A Guide to Choosing a Financial Professional

Transcription

1 A Guide to Choosing a Financial Professional What you should know before you invest Because you are a valued client, we believe it is important for you to understand the financial professional relationships available to you when obtaining investments, products, and services from Wells Fargo Advisors. Furthermore, it is important that you understand the exact nature and potential advantages of each relationship, so that you can select the professional you think is best-suited to help you meet your short- and long-term investment goals and objectives. This guide will help you better understand the different types of financial professionals and assist you in determining which type of relationship is the most appropriate for your needs. If you have any questions about the financial professional relationships available to you, please contact your Financial Advisor or your local Wells Fargo Advisors branch office. Wells Fargo Advisors offers its services through several types of financial professionals, and each type has different responsibilities. The firm s financial professionals can also hold more than two dozen professional designations and certifications, each of which represents a set of skills designed to address specific financial issues and opportunities. In addition to these industry-wide designations, Wells Fargo Advisors offers designations specific to the firm that enable some of our financial professionals to provide specific programs and advisory services to our clients. Our goal is for you to get the full value from your relationship with us. To that end, we have provided the following information to help you understand the full range of professionals that are available to you, including the range of their skills and credentials, as well as how they are compensated. Why invest with a financial professional? The financial professional you choose is a key component in shaping your financial future. You need to be able to entrust this person with your most personal information, dreams, and goals. Consequently, the financial professional you choose needs to not only be someone you can rely on, but someone with whom you can talk openly about your long-term plans. In today s fast-paced financial world, it s difficult for casual investors to monitor the markets and stay on top of emerging investment opportunities. Whether you have recently received a large sum of money, retired, or experienced some other type of major life change, a financial professional can assist you in your financial matters by offering professional experience and knowledge that do-it-yourself investors may not possess. Types of financial professionals In the past, financial professionals were limited in scope in terms of what they could provide and offer to their clients. As the financial industry has grown in size and complexity, so have the roles and responsibilities of financial professionals. In general, depending upon their relationship with their clients and their qualifications, financial professionals commonly are characterized as either Securities Brokers or Investment Adviser Representatives. Investment and Insurance Products: NOT FDIC Insured NO Bank Guarantee MAY Lose Value 1 of 13

2 Securities Brokers Securities Brokers are commonly referred to as stock brokers or registered representatives. They execute a transaction to purchase or sell a security at the request of a client. To qualify as a securities broker, an individual must first pass an exam that tests his or her knowledge of securities laws and investment products, and he or she must then become registered by the state in which he or she works as well as those states in which he or she conducts business with their clients. The type of exam the individual passes will determine the types of securities that may be transacted on behalf of his or her clients. The most basic exam available to perform the duties of a limited securities broker is the Series 6 exam. To earn this registration, an individual must successfully complete a training course and the Series 6 exam, which is administered by the Financial Industry Regulatory Authority (FINRA). Upon successful completion of this exam, an individual will have earned the Series 6 registration and demonstrated that he or she has the required knowledge and qualifications to sell mutual funds, variable annuities, and variable life insurance products.* At Wells Fargo Advisors, it is more common for a securities broker to earn the Series 7 registration by taking the course work and successfully completing the Series 7 exam, which is also administered by FINRA. An individual who has earned the Series 7 registration can solicit different types of securities such as stocks, bonds, mutual funds, and unit investment trusts (UITs). To sell managed futures pools, commodities, futures, and insurance products like annuities, an individual must earn additional registrations and licenses. In some instances, representatives holding a Series 6 registration may refer their clients to a professional who has a Series 7 registration to handle transactions on their clients behalf. Investment Advisers An Investment Adviser is a person (either an individual or an entity) who provides advice about securities for a fee and must be registered with the U.S. Securities Exchange Commission (SEC) or the state securities commission, depending on the amount of money or number of clients that he or she manages. An Investment Adviser Representative is a person who works for an Investment Adviser. Investment Advisers can provide these services on a discretionary basis (the Investment Adviser makes the investment decisions for you based on your investment objectives and risk tolerance) or on a nondiscretionary basis (the Investment Adviser provides investment advice and recommendations to you, but you make the investment decisions). For additional information about an Investment Adviser or Investment Adviser Representatives please refer to the Investment Advisory and Brokerage Services: A Guide to What You Should Know Before Investing with Us brochure, available online at wellsfargoadvisors.com. Types of financial professionals at Wells Fargo Advisors Wells Fargo Advisors has a long and distinguished history of offering quality advice and service. Today, the firm employs approximately 14,500 registered representatives. Your advisor not only provides access to a complete selection of industry products and services, but he or she can also work with your accountant, attorney, and other professional advisors, as needed, to help you attain your short- or long-term objectives. Depending on your goals and needs, at Wells Fargo Advisors there are two types of advisors registered with our firm: Financial Advisors and Licensed Bankers. Financial Advisors Financial Advisors are registered representatives that have successfully earned the Series 7 registration and can execute trades for stocks, bonds, mutual funds, etc. Some Financial Advisors may earn other specialized registrations that allow them to execute transactions in more complex financial products, which is described in more detail below. Some Financial Advisors also function as Investment Adviser Representatives. Financial Advisors must be properly registered before providing investment advisory services. Licensed Banker Within Wealth Brokerage Services (our division that operates in Bank Financial Centers), Licensed Bankers are employed by the Bank to offer traditional banking products and registered by Wells Fargo Advisors for the purpose of referring banking clients interested in conducting brokerage activity to a Financial Advisor. * Note: State insurance licensing is also required to solicit and sell variable annuity or life insurance policies. All data include Wells Fargo Clearing Services, LLC (including its predecessor firms) and Wells Fargo Advisors Financial Network, LLC as of 12/31/17. 2 of 13

3 Professional and industry designations Financial services industry professionals have access to a variety of professional educational opportunities. These opportunities provide specialized designations in fields such as retirement, investment management, planning, or financial products. Prerequisites and education requirements vary widely for each industry designation. Specialized designations may include, for example, Certified Financial Planner (CFP ), Certified Investment Management Analyst SM (CIMA ), and Chartered Financial Analyst (CFA ). Simply holding a professional designation does not, by itself, imply that the Financial Advisor is providing you with financial planning or investment advisory services with respect to any specific account. Furthermore, being a CFP certificant does not mean that a registered representative is acting in an advisory capacity. Industry designations vary broadly, from the prerequisites required to apply for or work toward the designations, to the ethics and background-check requirements, to the education and examination requirements, and the continuing education or recertification requirements. To ensure that our financial professionals receive the proper education and training, we review each designation thoroughly before allowing our advisors to obtain and utilize it while working at Wells Fargo Advisors. When we review each professional designation, we ask the following questions: What is the history and reputation of the issuing organization? What are the qualifications, including experience, necessary to earn the designation? How much education is required, and what is the content of the course work? What types of exams are required (in terms of complexity, length, and method of delivery, such as online or in a classroom)? Is the subject matter of the designation relevant? Are there continuing education requirements to maintain the designation? What are the ethical standards or code of ethics associated with the designation? The following are some common industry-wide professional designations held by financial professionals and a brief description of each. For the purposes of clarification, please note that organization is the name of the organization that issues and maintains the designation. Continuing education refers to the number of continuing education (CE) credit hours that the individual must earn to maintain the designation; CE credits are typically earned by taking courses, attending seminars, and similar activities that are specified and/or have been approved by the organization for the purposes of earning credits.* AAMS Accredited Asset Management Specialist Prerequisites: None required Education requirements: 10 modules, totaling 9 11 weeks Exams: Final exam for certification Description: The curriculum for this designation is designed to educate financial advisors in a variety of investment disciplines including, but not limited to, asset allocation, investment selection, insurance and investment tax considerations; regulatory and ethical considerations also are emphasized. The AAMS designation is designed for financial advisors who take a long-term approach with their clients. Accredited Domestic Partnership Advisor ADPA is a grandfathered designation. As of 4/29/16, the College for Financial Planning has academically suspended the Accredited Domestic Partnership Advisor SM or ADPA Professional Designation Program. Created in 2009, the ADPA was the first and only financial education program specifically focused on the unique needs of domestic partners. The curriculum addressed the unique financial planning needs of lesbian, gay, bisexual, and transgender (LGBT) individuals, as well as heterosexual couples who have chosen not to marry. However, the June 2015 SCOTUS ruling on same-sex-marriage rendered the majority of the program content no longer relevant. Other CFFP programs (like the AWMA and CFP Certification Professional Education Program) contain the still-relevant information related to the financial planning for domestic partnerships. However, there is no longer enough content to maintain a separate professional designation program. ADPA Designees will still be recognized via cffpdesignations.com and designees can still use the designation per CFFP Mark Usage Policy. * This list is as of 9/1/17 and is subject to change. This list may not be all-inclusive; consult your Financial Advisor regarding the designations and certifications he or she holds. 3 of 13

4 Prerequisites: Holds the AAMS or CRPC certification, or experience as a CFP professional. /index.aspx Education requirements: Four modules (self-study program), approximately 10 hours each Exams: Final exam for certification Description: This program introduces students to the planning needs of couples who are considered to be unmarried by state or federal law, or both. The curriculum covers the unique planning needs of lesbian, gay, bisexual, and transgender (LGBT) individuals, as well as heterosexual couples who have chosen not to marry. Specifically, topics that are covered include factors and situations that cause financial planning, for domestic partners to be different from legally married spouses, including wealth transfer, taxation, retirement planning, and estate planning issues. Topics also include alternative planning solutions for these situations. APMA Accredited Portfolio Management Advisor Prerequisites: None required Education requirements: Two-part self-study course (requires hours): 11-module course focusing on program concepts Online instructor-led graduate course involving direct application of program topics Exams: Final exam after completion of required course material Continuing Education: 16 hours every two years Description: The APMA covers topics including client assessment and suitability, risk/return, investment objectives, bond and equity portfolios, modern portfolio theory, and investor psychology. The course features investment policy statement work, portfolio building, and asset allocation decision making. The curriculum is based on a client-centered problem-solving approach. AWMA Accredited Wealth Management Advisor Prerequisites: None required Education requirements: Eight modules, totaling weeks Exams: Final exam for certification Description: The AMWA curriculum consists of instruction in eight topics, covering topics ranging from insurance, asset management, income tax, retirement, and estates. Areas of study include investment for retirement, strategies for small-business owners, management of deferred-compensation plans, insurance, estate planning, asset protection, and tax-reduction issues. CAIA Chartered Alternative Investment Analyst Prerequisites: U.S. bachelor's degree or the equivalent, and have more than one year of professional experience, or alternatively have at least four years of qualifying professional experience. Organization: CAIA Association Website: caia.org Education requirements: Generally requires one year of study to complete Level I and Level II exams Exams: Successful completion of Level I and Level II examinations Continuing Education: Self-evaluation assessment must be completed every three years Description: The CAIA program is a self-directed, self-study program designed to provide a comprehensive curriculum on risk-return attributes of institutional-quality alternative assets. The program focuses on core competencies related to creating, managing, and monitoring institutional-quality portfolios consisting of both traditional and alternative investments. CEBS Certified Employee Benefits Specialist Prerequisites: None Organization: Cosponsored by the International Foundation of Employee Benefit Plans (IFEBP) and the Wharton School of the University of Pennsylvania Website: ifebp.org/cebsdesignation/overview Education requirements: Eight courses (six required and two electives) Exams: Five required course exams Continuing education: 30 hours every two years Description: The Certified Employee Benefit Specialist (CEBS ) program has been redesigned to meet the demands of an evolving benefits industry while elevating the stature of designation holders. What is Different? CEBS moves to a five-course required curriculum focusing on the core elements of health care and retirement. Enhanced study materials with case study scenarios illustrate content and are accessible online in addition to print. 4 of 13

5 CFA Chartered Financial Analyst Prerequisites: Undergraduate degree, or combination of college and full time work experience adding up to four years. Organization: CFA Institute Website: cfainstitute.org Education requirements: Three levels (250 hours of study to complete each level) Exams: Three exams one exam after the completion of each level Continuing education: None required Description: The CFA is a graduate-level self-study program that develops and reinforces a fundamental knowledge of investment principles, such as ethical and professional standards, economics, quantitative methods, corporate finance, portfolio management, and wealth planning. The three levels of examination verify a candidate s ability to apply these principles across all areas of the investment decision-making process. The program s professional conduct requirements demand that both CFA candidates and charterholders adhere to the highest standards of ethical responsibility. CFP Certified Financial Planner Prerequisites: Bachelor s degree and three years of professional experience that can be categorized into one of the six primary elements of the personal financial planning process. Organization: Certified Financial Planner Board of Standards Website: cfp.net Education requirements: CFP Board-registered program, self-study or a CPA license, Ph.D. in business or economics, an attorney s license, or a CFA, ChFC, or CLU professional designation Exams: 10-hour CFP Certification Exam Continuing education: 30 hours every two years Description: The CFP certification is a comprehensive financialplanning certification. Financial Advisors must complete a rigorous study and series of exams covering topics such as insurance and estate planning, tax planning, as well as investment and retirement planning to earn the certification. CFP practitioners are also subject to strict adherence to the CFP Board s Financial Planning Practice Standards and Professional Code of Ethics and Responsibility. CFS Certified Fund Specialist Prerequisites: A bachelor's degree or 2,000 hours of financial services work experience. Organization: Institute of Business & Finance (IBF) Website: icfs.com Education requirements: Six modules designed to be completed within 15 weeks Exams: Three exams and one case study; each exam covers two modules Continuing education: 30 hours every two years Description: The CFS designation provides an in-depth education about all facets of mutual funds, including industry trends, mutual fund research, analysis, and evaluation, as well as Modern Portfolio Theory. ChFC Chartered Financial Consultant Prerequisites: Three years of full-time personal finance or insurance experience. Organization: The American College Website: theamericancollege.edu Education requirements: Seven required courses and two elective courses Exams: Nine exams one exam after the completion of each course Continuing education: 30 hours every two years Description: The ChFC designation delivers fundamental instruction on the concepts of financial planning, including investment, retirement, estate, insurance, and tax planning. Individuals who have earned this designation must adhere to The American College Code of Ethics and Procedures. CIMA Certified Investment Management Analyst Prerequisites: Three years of professional consulting experience and a clean regulatory/criminal record, or be able to satisfactorily justify any marks on records; also must pass an online qualification examination. Organization: Investment Management Consultants Association (IMCA), offered in conjunction with the Hass School of Business of University of California-Berkley and the Wharton School of the University of Pennsylvania Website: imca.org Education requirements: Four- to six-month study program followed by a one-week, onsite course Exams: Final certification exam Continuing education: 40 hours every two years 5 of 13

6 Description: Advisors who pursue the CIMA designation study investment management concepts for both fixed income and equity securities. The CIMA certification program covers core topic areas such as Governance; Fundamentals; Portfolio Performance and Risk Measurements; Traditional and Alternative Investments; Portfolio Theory and Behavioral Finance; Investment Consulting Process, and requires that candidates meet all eligibility requirements, including experience, education, examination, and ethics. CIMC Certified Investment Management Consultant (This designation was replaced by the CIMA designation after December 2003.) Prerequisites: (see CIMA) Organization: Investment Management Consultants Association (IMCA) Website: imca.org Education requirements: (see CIMA) Exams: (see CIMA) Continuing education: (see CIMA) Description: (see CIMA) CIPM Certification in Investment Performance Measurement Prerequisites: Two years of qualifying performance-related work experience or four years of investment industry professional experience. Organization: CFA Institute Website: cfainstitute.org Education requirements: None Exams: Successful completion of two exams required for certification completion Continuing Education: 45 hours every three years Description: The CIPM credential is dedicated to investment performance analysis and presentation. It is designed for financial professionals seeking to increase their mastery of performance measurement principles. The CIPM program applies best practices in investment analysis techniques through a self-directed curriculum and tests proficiency in professional ethics, performance evaluation, and investment reporting. C(k)P Certified 401(k) Professional Prerequisites: The prerequisite to use the C(k)P designation on marketing materials consists of personally having: 10 plans under management/advisory $30 million of assets under management/advisory Three years of experience in the defined contribution industry These requirements may be waived for professionals who function in an administrative capacity only and do not provide guidance on plans. Organization: The Retirement Advisor University in collaboration with UCLA Anderson School of Management Executive Education (TRAU) Website: trauniv.com Education requirements: Generally one year to complete Exams: Final exam for each course, online Mastery Curriculum Exam, online Candidate Designation Exam, online and proctored Continuing Education: 24 hours every 2 years Description: The C(k)P designation covers plan design, industry mechanics, fiduciary consideration, industry trends, due diligence, and a host of other basic and advanced concepts pertinent to retirement plan professionals. CLU Chartered Life Underwriter Prerequisites: Three years of full-time personal finance or insurance experience (within the previous five years). An undergraduate or graduate degree from an accredited school qualifies as one year of experience. The ChFC, RHU, REB, and CLF certification processes also satisfy the business experience requirements. Organization: The American College Website: theamericancollege.edu Education requirements: Five required courses and three elective courses Exams: Eight exams one exam after the completion of each course Continuing education: 30 hours every two years Description: The CLU program focuses on the fundamentals of insurance, estate planning, legal issues surrounding insurance, and the effective use of insurance with small business owners, such as group and nonqualified deferred compensation. Individuals who have earned this designation must adhere to The American College Code of Ethics and Procedures. 6 of 13

7 CMFC Chartered Mutual Fund Counselor Prerequisites: None, in collaboration with the Investment Company Institute (ICI) Education requirements: Nine modules, totaling 72 to 90 hours Exams: Final certification exam Description: The CMFC program is an industry-recognized mutual fund designation. It is the result of collaboration between the College for Financial Planning and the Investment Company Institute (ICI), the primary trade association for the mutual fund industry. This program provides the advisor with a thorough knowledge of mutual funds and their various uses as investment vehicles. CMFC designees must also comply with the CFP Board s Code of Ethics and Professional Responsibility. CMT Chartered Market Technician Prerequisites: Three years of professional analytical or investment management experience, and must be a member of the Market Technicians Association. Organization: Market Technicians Association (MTA) Website: mta.org Education requirements: Three levels/modules, totaling approximately 400 hours Exams: Three exams one exam after the completion of each level (two multiple choice exams and one essay exam) Continuing education: None required Description: Achieving this designation requires an in-depth knowledge and competency in the multiple facets of technical analysis of the financial markets (including terminology, charting methods, and the application of concepts such as Dow Theory ) and the ability to provide detailed opinions regarding the analysis. A strong emphasis on ethics is embedded in the course work throughout the CMT program. On achieving the designation, the advisor must adhere to the MTA Code of Ethics. This certification qualifies as a Series 86 exemption. CPM Certified Portfolio Manager Prerequisites: The current criteria for applicant eligibility are any of the following: 1) A certificate, diploma, or academic degree providing evidence of a four-year undergraduate degree. 2) Three years of employment in the financial services industry. 3) Letter of recommendation on behalf of the applicant who is employed in the financial services industry, written by a supervisor, where the credential requirements are desired for the training and development of the applicant. Organization: Academy of Certified Portfolio Managers (ACPM ), offered in conjunction with Columbia University in New York Website: academyofcpm.org Education requirements: Web-based, self-study program designed to be completed within eight months, followed by a five-day onsite course at Columbia University in New York Exams: Knowledge checks after the completion of each of the seven self-study modules; final exam at the completion of the Columbia University onsite course Continuing education: 15 hours each year Description: The CPM certification program is designed for financial professionals with portfolio management experience. The program provides a deeper understanding of key portfolio management concepts such as quantitative methods, financial statement analysis, corporate finance, fixed income analysis, derivatives, and portfolio management. CPWA Certified Private Wealth Advisor Prerequisites: Bachelor s degree from an accredited college or university or one of the following designations or licenses: CIMA, CIMC, CFA, ChFC, or CPA or is working as a CFP practitioner. Acceptable regulatory history as evidenced by FINRA s form U-4 or other regulatory requirements. Must have five years of professional client-centered experience in financial services or a related industry and two letters of reference from an Investment Management Consultants Association (IMCA) member, professional supervisor, or currently licensed professional in financial services or a related industry. Organization: Investment Management Consultants Association (IMCA), offered in conjunction with the University of Chicago Booth School of Business Website: imca.org Education requirements: Six-month study program followed by a one-week on-site course Exams: Final certification exam Continuing education: 40 hours every two years Description: This program focuses on advanced wealthmanagement topics, including: behavioral finance, charitable planning, estate planning, planning for closely held businesses, planning for executives, portfolio management, retirement planning, risk management, and tax planning. 7 of 13

8 CRC Certified Retirement Counselor Prerequisites: Bachelor s degree from an accredited college or university and a minimum of two years of related professional experience within the past five years, or have a high school diploma (or equivalent) and five years of related professional experience within the last seven years. Organization: International Foundation for Retirement Education (InFRE) Website: infre.org/crccandidates.shtml Education requirements: Self-study program with optional InRE Internet resources Exams: One final, comprehensive exam Continuing education: 15 hours annually Description: The CRC program focuses on four major areas: (1) retirement planning, (2) basics of investing, (3) retirement plan design, and (4) counseling, communication, and ethics. The CRC places a heavy emphasis on education and ethics; both topics are included in the course work, exams, and continuing education requirements. In addition, the candidate must agree to abide by the InFRE s Code of Ethics. CRPC Chartered Retirement Planning Counselor Prerequisites: None Education requirements: 12 modules, totaling 96 to 118 hours Exams: Final certification exam Description: The CRPC program focuses on the pre- and post-retirement needs of individuals, including courses on estate planning and asset management. CRPC designees must sign a code of ethics commitment. CRPS Chartered Retirement Plans Specialist Prerequisites: None Education requirements: 10 modules, totaling 9 11 weeks Exams: Final certification exam Description: The CRPS designation focuses on the design, installation, and administration of qualified retirement plans for businesses. The program covers defined contribution and defined benefit plans and IRAs, as well as the complex issues surrounding these retirement plans. Candidates must sign a code of ethics commitment. CTFA Certified Trust and Financial Advisor Prerequisites: Minimum of three years of experience in wealth management and the completion of an ICB wealth management-training program, five years of experience in wealth management and a bachelor s degree, or 10 years of experience in wealth management. Applicants must also have a letter of reference and sign ICB s Professional Code of Ethics statement. Organization: The American Bankers Association (ABA) Institute of Certified Bankers (ICB) Website: aba.com/training/icb/pages/ctfa.aspx Education requirements: Self-study program Exams: Four-hour comprehensive exam Continuing education: 45 credits every three years, with a minimum of six hours in each of four core subject areas Description: The CTFA certification is a professional credential for financial services professionals who provide fiduciary services related to trusts, estates, guardianships, and individual asset-management accounts. The course work covers topics including fiduciary and trust activities, financial planning, tax law and planning, investment management, and ethics. CWS Certified Wealth Strategist Prerequisites: Three-plus years experience in the financial services industry; must have significant experience in a clientfacing role or a four-year degree from an accredited school. Organization: Cannon Financial Institute Website: cannonfinancial.com Education requirements: Self-study program focused on 13 wealth management issues, two instructor-led classes, and a final capstone project to be completed within six months Exams: 10 mastery exams one exam after the completion of each module; capstone business plan and case study project to complete course Continuing education: 33 hours every two years Description: The CWS program is designed to provide financial services professionals with the technical knowledge to manage the complex financial issues facing high net worth investors. The program focuses on key wealth management topics, which include: investments, liabilities, insurance, executive compensation, protection strategies, qualified retirement plans/ IRA distributions, business succession planning, charitable gifting, and wealth distribution issues. 8 of 13

9 LUTCF Life Underwriter Training Council Fellow Prerequisites: Membership in a local association of National Association of Insurance and Financial Advisors (NAIFA). Organization: The American College Website: theamericancollege.edu Education requirements: Three eight-week courses Exams: Both the online and classroom-based courses consist of eight weeks of instruction followed by a week of study and review for the exam. The program can be completed in one year or less. Continuing education: Three hours of ethics-related continuing education every two years for designees who earned their credential on or after 7/1/2015. Description: The program focuses fundamental prospecting, selling, and practice management skills plus working knowledge of the four practice specialties. PRP PLANSPONSOR Retirement Professional Prerequisites: Five years of retirement industry sales, service, or support experience. A professional letter of reference is also required. Organization: PLANSPONSOR Institute, the educational arm of PLANSPONSOR Website: plansponsorinstitute.com Education requirements: 15 Internet-based courses followed by a multi-day instructor-led classroom session Exams: Online exam after each course and one final, comprehensive exam after the multi-day classroom session Continuing education: On an ongoing basis, over a two-year cycle, PRPs must participate in PLANSPONSOR Institute sanctioned web-based presentations and conferences, and accrue a specified number of continuing education credits. Description: The PRP curriculum covers a broad range of topics, including retirement plans and investment strategies, as well as compliance and fiduciary issues. The program is designed to focus on practical business solutions that are crafted with a keen awareness of fiduciary implications for the advisor and for the customers they hope to serve. QPFC Qualified Plan Financial Consultant Prerequisites: Organization: American Society of Pension Professionals & Actuaries Website: asppa.org Education requirements: Must have a Series 6, 7, or 65 securities license and two letters of reference noting retirement plan related experience; or, state life or annuity insurance license and two years of relevant experience; or, Investment Advisor Representative or Registered Investment Advisor credential and two letters of reference demonstrating two years of relevant retirement plan related experience; or, two letters of reference demonstrating at least three years of retirement plan related experience. Exams: Successful completion of Plan Financial Consulting Part 1 and Part 2 exams Continuing Education: 40 hours (two of these hours must be Ethics) in a two-year cycle Description: The QPFC is designed for professionals who sell, advise, market, or support qualified retirement plans. The program provides a detailed understanding of general retirement planning concepts, terminology, distinctive features of qualified plans, and the role of retirement plan professional. The program requires candidates demonstrate proficiency in plan administration, compliance, investment, fiduciary, and ethics issues. RP Registered Paraplanner Prerequisites: Foundations in Financial Planning Professional Program Education requirements: 10 modules, totaling 9 11 weeks and a three-month internship Exams: Final certification exam Description: This program was created for frontline employees in the financial services industry. RP candidates study the basic, practical knowledge of all aspects of the financial services industry. This designation is awarded to students who complete the program, pass the final examination, sign a code of ethics commitment, and complete a three-month internship. 9 of 13

10 Firm-sponsored designations In addition to industry designations, the financial professionals at Wells Fargo Advisors may obtain firm-sponsored designations after meeting specific criteria established by the firm to ensure the individual s competency to administer specific firm programs and/or specified investment services. These criteria and requirements vary, depending on the type of program and/or responsibilities that the financial professionals wish to undertake. The following list provides details about these types of credentials: 3 Fundamental Choice Portfolio Manager Prerequisites: Two years as a Financial Advisor or equivalent industry experience, holds the FINRA series 65 and 66 registrations (which qualify the Financial Advisor to act as both an investment advisor representative and a securities agent, enabling him or her to provide investment advice to clients), and is registered as an Investment Adviser Representative in his or her home state. Description: Fundamental Choice is a Wells Fargo Advisors discretionary portfolio management program based on the fundamental research ratings for various investment products made by Wells Fargo Advisors correspondent research sources. (For the definition of discretionary, see the Investment Advisers section above.) Financial Advisors manage client portfolios based on correspondent research firms recommendations and market strategies, as well as the Fundamental Choice guidelines, and can hold equities, select exchange-traded funds (ETFs), select eligible mutual funds, and cash. Quantitative Choice Portfolio Manager Prerequisites: Two years as a Financial Advisor or equivalent industry experience, holds the FINRA series 65 or 66 securities registration, and is registered as an Investment Adviser Representative in his or her home state. Description: Quantitative Choice (QC) is a guided Financial Advisor-directed discretionary program within Wells Fargo Advisors. This is an equity- and cash-only program. Financial Advisors manage equity and cash in client portfolios based on three available styles: Growth, Core, and Value, as well as the QC portfolio guidelines. QC is a highly disciplined, objective approach to portfolio management in which stock selections are based on analysis of historical data and anticipated future trends. PIM (Private Investment Management) Portfolio Manager Prerequisites: Minimum of two years as a portfolio manager, five years as a registered representative, holds the FINRA series 65 and 66 registrations, is registered as an Investment Adviser Representative in his or her home state, has a minimum of $50 million in assets under management, $500,000 in annual production for the last three years, and has Branch Manager approval. Description: PIM is a discretionary program where the Financial Advisor also acts as the Portfolio Manager and makes all the investment decisions; it is an open-architecture program in which virtually all security types may be used. Financial Advisors manage portfolios based on their Investment Philosophy Statement and the PIM portfolio guidelines. The criteria required to obtain the PIM designation are more stringent than our other programs such as Quantitative Choice and Fundamental Choice. Advisory programs mentioned on this page are not designed for excessively traded or inactive accounts and are not suitable for all investors. In addition to the designations covered above, you may come in contact with financial professionals who hold the following designations: AIF Accredited Investment Fiduciary CDFA Certified Divorce Financial Analyst: Institute for Divorce Financial Analysts CES Certified Estate and Trust Specialist: Institute of Business Finance CIS Certified Investment Strategist: Investment Management Consultants Association CTFA Certified Trust and Financial Advisor: American Bankers Association Institute of Certified Bankers PRP PLANSPONSOR Retirement Professional: PLANSPONSOR Institute RICP Retirement Income Certified Professional 10 of 13

11 Costs of working with a financial professional You can choose any of a number of ways to establish a relationship with a financial professional. The process begins with a decision about whether to enter into either a brokerage or an advisory relationship with your Financial Advisor. (For more information on the difference between brokerage and investment-advisory relationships, please refer to the guide Investment Advisory and Brokerage Services, available at wellsfargoadvisors.com/guides.) Some of the differences are related to the types of programs and fees associated with the various relationships, which are described below. Brokerage account The fees in a general brokerage account are typically based on a transaction charge for each trade made within the account (often called the commission ). In transaction-based pricing, you pay a commission or sales charge on each transaction. Other costs and charges may also apply to the account, and you pay separately for any other services you request. Investment advisory account The fees associated with this kind of account are typically an agreed-upon percentage of the assets held in the account. The following list describes the different pricing methods that are offered: Asset-based fee This fee is an agreed-upon percentage of the assets in the account. It covers both investment advice to you and your trading costs (note: other nonprogram costs are not included). An asset-based fee is expressed as an annual percentage (e.g., 2.5%), but is charged to your account on a quarterly basis (e.g., 0.625% each quarter); it is typically subject to a minimum dollar amount. Fee plus commission With this type of arrangement, you can pay an asset-based fee equal to an agreed-upon percentage of the assets in the account, plus commissions on each trade outside of the portion designated for the asset-based fee. How the financial professionals at Wells Fargo Advisors are compensated Our financial professionals compensation may be based on a combination of commissions and fees generated from the products sold to you which could vary depending on the type of investment and amount invested. Your Financial Advisor is authorized to sell products and services issued by Wells Fargo Advisors, its affiliated companies or other companies that have relationships with Wells Fargo & Company ( business partners ). The products may be traded, distributed, or placed through Wells Fargo Advisors, its affiliated companies, and business partners. Also, in certain instances, our financial professionals may earn a bonus or incentive based on their past production levels. Listed below is a general description of each form of compensation that may be earned by financial professionals at Wells Fargo Advisors: Fees and commissions Financial Advisors at Wells Fargo Advisors are paid via commission and fees for facilitating transactions within their clients accounts. Your Financial Advisor is paid an amount that is based on the payout rate associated with the type of transaction, product, or service that is provided to you. Recurring revenue Some of our Financial Advisors also receive recurring revenue. Recurring revenue includes fees and commissions generated from fee-based advisory business, mutual fund trails, annuity trails, managed futures trails, hedge fund trails, and exchange fund trails that are generally paid on a consistent (recurring) basis, which generally occurs annually. Referral arrangements Within the division that operates in Wells Fargo financial centers and some Wells Fargo branches, a Licensed Banker (LB) may refer you to a Financial Advisor, as they generally work as a team. In this case, the Licensed Banker will be compensated through a referral arrangement within the firm. One-time fee For a freestanding financial plan, we charge a one-time fee, which covers the financial plan only. This one-time fee does not cover any additional fees or costs for having us or another financial institution implement the plan. We also provide investment consulting services to institutional clients for a one-time fee or a combination of one-time and asset-based fees. 11 of 13

12 Additional compensation received by Wells Fargo Advisors financial professionals from the firm and product sponsors From time to time, Wells Fargo Advisors initiates incentive programs for our associates, including Financial Advisors. These programs could include, but are not limited to, the following: programs that compensate associates for attracting new assets and clients to the firm or for referring business to its affiliates (such as referrals for mortgages, trusts, or insurance services); preparing Envision investment plans, participating in advanced training, and improving client service; and programs that reward Financial Advisors who meet total production criteria. Financial Advisors who participate in these incentive programs may be rewarded with cash and/or noncash compensation, such as deferred compensation, bonuses, training symposiums, and recognition trips. Portions of these programs may be subsidized by external vendors and Wells Fargo Advisors affiliates, such as mutual fund companies, insurance carriers, or money managers. Consequently, Financial Advisors and other associates have a financial incentive to recommend the programs and services included in these incentive programs as well as other available products and services offered by Wells Fargo Advisors. Incentive programs generally have specific requirements for a Financial Advisor to maintain good standing in the program. Such requirements include, but are not limited to, annual curriculum requirements, business planning requirements, and satisfactory survey results. Wells Fargo Advisors maintains oversight of such programs, specifically monitoring for conflicts of interest and sales practices. In addition, advisors are provided educational materials regarding the recommendation of incentive-related products and services, and how those recommendations relate to client suitability. Financial Advisors who join Wells Fargo Advisors may be eligible to receive incentives, one-time or ongoing bonuses, and/or other compensation if they reach certain production levels or other targets. It is a common practice in the brokerage industry for firms to pay bonuses to encourage financial advisors to join a new firm. This may provide your financial advisor with an incentive to recommend the transfer of your account to the new firm. In addition, Wells Fargo Advisors also has programs whereby a retired or terminated Financial Advisor may receive compensation for an agreed-upon time frame for production generated by the new Financial Advisor servicing your accounts, even though the retired or terminated Financial Advisor may not provide further services to you. Also, certain programs or services may provide differing compensation to your Financial Advisor, which may create an incentive to recommend certain services to achieve or maintain certain production levels or other targets. Please review your options, including portability of assets and termination charges. Also, think carefully about the fees, rates, and product offerings at the new firm to ensure that they are consistent with your investment objectives and needs. (All of these issues are discussed in greater detail below.) What you should consider if your current financial professional recently joined Wells Fargo Advisors It is common for financial professionals to change firms during their career. When this happens, it creates a scenario where you are faced with bringing your business to the new firm or leaving your accounts in the hands of a different financial professional at the original firm. Before making this very important decision, it is essential that you consider a number of various factors that result from the change. Questions you should ask The following list includes some questions that you should ask your current financial professional: Why is my broker joining Wells Fargo Advisors? What products and services are available at Wells Fargo Advisors? Are all of the products and services that I use available? Are the fees and commissions different at Wells Fargo Advisors? Are there elements of the broker s transition bonus package that relate to commissions or fees as related to my account(s)? 12 of 13

13 Fees and charges It is important to know if there are any fees that are required to change firms along with your broker. There may be termination fees associated with your current account, as well as transfer fees assessed to move your account to Wells Fargo Advisors. Furthermore, it is essential that you ask about our commission rates and margin rates if your investment strategy employs margin. Conflicts of interest Your Financial Advisor may have received a financial bonus to join Wells Fargo Advisors. This bonus is generally contingent upon attaining commission and fee production goals at Wells Fargo Advisors within a specific time period after joining the firm. In addition, your broker may be eligible for a deferred financial bonus based upon his or her ability to achieve his or her prior commission and fee production levels at the past firm. This financial bonus may also be based on a broker s ability to bring in client assets from his or her previous firm. As a result, your broker may have an incentive to recommend certain services to you or to bring your assets to Wells Fargo Advisors. You should keep this in mind when deciding on future account transactions and services if you decide to follow your broker to Wells Fargo Advisors. Portability Certain investment products may not be transferable (or portable ) to a new firm. If you choose to liquidate these products, you may incur additional fees or tax consequences. In these scenarios, it may be prudent to leave these types of securities at your broker s previous firm. It is important to remember that you are not required to sell such securities when your broker changes firms. You can open an account with the new firm and transfer only the securities that you wish to move. It is not required that you move everything in your previous account or liquidate investment products that are not transferable. Products and services Your broker s new firm may offer new products previously unavailable to you; on the other hand, the new firm may lack a number of products that you may have purchased in the past. Many firms offer proprietary products or services that are available only at a particular firm. Some firms also conduct investment banking business that may provide access to initial public offerings, which is important when weighing potential conflicts of interest. It is important that you fully educate yourself with regard to the offerings available at your broker s new firm to determine if it will fully meet your investment needs. How can I check the background of my financial professional? The Financial Industry Regulatory Authority (FINRA) offers a free service to investors on their public website where you can research the background of any currently registered securities broker. If you are interested in checking the background of your financial professional, visit finra.org or call FINRA directly at For more information If you are interested in learning more about how Wells Fargo Advisors or our Financial Advisors can help you, please feel free to visit your local branch office or visit our website at wellsfargoadvisors.com. To learn more about financial professionals, visit the following websites: Financial Industry Regulatory Authority (FINRA) finra.org U.S. Securities and Exchange Commission (SEC) sec.gov Securities Industry and Financial Markets Association (SIFMA) sifma.org Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and nonbank affiliates of Wells Fargo & Company , 2018 Wells Fargo Clearing Services, LLC. All rights reserved IHA BDC-v7 E of 13