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 Ameriprise financial advisor’s 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 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 mutual fund 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, LLC 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 advisor 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 advisor or distributor may pay a fee to Ameriprise for the mutual fund shares purchased during a given period (sales-based payment). As of December 2013, Ameriprise received an asset-based payment (up to 0.25% per year for mutual funds and 0.16% per year for 529 plans) on some or all of 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 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 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 July 1, 2014, twenty-seven firms fully participate in the Program. These firms include: Allianz Global Investors, American Century Investments, BlackRock Funds, Calvert Investments, Columbia Management, Delaware Investments, Deutsche Asset & Wealth Management, Dreyfus, Eaton Vance, Federated, Fidelity Investments, Goldman Sachs & Co., Invesco, Ivy Funds, Janus Capital Group, John Hancock Investments, JP Morgan Asset Management, Legg Mason, Lord Abbett, MainStay Investments, MFS Investment Management, Nuveen Investments, OppenheimerFunds, Prudential Investments, Putnam Investments, Virtus Investment Partners and Wells Fargo Advantage Funds. 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 Investments, BlackRock Funds, Calvert Investments, Columbia Management, Deutsche Asset & Wealth Management, Fidelity Investments, Ivy Funds, JP Morgan Asset Management, John Hancock Investments, Legg Mason, MFS Investment Management, OppenheimerFunds and Putnam Investments. 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 Investments and PIMCO Investments. These firms are Limited Participation firms.
529 plan Limited Participation firms include: AllianceBernstein and Franklin Templeton Investments.
Mutual Fund List
Ameriprise financial advisors may make mutual fund recommendations based on a group of funds that appear on an Ameriprise Financial Services mutual fund list (the “List”). The List is developed by the Ameriprise Investment Research Group (IRG). Approximately 1,600 mutual funds are eligible for inclusion on the List, which includes only mutual funds from Full Participation Firms in the Ameriprise Financial Services Mutual Fund Program described above.
In developing the List, the IRG 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 A share class. 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 Advantage, SPS Advisor or the Ameriprise Brokerage Platform. 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 receives payments for the services we provide to the Full Participation firms (including Columbia Management) and to other funds available for sale at Ameriprise Financial Services. The amount of fees Ameriprise Financial Services 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 Financial Services to be on the List. Clients may choose to follow the recommendations provided by the Ameriprise financial advisor or may select from any of the other funds offered through Ameriprise Financial Services, regardless of whether that fund appears on the List.
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 Ameriprise 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. Certain 529 plans may pay Ameriprise financial advisors a fee of up to 1% assets for NAV rollovers.
The total amount received from all distribution support firms in 2013 was $9,337,483. The firms that paid more than $500,000 were: First Eagle Funds ($1,797,504), Managers Funds ($664,602), NATIXIS ($687,718) and Thornburg Funds ($532,937). The remaining firms paid amounts ranging from $9 to $472,286.
Other financial relationships
In addition to sales charges, 12b-1 fees and marketing support payments Ameriprise receives, the mutual fund’s financial advisor, 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, of 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, Inc. 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, LLC as an underlying investment option in products offered through the program.
Ameriprise has marketing support agreements with BlackRock Advisors, LLC and Fidelity Investments, with respect to mutual fund positions held by Ameriprise Financial customers. BlackRock, Inc. and Fidelity Investments each own more than 5% of the outstanding shares of Ameriprise Financial, Inc. stock.
Ameriprise 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.
The following funds are affiliated with Ameriprise Financial, Inc.: Columbia Management, Wagner, 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 2013 mutual fund firms’ marketing support follow, segmented by mutual fund or 529 products:
Mutual fund marketing support arrangements by fund firms (Jan. 1, 2013 to Dec. 31, 2013)
|Fund family||Marketing support payments from fund firms in 20131||Source of payment|
|AllianceBernstein||$733,127||AllianceBernstein Investment Research and Management, Inc.|
|Allianz||$912,825||Allianz Global Investors Distributors, LLC|
|American Century||$4,689,043||American Century Investment Services, Inc.|
|Blackrock||$9,903,355||BlackRock Advisors, LLC|
|Calvert||$2,310,533||Calvert Distributors, Inc.|
|Columbia||$54,973,425||Columbia Management Distributors, Inc.|
|Dreyfus Funds||$3,538,537||The Dreyfus Corporation and/or Dreyfus Service Corporation|
|DWS Funds||$5,205,146||DWS Distributors, Inc.|
|Eaton Vance||$6,275,858||Eaton Vance Distributors, Inc.|
|Federated Investors||$2,354,288||Federated Securities Corp.|
|Fidelity Investments||$10,907,658||Fidelity Distributors Corporation|
|Franklin Templeton||$4,991,223||Franklin Templeton Distributors, Inc.|
|Goldman Sachs||$4,939,868||Goldman, Sachs & Co.|
|Invesco||$9,842,964||Invesco Aim Distributors, Inc.|
|IVY Funds||$4,834,812||Ivy Funds Distributor, Inc.|
|Janus Advisor||$4,040,549||Janus Capital Management, LLC|
|John Hancock||$8,142,189||John Hancock Funds, LLC|
|J.P. Morgan||$4,100,427||J.P. Morgan Distribution Services, Inc.|
|Legg Mason||$5,487,163||Legg Mason & Co., LLC|
|Lord Abbett2||$413,225||Lord Abbett Distributor LLC|
|MFS||$17,349,016||MFS Fund Distributors, Inc.|
|Oppenheimer||$14,823,032||Oppenheimer Funds Distributor, Inc.|
|PIMCO||$3,004,948||PIMCO Investments, LLC|
|Prudential||$5,047,248||Prudential Investments, LLC|
|Putnam||$3,519,618||Putnam Retail Management Limited Partnership|
|Virtus||$3,637,389||Virtus Investment Partners, Inc.|
|Wells Fargo||$11,208,072||Wells Fargo Funds Distributor, LLC|
|Total marketing support payments from fund firms in 2013:||$210,054,162|
1 "Marketing support payments" represents amounts recognized as revenue by Ameriprise Financial Services, Inc. for the billing period from Jan. 1, 2013, through Dec. 31, 2013, on retail mutual fund sales and assets. These figures also include amounts pertaining to participation in Ameriprise-organized conferences.
2 Lord Abbett was added to the program from a distribution support relationship on Aug. 1, 2013.
529 plan marketing support arrangements by fund firms (Jan. 1, 2013 to Dec. 31, 2013)
|Fund family||Marketing support payments from fund firms in 20133||Source of payment|
|AllianceBernstein||$51,758||AllianceBernstein Investment Research and Management, Inc.|
|Allianz||$4,939||Allianz Global Investors Distributors, LLC|
|American Century||$86,480||American Century Investment Services, Inc.|
|Blackrock||$50,000||BlackRock Advisors, LLC|
|Calvert||$2,251||Calvert Distributors, Inc.|
|Columbia||$62,059||Columbia Management Distributors, Inc. & Colombia Management Investment Distributors, Inc.|
|Fidelity||$813,808||Fidelity Distributors Corporation|
|Franklin Templeton||$17,065||Franklin Templeton Distributors, Inc.|
|Hartford||$16,647||Hartford Securities Distribution Co., Inc.|
|ING||$388,222||ING Investment Distributors, LLC|
|IVY Funds||$3,418||Ivy Funds Distributors, Inc.|
|John Hancock||$251,496||John Hancock Funds, LLC|
|JP Morgan||$257,776||J.P. Morgan Distribution Services, Inc.|
|Legg Mason4||$37,500||Legg Mason & Co., LLC|
|MFS||$100,805||MFS Fund Distributors, Inc.|
|Oppenheimer||$263,076||Oppenheimer Funds Distributor, Inc.|
|Putnam||$29,920||Putnam Retail Management Limited Partnership|
|Upromise||$2,843||Upromise Investments, Inc.|
|Total marketing support payments from fund firms in 2013:||$2,440,063|
3 "Marketing support payments" represents amounts recognized as revenue by Ameriprise Financial Services, Inc. for the billing period from Jan. 1, 2013, through Dec. 31, 2013, on 529 plan sales and assets. These figures also include amounts pertaining to participation in Ameriprise-organized conferences.
4 A flat-fee amount paid in lieu of sales-or asset-based marketing support.