Variable Annuity Revenue Sharing

In addition to receiving commissions in connection with the sale of annuity products, UBS Financial Services Inc. receives other types of compensation from the insurance companies that underwrite the variable annuity products that we sell to our clients (commonly referred to as "revenue sharing"). Revenue sharing payments, which are made by the insurance company out of their own resources and not paid by the client, may have up to four of the following components:

  • One-time setup payment: These payments are intended to offset various expenses incurred by us in preparing for the insurance companies selling its products to our clients, such as reviewing marketing materials, systems costs, administrative costs and marketing expenditures.
  • Expense reimbursement allowance payments: These payments (ranging from 0.05% to 0.25% annually) are based on annualized quarterly sales. These payments are intended to offset expenses we incur in the sale of variable annuity products, but may be used for other purposes.
  • Quarterly asset payments: These payments (ranging from 0.04% to 0.10% annually) are based on variable annuity assets held by our clients at certain insurance companies.
  • Quarterly persistency payments: These payments (ranging from 0% to 0.05% annually) are based on assets attributable to certain annuity products sold by us but that remain with the insurance company for an agreed minimum period, generally five or more years.

Although none of these revenue sharing payments are paid to the Financial Advisor or the branch office, these payments may present a conflict between our interests and those of our clients because the payments may create a financial incentive for us to recommend that our clients buy and hold certain annuity products that we maintain on our distribution platform. Although a wide variety of annuity products (offered by different insurance companies) are available through our Financial Advisors, they are only part of the universe of annuity products in the marketplace. UBS Financial Services Inc. determines whether an insurance company has access to our clients based upon our own review and evaluation of each insurance company and its annuity products. There are multiple factors involved in determining a particular insurance company's access to our clients. Although revenue sharing may be one factor, others include the financial stability of the insurance company and the features of its products. In addition to the payments described above, from time to time insurance companies will reimburse UBS Financial Services Inc. for expenses we incur in connection with certain training and educational meetings, conferences or seminars. Also, in the ordinary course of business, our Financial Advisors may receive promotional items, meals or entertainment, or other similar "non-cash" compensation from insurance companies with which we do business.

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