Strategic Partner Relationships
H. Beck, Inc. (HBI) offers a variety of different investment advisory, mutual fund, annuity, insurance, and alternative investment products to our representatives and customers. Our representatives are free to choose what products they sell to customers from among these many products. Because of the numerous investment and insurance alternatives available, HBI strategically selects product sponsors whose products it offers to clients. These product sponsors are called "Strategic Partners" and a list of our Strategic Partners is available here.
HBI provides the Strategic Partners with access to the firm’s financial advisors so the Strategic Partners can deliver education, training, and marketing support for their products. HBI believes that the Strategic Partner relationships make HBI financial advisors more knowledgeable about the products and therefore better able to service the needs of its clients.
In exchange for receiving access to HBI financial advisors, Strategic Partners provide HBI with both financial and nonfinancial support, also called revenue sharing. This compensation is in addition to typical sales-based compensation such as loads, commissions, premiums, 12b-1 fees, and other asset-based fees and expenses – all of which are borne by the investor and disclosed to the investor in the prospectus or offering documents. By contrast, revenue sharing payments are paid directly to HBI by the product sponsor or its affiliates.
HBI’s representatives do not receive any part of the revenue sharing payments and are not compensated any more for recommending products offered by the Strategic Partners. Accordingly, HBI does not believe the revenue sharing creates any incentive for its financial advisors to recommend one product over another based on the amount of compensation received by the financial advisor. Nonetheless, the educational, training and marketing activities provided by the Strategic Partners create greater visibility for their products and therefore could lead financial advisors to focus more on products from sponsors who make revenue sharing payments to HBI when recommending investments to clients – as opposed to products from sponsors that do not make such payments. HBI may also use payment from Strategic Partners to reimburse HBI’s representatives for client-related activities such as client seminars, client appreciation events, meet and greet events and charitable events.
Because we receive more compensation for the sale of products from Strategic Partners than for the products from other providers, we have a financial incentive to sell the products of Strategic Partners. The amounts and forms of compensation we receive from Strategic Partners vary based on a number of factors including level of past sales, prospective future sales and the types of service and access to distribution we provide. We receive one or more of the forms of compensation described below in connection with our arrangements with each Strategic Partners.
Mutual Funds and ETFs
Strategic Partners of mutual funds and ETFs pay us or our affiliates either an amount of up to 0.06% on Assets Under Management (NQ) or fixed fees of up to $350,000 annually to support and participate in various conferences and seminars conducted by us and our affiliate.
Strategic Partners of variable annuities pay us or our affiliates an amount of up to 0.25% of the amount of our new sales of their products quarterly. Such providers may also pay us or our affiliates fixed fees of up to $65,000 annually to support and participate in various conferences and seminars conducted by us and our affiliate.
Equity and Fixed Indexed Annuity Providers
Strategic Partners of equity index annuities pay us or our affiliates an amount of up to .15% based on gross new sales volume. Such providers may also pay us or our affiliates fixed fees of up to $65,000 annually to support and participate in various conferences and seminars conducted by us and our affiliate.
Strategic Partners of 401(k), group variable annuity and other retirement products pay fixed fees for the benefit of us or our affiliates up to $250,000 annually to support and participate in conferences and seminars.
Strategic Partners of alternative investment products, including limited partnership, real estate investment trust (REIT), and hedge fund products, pay us or our affiliate an amount of up to 1.50% of new investments in such products. In addition, such providers pay us or our affiliates fixed fees of up to $75,000 annually to support and participate in conferences and seminars. Strategic Partners of alternative investment products also pay us or our affiliates an initial fee of up to $5,000 and an annual fee of up to $1,500 to support the due diligence efforts of us or our affiliates related to such products and providers.
Variable Life Insurance
Strategic Partners of variable life insurance products may pay us or our affiliates wholesale overrides in an amount of up to approximately 31% of first year target premium and an amount of up to approximately 4% of any renewal premiums. Strategic Partners of variable life products also pay us or our affiliates up to $45,000 annually to support various workshops and meetings, to support the development of account management tools and other technology and to support our due diligence efforts. In the case of variable life insurance products, Strategic Partners provide a variety of policy and underwriting support services to HBI, our affiliates and our financial advisors. We may pay our financial advisors a higher percentage of compensation for sales of Select Provider variable life insurance products than for other such products we sell.
Compensation Received in Connection with FundVest Funds
In addition to serving as an investment adviser, HBI is the introducing broker-dealer of record for brokerage accounts established in connection with the following investment advisory programs: H. Beck Portfolio Builder, H. Beck Choice and H. Beck Advisory Choice Asset Management Plus (ACAMP+), (the "IA Programs"). Approved trades in these brokerage accounts are introduced by HBI to Pershing, LLC ("Pershing"), H. Beck’s clearing broker. Pershing (member FINRA/SIPC) is a global provider of financial business solutions to institutional and retail financial organizations and independent registered investment advisors. Pershing is a subsidiary of The Bank of New York Mellon Corporation.
Pershing makes certain mutual funds (the "FundVest Funds") available to brokerage accounts established in connection with the IA Programs. The FundVest Funds do not have transaction fees (e.g., front end sales loads or deferred sales charges), provided they are held for at least three months. If FundVest Funds are held for less than three months, HBI bears any transaction fees in those cases. HBI receives 12b-1 fees through Pershing from the FundVest Funds or other mutual funds available through this program which are in addition to the investment advisory fees HBI receives from its clients under the IA Programs. HBI also receives from Pershing 55% of the service fees (defined below) Pershing receives in connection with the sale and retention of certain FundVest Funds. These fees are paid in accordance with an asset-based formula. The FundVest program is not a part of HBI's Strategic Partner Program, and HBI will not receive FundVest payments where funds participate in HBI’s Strategic Partner Program.
In addition, in association with certain other FundVest Funds, Pershing will pay 15% of the service fees that Pershing receives from such FundVest Funds to HBI. “Service Fees” are fees other than Rule 12b-1 Plan Fees paid directly or indirectly by a Fund pursuant to an agreement between Pershing and the parties that distribute the funds. Service fees are paid to Pershing in exchange for Pershing's administration of the FundVest program.
Effective April 1, 2017, for the IA Programs, HBI will credit back to client accounts FundVest program payments HBI receives from Pershing as a result of 12b-1 fees paid to Pershing from the FundVest funds with respect to assets held in a client's account. HBI shall retain payments of Service Fees.
For additional details regarding the FundVest program, please refer to www.pershing.com/mutual_fund.htm.
For more information about the Strategic Partner Program, you may contact the HBI Compliance Department by calling our toll-free number: 1.800.333.6884.
Bank Deposit Sweep Program
HBI offers a Sweep Program that enables its clients to earn a return on cash that is waiting to be invested. Participants in the Sweep Program authorize Pershing, LLC, our clearing agent, to transfer cash balances into an account at a bank whose deposits are insured by the Federal Deposit Insurance Corporation. The insured limits are explained in the disclosures below. Clients should read the disclosures and contact their financial advisor with any questions. HBI’s Sweep Program utilizes the following options: