Rising Floor Guaranteed Minimum Death Benefit A type of enhanced death benefit that is equal to the greater of (1) the contract value or (2) premium payments less prior withdrawals increased annually at a specified rate of interest. Many contracts permit annual withdrawals of a certain amount free of a surrender charge. A breakpoint is the dollar amount for the purchase of a load mutual fund's shares that qualifies the investor for a reducedsales charge. Please see the SEC file number table below for your An AUV is the net asset value after income and capital gains have been included and subaccount management expenses have been subtracted. Persistency Bonus An enhancement to the policy's benefits, usually in the form of additional interest credits and/or reduced charges, for policies that remain in force for a certain period. Institutional Investors vs. Retail Investors: Whats the Difference? to your policy will not change for the life of your policy (unless subject to an automatic step-up as described in the Automatic Step-Up section of Exclusion Ratio The formula that determines which portion of an annuity payment is considered taxable and which is a tax-free return of principal. Since it was previously taxed, cost basis is not taxed upon withdrawal. In some cases, funding of such plans is through fixed or variable annuities. Over the long term, an investment in Class A shares at levels that qualify for a reduced sales charge will generally outperform the same investment in Class B or C shares of the same fund family. O-share Variable Annuities O-shares are intended to merge the advantageous M&E and surrender charges of A-share and B-share variable annuities, respectively. O-Share Variable Annuities Annuity contracts which do not impose up-front sales charges, while, typically, possessing surrender charge periods similar to B-shares. The Financial Industry Regulatory Authority (FINRA) provides the following example of a breakpoint discount schedule: Suppose that an investor plans to invest $100,000 in afront-end loadmutual fund that carries a standard sales charge of 5.0%, or $5,000, and offers breakpoints. Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks. What is a Letter of Intent (LOI) and how can it help my clients qualify for breakpoint discounts? Unit Investment Trusts (UITs) | Investor.gov Annuity Unit Value The number of annuity units in an account remains constant during the annuitants lifetime. ROA permit investors to pay sales charges based on their total investment in the fund. Aristotle Funds | Portfolio Optimization Moderate Fund Our time-tested investment discipline is offered to clients through mutual funds, variable annuities, separately managed accounts, and offshore funds. In other words, this investor is able to save $1,750 on the transaction. Bailout Provision If a fixed annuitys interest rate falls below a rate specified in the annuity contract, this feature assures the free withdrawal of all funds from an annuity account. Cash Value (Surrender Value) The amount available to the owner when a policy is surrendered. Also known as purchase payments. Where can I find information to help educate my clients about breakpoint discounts? OGC staff contact:Joe Savage Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. This tool allows you to look up breakpoint schedules and linkage rules for mutual funds with sales charges to ensure discounts are given where applicable. However, if the investor does not actually make the required purchases at the end of the specified period, he or she will be required to forfeit the discounts received pursuant to the letter of intent. Ordinary Shares: Definition, How They Work, Advantages - Investopedia Record the BIN/TIN for each account in which the customer holds any funds within the same fund family. With fixed immediate annuities, the payment is based on a specified interest rate. B-Share Variable Annuity. Withdrawal Fee An administrative fee charged on withdrawals. Basically, ROA grant holders of mutual fund shares the potential for reduced commissions when purchasing more shares. Beneficiary A person, persons, or trust designated under the contract to receive any payments due in the event of the death of the owner or the annuitant. Excess Interest Interest credited to a fixed annuity contract beyond the minimum guaranteed by the insurance company. Employers may also make direct contributions on behalf of employees. Investors can qualify for breakpoints through a single purchase of Class A mutual fund shares, with a letter of intent (LOI) or through rights of accumulation (ROA). Wrap fees allow an investment advisor to charge one straightforward fee to their clients, simplifying the process for both the advisor and the customer. Our exceptional client service, investment platform, and competitive cost structure can help address clients needs, regardless of their financial objectives. Premature Distribution or Withdrawal (Premature Distribution Penalty) Withdrawals made from deferred annuities and certain other tax-favored plans may be subject to an additional 10% federal income tax if the withdrawal is made before the contract owner reaches age 59 1/2. 3. A LOI, a formal document signed by the investor outlining their plans for investment in the fund, enables an investor to qualify for breakpoints by committing to an investment schedule over a. A right of accumulation (ROA) allows investors to aggregate their own holdings as well as the holdings of certain related parties, such as spouses and children, toward achieving the investment thresholds at which breakpoint discounts become available. The term refers to their position as accounts held within the separate account of the insurance company offering the variable annuity. issue the policy with the applicable rates in effect at that time. The extent of the discount depends on the amount invested in a particular family of funds. Service Provider A company that provides any type of service to the plan, including managing assets, recordkeeping, providing plan education, and plan administration. Arbitration and mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution Portal. The issuing company assumes the investment risk. To learn more about FINRA breakpoints initiatives, please see our Mutual Fund Breakpoints Web page. Ask your clients for the information necessary to determine their eligibility for breakpoint discounts, such as their fund holdings and the holdings of their spouse or children, among other relatives. Mutual Fund Prospectuses and Reports | Transamerica Mortality and Expense Risk Charge (M&E) A fee charged in variable annuities for insurance guarantees, including the death benefit, the guaranteed lifetime income options, and the guarantee that contract charges will not increase. Market Risk The risk of losing portfolio value due to the volatility of the stock market. The account and mutual fund are the same. A shares, once popular are rarely offered. Share Our Selves has an on-call service available for after-hours care, please call 949.270.2100 for assistance. PDF 2015 Regulatory and Examination Priorities Letter - FINRA.org Transfer The movement of assets from one subaccount to another. Investment Companies Flashcards | Quizlet A-share contracts typically have no surrender charges. A LOI, a formal document signed by the investor outlining their plans for investment in the fund, enables an investor to qualify for breakpoints by committing to an investment schedule over a period of time. 7. Single Premium Annuity An annuity contract that is purchased with a single payment. Variable Annuity Share Classes - Institute of Business & Finance The L share annuity class is ideal for investors . Variable Annuitization A stream of income payments that vary based on the investment performance of underlying subaccounts. The risks associated with an investment in the Fund can increase during times of significant market volatility. applicable product. All immediate annuities and some deferred non-qualified annuities are in this category. Independent Review of the Transamerica Variable Annuity Series O-Share Contingent Deferred Sales Charge Costs imposed on the withdrawal of proceeds or liquidation of a variable annuity, which typically range from 5% to 7% in the first year, and subsequently decline to zero. Contributions are not dependent on company profits. Investors also may be able to aggregate holdings they have in different accounts at the same broker-dealer, at different broker-dealers, or in different types of accounts, such as 401(k)s and 529 plans, as well as the holdings in the accounts of related parties toward achieving an investment threshold at which a breakpoint discount is available. Breakpoint discounts are volume discounts to the front-end sales load charged to investors who purchase Class A mutual fund shares. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. Money-Purchase Plan A type of defined contribution plan in which the employers contributions are determined by a specific formula, usually as a percentage of pay. The T share is like a hybrid of A share and C shares. Please see FINRA OGC Interpretative Guidance for more information. Accumulation Phase The period in an annuity contract prior to annuitization when annuity owners can add money and accumulate tax-deferred assets. In 2003, at the request of the SEC, NASD, joined by the Securities Industry Association (SIA) and the Investment Company Institute (ICI), led a task force on breakpoints charged with recommending industry-wide changes to address errors and missed opportunities to provide breakpoint discounts. B-share refers to a type of variable annuity that does not have front-end sales charges but does include surrender fees. To find information regarding ROA rules for each mutual fund, you should review the fund's prospectus and statement of additional information, or consult with your firm's compliance officer. Enhanced Death Benefit A death benefit that goes beyond the guaranteed minimum death benefit by periodically locking in investment gains or paying a minimum stated interest rate on purchase payments. Refund Annuity A contract that provides a lump sum at the death of the annuitant, which when added to total annuity payments equals the purchase price. From the External sharing section, you can set the desired sharing setting . L-Share Variable Annuities Variable annuity contracts that typically have shorter surrender periods, such as three or four years. Mutual fund prospectuses and statements of additional information also may be available online at a fund company's website. And with the rise of DoL fiduciary, we're actually seeing the emergence of a 17th share class - the T share. Continue your industry education and access the latest in retirement industry resources by becoming an IRI member. Annuities often have high fees compared to mutual funds and other . Deferred Annuity The annuity contract during the time period prior to annuitization. The form is signed by the applicant and is part of the insurance or annuity contract. What mutual fund share classes are available through NYLIFE Securities? variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic pay-ments to you, beginning either immediately or at some future date. James Chen, CMT is an expert trader, investment adviser, and global market strategist. FINRA IS A REGISTERED TRADEMARK OF THE FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. FINRA operates the largest securities dispute resolution forum in the United States, To report on abuse or fraud in the industry. Where can I find more information about Mutual Fund Breakpoints and discount eligibility? Subaccount The investment funds offered in variable annuity contracts are often called subaccounts. Bonus Rate Extra interest accumulated in the first year of a deferred annuity that is added to the sum upon which interest is calculated in later years, also called a first-year bonus rate. The offers that appear in this table are from partnerships from which Investopedia receives compensation. The bonus may or may not be guaranteed in the contract. Guaranteed Minimum Death Benefit (GMDB) The basic death benefit offered under variable annuity contracts, which specifies that if the owner, or in some contracts the annuitant, dies before annuity income payments begin, the beneficiary will receive a payment equal to (a) the greater of the contract value or (b) purchase payments less withdrawals. Assumed Investment Return (AIR) Variable annuity payments increase or decrease based on the net performance (returns after fees and expenses) of the underlying investments in relation to a benchmark assumed investment return. Guaranteed Minimum Withdrawal Benefit (GMWB) A guarantee that promises a certain percentage (usually 5% to 7%) of a guaranteed benefit base (often paid premiums) can be withdrawn annually until the base is completely recovered, regardless of market performance or the actual account balance. Alternative Mutual Funds Purchase payments are directed to a range of investment options, which may be mutual funds, or directly into the separate account of the insurance company that manages the portfolios. However, every firm that sells or anticipates selling mutual funds, no matter its business model, should cover the topics listed in parts I and II of the outline. Report a concern about FINRA at 888-700-0028, Securities Industry Essentials Exam (SIE), Financial Industry Networking Directory (FIND), Mutual Fund Breakpoints: A Break Worth Taking. Charitable Annuity (Gift Annuity) A charitable gift annuity is a contract between a donor and a foundation, under which the foundation guarantees payment of an annuity. Since FINRA recognizes that every firm has a unique business model, firm element training methods and content may vary. Nationwide O Series is a variable annuity that's designed for investors looking for tax-deferred growth potential, varied investment choices and retirement income. Fixed Indexed Annuity An annuity on which credited interest is based upon the performance of an equity market index, such as the S&P 500. The rider fee and withdrawal percentages applicable When you purchase Class A, 529-A and ABLE-A shares, your sales charge is based on the total value of all the accounts that you, your spouse or equivalent (if recognized by law) and children under 21 have with American Funds. Variable annuity dollar cost averaging programs involve allocating a certain amount to one investment subaccount, such as a money market fund, and then having portions of that payment periodically transferred to other subaccounts. All Rate Sheet Prospectus Supplements are also available on the Edgar system at www.sec.gov. A contract in which an insurance company agrees to pay an income for life or for a specified number of years. Separate Account The insurance companys investment portfolio that supports variable life and annuity contracts. Income or Payout Options Methods by which a contract owner can receive income from an annuity. Cash Refund Annuity An annuity settlement payment, which provides that upon the death of the annuitant before payments totaling the purchase price have been made, the excess will be paid in one sum to designated beneficiaries. Savings Period or Phase The period in which the owner of a deferred annuity makes payments and accumulates assets. For example, by signing an LOI to buy $25,000 worth of fund shares over the course of a year in $5,000 increments, an investor can obtain the $25,000 breakpoint discount on each $5,000 purchase. The Morningstar Rating for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. The value of your contract will fluctuate with changes in the value of the separate accounts. FINRA, OGC The amounts listed PDF Variable Annuities: What You Should Know - SEC.gov However, the advisor assesses fees for the services, including the I-share contract, which is agreed upon by the client. Premiums The amounts of money paid into an annuity contract. For example, a mutual fund might charge a front-end load of 5.75 percent for share purchases of less than $50,000, but reduce the load to 4.50 percent for investments between $50,000 and $99,999, and further reduce or eliminate the load for larger investments. Investment Companies Flashcards | Chegg.com Annuitant The person, frequently the contract owner, to whom an annuity is payable and whose life expectancy is used to calculate the income payment. Guaranteed Minimum Living Benefit (GMLB) A benefit that protects against investment risks by guaranteeing the level of account values or annuity payments. The Joint NASD/Industry Task Force urges mutual funds to include these definitions in their prospectuses and other relevant materials as soon as is reasonably practicable. If a mutual fund offers breakpoint discounts, the breakpoint schedule will be listed in the fund's prospectus and statement of additional information. It is an element of added protection to the investor that variable annuity assets are held in a separate account protected from the claims of insurance company creditors. Wrap-fee A comprehensive charge levied by an investment manager or investment advisor to a client for providing a bundle of services, such as investment advice, investment research and brokerage services. Currently Sold Annuity Contracts . Read the mutual fund prospectus or Statement of Additional Information, check a mutual fund company's website, or ask a financial professional for information on the terms and conditions of any available breakpoints. Record this information in each client's file so it can be applied to future purchases of a particular fund, which might result in additional breakpoint discounts. Annual Contract Fee An annual fee paid to the insurance company for administering the contract. Guaranteed Investment Contracts (GICs) Group contracts with an insurance company at a fixed rate of interest. The adjustment is based on the relationship of market interest rates at the time of surrender and the interest rate guaranteed in the annuity. At the request of the Securities and Exchange Commission ("SEC"), NASD convened and led a Joint NASD/Industry Breakpoint Task Force, with representatives from, among others, Investment Company Institute ("ICI"), Securities Industry Association ("SIA"), National Security Clearing Corporation ("NSCC"), broker/dealers, mutual funds, and transfer agents, to examine the difficulties that the financial industry experienced delivering breakpoint discounts on Class A mutual fund share sales and to develop recommendations to facilitate the complete and accurate delivery of breakpoint discounts in the future. Dollar cost averaging does not guarantee a profit or prevent a loss in declining markets. Defined Contribution Plan An employer-administered retirement plan in which the contribution, rather than the benefit, is defined. Any additional investments would incur a sales charge of 3.75% until the investor reaches the next breakpoint of $100,000. What is a Right of Accumulation (ROA)? Indexed Annuity (See Fixed Indexed Annuity.). The withdrawal percentage is determined by the number of rider years and the annuitants age (or the annuitants spouses age if younger and the joint life option is elected) at the time of the first If the total investment return minus expenses exceeds the AIR, the payment increases. should be read and retained with the prospectus. Rights of accumulation are rights that allow a shareholder to receive reduced sales commission charges when the amount of mutual funds purchased plus the amount already held equals a rights of accumulation (ROA) breakpoint. We must also receive your completed application within 7 calendar days from the date that this supplement is no longer effective, and the policy must be funded within 60 calendar This is due to both the availability of breakpoints and the lower 12b-1 Fees associated with A shares. To assess your clients' opportunities to receive breakpoint discounts, you should: For more guidance on how to ensure your clients receive the appropriate breakpoint discount, please see our Mutual Fund Breakpoints Web page. Fixed Annuitization A series of guaranteed income payments of a specified amount payable for the life of the annuitant(s) or a specified number of years. withdrawal taken on or after the rider anniversary immediately following the annuitants (or the annuitants spouses if younger and the joint life option is elected) attainment of the minimum benefit age. The service focuses on contract titling and spousal continuation to help you avoid titling mistakes, arbitration, unexpected. days from the date that this supplement is no longer effective. The objective of asset allocation is to reduce investment risk. 1. An LOI allows investors to receive breakpoint discounts based on a commitment to buy a specified number of shares over a period of time, usually 13 months.

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