRock, Inc., and J.P. Morgan Chase & Co. each own more than 5% of the outstanding shares of Ameriprise Financial, Inc. stock.

Transaction charges

Financial advisors pay charges on mutual fund sales, purchases and exchanges ("transaction charges"). Transaction charges are determined using a variety of factors such as: the type of transaction, processing methodology (e.g., online, telephone, systematic arrangements), account type (fee-based SPS Advantage account/transaction-based brokerage account), and, in one case, the firm. Financial advisors pay the same mutual fund transaction rate for all mutual fund firms except American Funds. Financial advisors pay significantly higher transaction charges (up to $85 per transaction) on mutual fund purchases of American Funds. This higher transaction charge may be a disincentive for financial advisors to recommend American Funds. Additionally, American Funds does not pay Ameriprise Financial Services for either marketing support or distribution support.

Columbia and other affiliated mutual funds

The following funds are affiliated with Ameriprise Financial, Inc.: Columbia Management, Wanger, Columbia Acorn and Threadneedle.

The affiliates of Ameriprise provide certain administrative, and transfer agent services to these mutual funds. Ameriprise and its affiliates generally receive more revenue from sales of affiliated mutual funds than from sales of other mutual funds. Employee compensation and operating goals at all levels of the company are tied to the company's success. Certain employees may receive higher compensation and other benefits based, in part, on assets invested in affiliated mutual funds.

Summaries of 2012 mutual fund firms' marketing support follow, segmented by mutual fund or 529 products:

Mutual fund marketing support arrangements by fund firms: Jan. 1, 2012 to Dec. 31, 2012

Fund family

Marketing support payments from fund firms in 20121

Source of payment

AllianceBernstein

$605,852

AllianceBernstein Investment Research and Management, Inc.

Allianz

$166,800

Allianz Global Investors Distributors, LLC

American Century

$4,468,631

American Century Investment Services, Inc.

BlackRock

$7,537,070

BlackRock Advisors, LLC

Calvert

$1,683,966

Calvert Distributors, Inc.

Columbia

$54,928,112

Columbia Management Distributors, Inc.

Credit Suisse2

$478,187

Credit Suisse Asset Management Securities, Inc.

Delaware3

$502,493

Delaware Investments

Dreyfus

$3,163,247

The Dreyfus Corporation and/or Dreyfus Service Corporation

DWS Funds

$4,629,936

DWS Distributors, Inc.

Eaton Vance

$6,840,006

Eaton Vance Distributors, Inc.

Federated Investors

$3,728,673

Federated Securities Corp.

Fidelity Investments

$11,892,924

Fidelity Distributors Corporation

Franklin Templeton

$4,431,562

Franklin Templeton Distributors, Inc.

Goldman Sachs

$3,074,677

Goldman, Sachs & Co.

Invesco

$8,432,702

Invesco Aim Distributors, Inc.

Ivy Funds

$2,337,677

Ivy Funds Distributor, Inc.

Janus Advisor

$4,861,776

Janus Capital Management, LLC

John Hancock

$6,385,646

John Hancock Funds, LLC

J.P. Morgan

$1,737,873

J.P. Morgan Distribution Services, Inc.

Legg Mason

$5,012,355

Legg Mason & Co., LLC

MFS

$14,166,384

MFS Fund Distributors, Inc.

Nuveen

$1,378,187

Nuveen Investments

Oppenheimer

$11,998,169

Oppenheimer Funds Distributor, Inc.

PIMCO

$2,512,255

PIMCO Investments, LLC

Prudential

$2,127,676

Prudential Investments, LLC

Putnam

$2,736,145

Putnam Retail Management Limited Partnership

Virtus

$1,900,260

Virtus Investment Partners, Inc.

Wells Fargo

$9,354,064

Wells Fargo Funds Distributor, LLC

Total marketing support payments from fund firms in 2012:

$183,073,303

1 "Marketing support payments" represents amounts recognized as revenue by Ameriprise Financial Services, Inc. for the billing period from Jan. 1, 2012, through Dec. 31, 2012, on retail mutual fund sales and assets. These figures also include amounts pertaining to participation in Ameriprise Organized conferences.

2 Credit Suisse Asset Management moved from the program to a distribution support relationship on May 1, 2012.

3 Delaware Investments was added to the program from a distribution support relationship on June 1, 2012.
529 plan marketing support arrangements by fund firms: Jan. 1, 2012 to Dec. 31, 2012

Fund family

Marketing support payments from fund firms in 20123

Source of payment

AllianceBernstein

$43,668

AllianceBernstein Investment Research and Management, Inc.

Allianz

$2,514

Allianz Global Investors Distributors, LLC

American Century

$75,198

American Century Investment Services, Inc.

BlackRock

$50,0002

BlackRock Advisors, LLC

Calvert

$911

Calvert Distributors, Inc.

Columbia

$159,847

Columbia Management Distributors, Inc.

Fidelity Investments

$764,476

Fidelity Distributors Corporation

Franklin Templeton

$10,048

Franklin Templeton Distributors, Inc.

Hartford

$7,386

Hartford Securities Distribution Co., Inc.

ING

$43,387

ING Investment Distributors, LLC

Ivy Funds

$1,354

Ivy Funds Distributor, Inc.

John Hancock

$135,499

John Hancock Funds, LLC

J.P. Morgan

$107,465

J.P. Morgan Distribution Services, Inc.

Legg Mason

$30,0002

Legg Mason & Co., LLC

MFS

$86,529

MFS Fund Distributors, Inc.

Oppenheimer

$197,804

Oppenheimer Funds Distributor, Inc.

Putnam

$22,541

Putnam Retail Management Limited Partnership

Upromise

$4,117

Upromise Investments, Inc.

Wells Fargo

$831,764

Wells Fargo Funds Distributor, LLC

Total marketing support payments from fund firms in 2012:

$2,574,506

1 "Marketing support payments" represents amounts recognized as revenue by Ameriprise Financial Services, Inc. for the billing period from Jan. 1, 2012 through Dec. 31, 2012, on 529 plan assets.

2 A flat fee amount paid in lieu of sales or asset based marketing support.

Neither Ameriprise Financial nor its affiliates or representatives, offer tax advice. Consult with your tax adviser regarding your specific situation.

Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. The prospectus contains this and other important information about the funds and should be read carefully before investing. To obtain a free copy of a prospectus, please contact your financial advisor.

An investor should consider the investment objectives, risks, and charges and expenses associated with 529 college savings plans before investing. More information about 529 plans is available in the issuer's official statement. The official statement should be read carefully before investing. An investor should consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

Investment products are not insured by the FDIC, are not deposits or obligations of or guaranteed by a financial institution, involve investment risks, including possible loss of principal, and may fluctuate in value.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC.