What You Should Know about Investing with Mutual of Omaha Investor Services, Inc.

Transcription

1 What Yu Shuld Knw abut Investing with Mutual f Omaha Investr Services, Inc. As a custmer r ptential custmer, there are a few things we want yu t knw abut us: We are Mutual f Omaha Investr Services, Inc. (MOIS) We are a registered brker dealer member FINRA ( ( and investment advisry firm with the SEC ( Our hme ffice is lcated at 3300 Mutual f Omaha Plaza, Omaha, NE Yu may call us at Our registered Representatives and investment advisr Representatives ( Reps ) can ffer yu many financial prducts and services t help yu pursue yur financial gals and bjectives. Sme f these prducts include: Mutual funds Variable annuities Life insurance 529 cllege savings plans Retirement plans Fee-based investments Financial planning As a custmer, it is imprtant that yu understand these prducts, the fees and csts assciated with investing in these prducts, and hw MOIS and yur Rep are cmpensated fr the sale f these prducts. Our Respnsibilities t Each Other Read the prspectus, sales literature and ther dcuments befre making an investment; pay particular attentin t the csts, fees and risk factrs f the investment. Yu re nt alne if yu find these dcuments verwhelming and the terminlgy freign. If yu prmise t let yur Rep r ur hme ffice knw if yu dn t understand smething, we prmise t prvide yu the infrmatin yu need t feel cmfrtable and cnfident in the decisins yu are making. Prvide yur Rep with cmplete and accurate infrmatin regarding yur financial situatin, including, but nt limited t: incme, net wrth, investment bjectives, time hrizn, and risk tlerance. Yur Rep may ask yu a lt f questins; but it isn t because we re nsy. We re simply getting t knw yu and gathering infrmatin s we can prvide yu the mst suitable ptins fr yur situatin. Answer as hnestly and penly as yu can, and if yu dn t knw the answer, yur Rep will wrk with yu t figure it ut. Update yur Rep prmptly when there are changes in yur financial situatin including,

2 but nt limited t; incme, net wrth, investment bjectives r liquidity needs. We get it: life happens and things change. It s imprtant t keep yur Rep psted, as sme changes may affect the prducts r strategy yu and yur Rep have put in place. Review and retain all investment infrmatin yu receive, such as prspectuses, new accunt agreements, disclsure frms, accunt statements, and cntracts. Yu may receive dcuments frm time t time frm the cmpany (r cmpanies) that hld yur mney. Sme f the dcuments may require actin n yur part, s it s imprtant that yu read them. If yu aren t sure what yu are reading r if yu need t d anything, reach ut t yur Rep r ur Hme Office s we can help. Bring any discrepancies, cncerns r questins t the attentin f yur Rep r MOIS immediately. It s ur gal t prvide yu the infrmatin yu need t feel cmfrtable and cnfident in the decisins yu are making. Let s wrk tgether t make sure yur questins and cncerns are answered as they arise. Cnsult an attrney r tax advisr fr any legal r tax advice. Our Reps are nt accuntants r attrneys, s they d nt ffer tax r legal advice. But they are happy t wrk with yu and yur tax and legal advisrs t help yu execute yur strategy as yu intended. Investment and Insurance Prducts: NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY MUTUAL FUNDS A mutual fund pls mney frm many investrs and invests the mney in stcks, bnds, shrtterm mney-market instruments r ther securities. In return, investrs receive shares f the mutual fund, which are valued based n the value f the underlying investments. Mutual funds have a prtfli manager r a team that selects the investments fr the fund in based n the fund s bjectives and risk tlerance. There are many types f mutual funds, including, but nt limited t index funds, stck funds, bnd funds, internatinal funds, and mney market funds. Each mutual fund type may have a different investment bjective, strategy and/r investment prtfli. Different mutual funds may als be subject t different levels f risk, vlatility, and fees and expenses depending n the investments held inside the mutual fund. Mutual funds are subject t market fluctuatin and can lse mney. A mutual fund s prspectus is a dcument that prvides yu imprtant infrmatin including, but nt limited t, bjectives, expenses, and risks assciated with the mutual fund. Accrdingly, yu shuld carefully cnsider the disclsures within each mutual fund s prspectus befre

3 investing. While it is cmmn fr investrs t diversify their mutual fund hldings amng several mutual fund cmpanies, yu shuld carefully evaluate the benefits and the csts f ding s. Oftentimes, mutual fund cmpanies ffer a breakpint, r discunt n sales charges r fees, based n the amunt f mney yu invest with them (i.e. the mre yu invest with them, the lwer yur sales charges r fees may be). Spreading yur mney acrss multiple mutual funds cmpanies may prevent yu frm being able t take advantage f breakpints. As with any investment, yu shuld always carefully review the sales charges and ptential breakpints t evaluate hw they may be affected by yur previus mutual fund investments and/r thse yu investments yu plan t make in the future. Available Multi Class Pricing Optins fr Mutual Funds A single mutual fund, with ne prtfli, may ffer mre than ne class f shares t investrs. The share class desn t change hw much f the fund prtfli yu wn, but each share class may have different fees and expenses. When cnsidering which share class will wrk best fr yur situatin, yu and yur Rep must cnsider factrs like hw lng yu plan t hld the shares, if there are any fees invlved with redeeming yur shares early and the ttal expenses invlved with hlding yur shares lng term. Yur mutual fund s prspectus will specifically detail the different share classes that are available fr yur mutual fund, including each share class s fees and expenses. While the specific disclsures within yur mutual fund s prspectus must be cnsidered, the fllwing is a general summary f the types f class shares typically available: Class A Shares Class A shares typically include a frnt-end sales charge. When yu buy Class A shares with a frnt-end sales charge, a prtin f the dllars yu pay is nt invested. The prtin that s nt invested is used t pay yur sales charges. Class A shares may als impse an asset-based perating expense (the expense is based n hw much yu have in yur accunt), but the A shares fee is generally lwer than the asset-based perating expense impsed by Class B r Class C shares (discussed later). A mutual fund may ffer yu a discunt n the Class A share frnt-end sales charge if yu: Make a purchase in an amunt qualifying fr a breakpint as defined in yur mutual fund s prspectus; Already wn ther mutual funds with the same mutual fund family, either with ur firm r anther firm, if the ttal triggers a breakpint (this is knwn as Rights f Accumulatin ); r Cmmit t regularly purchasing the mutual fund s shares t reach a breakpint within a certain perid f time (this is knwn as Letter f Intent ) Class B Shares Class B shares typically d nt include a frnt-end sales charge at the time f purchase.

4 Therefre, unlike Class A share purchases, all f yur dllars are immediately invested. Hwever, Class B shares charge nging asset-based perating expenses based n hw much mney yu have invested. The Class B share perating expense charges are typically higher than the nging perating expenses assciated with Class A shares. Class B shares als nrmally charge a cntingent deferred sales charge (CDSC), which yu pay when yu sell yur shares. The CDSC nrmally declines the lnger yu hld yur Class B shares, and it is eventually eliminated after a specified time perid. Once the CDSC is eliminated, Class B shares ften then cnvert int Class A shares. When Class B shares cnvert, they generally will begin t charge the same asset-based perating expense as the Class A shares. Class C Shares Class C shares usually d nt impse a frnt-end sales charge n their purchase, s the full dllar amunt that yu pay is immediately invested. Often Class C shares impse a small cntingent deferred sales charge (CDSC), like the Class B shares, if yu sell yur shares within a shrt time f purchase, usually within ne year. Class C shares typically impse higher nging assetbased perating expenses than the asset-based perating expenses assciated with Class A shares. Since Class C shares generally d nt cnvert int Class A shares, their nging assetbased perating expense will nt be reduced as with Class B shares. In mst cases, Class C share perating expenses are higher than Class A shares r Class B shares if yu hld the funds fr a lng perid f time. Other Share Classes While the A, B, and C share classes are the mst cmmnly sld, there are mre variatins f share classes. The additinal share classes may utilize a frnt-end lad, back-end lad r levellad sales charge structure. Fr particular share class infrmatin, please refer t yur mutual fund s prspectus. Operating Expenses Operating expenses are deducted frm the mutual fund s ttal assets, s they reduce investment returns. Annual fund perating expenses may include management fees, 12b- 1 fees, and the cst f sharehlder mailings and ther expenses. 12b-1 fees are payments made by a mutual fund in cnnectin with marketing and distributin expenses, which may include cmpensating Reps. Depending n share class, 12b-1fees typically range between 25 basis pints (0.25%) t 100 basis pints (1.00%) annually. The fund s prspectus includes its expense rati, r what ttal percent f fund assets are used fr all expenses; this helps yu cmpare annual expenses f different funds yu are cnsidering. Variable Annuities INSURANCE PRODUCTS A variable annuity is a cntract between yu and an insurance cmpany. Yu may purchase a variable annuity by either making a single purchase payment r a series f purchase payments.

5 In return, the insurer agrees t make peridic payments t yu in an amunt that will be linked t the perfrmance f the variable annuity s underlying investments. Yur peridic payments frm the insurer may either begin immediately r at sme future date. Yur purchase payments are invested in underlying investments, r sub-accunts, yu select at the time f depsit. A variable annuity ffers a range f sub-accunt investment ptins, including stcks, bnds, and mney market-based investments. The value f yur investment will vary depending n the perfrmance f the sub-accunts yu chse. Variable annuities are subject t market fluctuatin and can lse mney. Many variable annuities ffer, at an additinal cst, a variety f add-n ptins, r riders, and guarantees, which may include enhanced incme r a death benefit. Yur Rep will prvide yu with a prspectus prir t investing in a variable annuity. As the structure f each variable annuity may be different, it is imprtant that yu thrughly review the prspectus, as it will cntain a full explanatin f the variable annuity yu may invest in. Further, the prspectus will detail the risks, fees and expenses assciated with yur sub-accunt investments and the variable annuity as a whle. The Tw Distinct Phases f Variable Annuities Variable annuities have tw distinct phases referred t as the accumulatin phase and payut phase. During the variable annuity accumulatin phase, yu allcate yur purchase payments t ne r mre f the sub-accunt investment ptins. Fr example, yu culd allcate 20% t an equity fund, 40% t an internatinal stck fund, and 40% t a bnd fund. As nted abve, yur investment is subject t market fluctuatin, and the mney yu invest will increase r decrease depending n the fund s market perfrmance. During this phase, yu can generally transfer yur mney frm ne sub-accunt investment ptin t anther withut paying tax n yur investment incme and gains. If yu withdraw mney frm yur annuity during the early years f the accumulatin phase yu may pay surrender charges. Additinally, yu may have t pay a 10% federal tax penalty if yu withdraw mney befre yu turn 59 ½ years ld. In the variable annuity payut phase, yu are generally ffered several payment ptins fr mney accumulated in the cntract. Yu may chse t receive yur purchase payments plus investment incme and gains, if any, in either a lump sum r peridic payments as desired. Yu may annuitize the cntract and receive a stream f payments at regular intervals (such as mnthly r quarterly). If annuitizatin is chsen, yu generally will be prvided chices regarding hw lng yu wuld like the payments t extend. 1 Variable Annuity Features There are several unique features f a tax-deferred variable annuity which distinguish it frm ther investments. Yu shuld thrughly evaluate yur need t add any additinal features t yur 1 Sme variable annuities are established as immediate annuities. This means there is n accumulatin phase and yu begin receiving annuity payments n a regular basis shrtly after yur purchase.

6 variable annuity, as many f these features may carry certain csts and fees. A few f the mst cmmn features f a variable annuity include: Variable annuities are tax-deferred. This means that yu pay n taxes n the incme and investment gains frm yur annuity until yu withdraw yur mney. When yu eventually withdraw mney frm yur variable annuity, yu will be taxed at yur rdinary incme tax rate, rather than at ptentially lwer capital gains rates (as yu may in ther investments like mutual funds). There are n additinal tax benefits frm purchasing a variable annuity within a qualified accunt, such as an IRA. Hwever, ther features f a variable annuity may still make it an attractive investment in a qualified accunt. Variable annuities can allw yu t receive peridic payments fr the rest f yur life (r the life f yur spuse r ther persn that yu designate). Variable annuities may ffer a death benefit feature. If the wner (r in sme cntracts, the annuitant) dies, yur beneficiary (such as yur spuse r child) will typically receive the greater f: (i) all the mney in yur accunt, r (ii) sme guaranteed minimum (such as all purchase payments less any f yur withdrawals). 2 Certain variable annuities may ffer, fr an additinal fee, ptinal riders. These riders may prvide fr an enhanced death r incme benefit. Yu shuld carefully review the features f the ptinal riders, hw they wrk, the assciated expenses r fees and whether they are apprpriate prir t selecting a rider. Sales and Surrender Charges Variable annuities may charge a frnt-end sales charge r a back end sales/surrender charge. The surrender charge is generally a percentage f the amunt withdrawn r f the accunt value within a certain perid f time after a purchase payment is made t the cntract. Sme annuities, hwever, d nt have surrender charges. It is imprtant t understand the surrender charges assciated with yur variable annuity investment. Surrender charges are set frth in the prspectus. Variable annuities may als impse asset-based sales charges. Fees and Expenses Yu will pay varius fees and expenses when yu invest in a variable annuity. These charges will reduce the value f yur cntract. They may include the fllwing: Mrtality and expense risk charge (M&E): This charge cmpensates the insurance cmpany fr varius risks it assumes under the annuity cntract. Administrative fees: These fees cver administrative csts assciated with servicing yur annuity, including recrdkeeping and ther administrative expenses. Underlying fund expenses n sub-accunts: This nging fee cvers tw aspects f the subaccunts in the annuity management fees and fund expenses. Management fees cver the csts f managing the prtfli f securities within the sub-accunt. Fund expenses include the cst f buying and selling the funds r securities as well as administering trades. 2 The death benefit amunt may be impacted by any ptinal death benefit riders assciated with a particular variable annuity cntract.

7 Optinal rider fees: Variable annuities may ffer ptinal riders fr enhanced death benefit r living benefit features. These features are generally available fr an additinal fee. Variable Life Insurance A life insurance cntract can serve many purpses. It can prvide a surce f incme fr yur family in the event f yur death, facilitate an efficient transfer f wealth frm ne generatin t the next, r make funds available t ensure the cntinuatin f yur business. In additin t assessing yur individual needs, it is imprtant t determine which type f plicy is best suited t meet thse needs. There are tw basic types f life insurance: term insurance, which prvides a specific amunt f death benefit cverage if yu die within the perid f the cntract; and permanent insurance, which prvides death benefit prtectin, but als gives yu the ability t accumulate cash value. Variable life insurance is a flexible type f permanent insurance. It prvides a traditinal death benefit, but at the same time allws yu t participate in the variety f investment ptins ( subaccunts ) such as stck, bnd r mney market funds t attempt t grw yur cash value. It is imprtant t nte that the cash value f a variable life insurance plicy is nt guaranteed. The cash value varies with the investment experience f the underlying sub- accunts. Variable life insurance plicies are subject t market fluctuatin and yu can lse mney. Premium Payments and Frfeiture f Benefits Generally, premium payments fr variable universal life (VUL) insurance are flexible, while premium payments fr variable life (VL) insurance are fixed. The amunt and timing f the payments are generally determined by the plicyhlder. With many plicies, the insurance csts, including the plicy fees and expenses are deducted directly frm the cash value rather than thrugh premium payments. Purchasers f variable life insurance must carefully cnsider the insurance csts ver the prjected life f the cntract. Fr insurance cverage t remain intact, all csts must be paid as they becme due. If the cash value under a variable life insurance plicy is depleted and the purchaser cannt therwise satisfy the nging premium expenses, the plicy may lapse and the purchaser r his/her beneficiaries will frfeit any right t receive a death benefit. Variable Life Insurance Features The death benefit and/r cash value f the plicy will fluctuate accrding t the investment perfrmance f the sub-accunt ptins yu elect. Premiums may be either fixed r flexible, depending n the plicy yu chse. Scheduled premium variable life insurance requires fixed peridic premium payments. Flexible premium variable life insurance allws changes in the duratin and amunt paid. Variable life insurance can be purchased with a single payment r with multiple payments. An additinal benefit f variable life insurance is tax-deferral. There is n tax n earnings until mney is withdrawn. When yu make withdrawals frm yur variable life insurance plicy, yu may incur a tax n the earnings at rdinary incme tax rates rather than lwer capital gains tax rates.

8 Yu will pay varius fees and charges when yu purchase a variable life insurance plicy, which may include frnt-end sales charges, surrender charges, administrative charges, mrtality and expense (M&E) fees and sub-accunt fees. Further, there are csts assciated with ptinal plicy features that yu may elect. Charges fr the cst f insurance may vary depending n individual circumstances (i.e., age, sex, health, smker/nn-smker, face amunt f plicy, etc.). If a plicy is terminated befre the end f the surrender perid, surrender charges may be assessed. These surrender charges are generally higher in the early years f a plicy and decline ver a perid f time. A prspectus is prvided when the variable life insurance prduct is recmmended. It is imprtant that yu thrughly review the prspectus as it will cntain a full explanatin f yur specific plicy. Further, the prspectus will detail the risks t which yur plicy may be subject. Yu shuld als receive an insurance cntract frm the insurance cmpany which sets frth the terms f yur variable life insurance cntract. 529 COLLEGE SAVINGS PLANS A 529 cllege savings plan ( 529 plan ) is a tax-advantaged investment prgram designed t help parents and thers pay fr qualified higher educatin csts. The 529 plan ffers families the pprtunity t grw and withdraw earnings that are free frm federal taxes. State Tax Cnsideratins/State Plan Cnsideratins Depending n yur state f residence, an investment in a particular 529 plan may r may nt affrd yu state tax benefits. State tax treatment can be an imprtant cnsideratin in deciding which plan t select. Sme states ffer favrable tax treatment t their residents nly if they invest in a 529 plan ffered by that state. Please nte that if yu invest in an ut-f-state plan yu may nt receive these ptential tax benefits. Yu shuld cnsult with yur tax adviser abut any state r lcal tax implicatins befre selecting a specific 529 plan. Befre investing in an ut-f-state plan, yu shuld carefully cnsider and cnsult yur tax adviser cncerning: The plan s expenses cmpared t the plan(s) spnsred by yur hme state; The investment ptins available cmpared t thse available within the plan(s) spnsred by yur hme state; Hw any tax benefits and/r penalties cmpare t any tax benefits and/r penalties under the plan(s) spnsred by yur hme state; r Any cntributin limits that may exist cmpared t thse that may exist under the plan(s) spnsred by yur hme state Available Multi Class Pricing Optins fr 529 Plans A single 529 plan may ffer mre than ne class f shares t investrs. Each class Represents a similar interest in the 529 plan s prtfli, but has different fees and expenses. Accrdingly, yu must cnsider a variety f factrs when cnsidering what class f shares t purchase, including

9 the prjected hlding perid f yur investment and the pssibilities f early redemptin. Yur 529 plan s prspectus/prgram disclsure will specifically detail the different classes f shares that are available fr yur 529 plan, including csts and fees. UNIT INVESTMENT TRUSTS A unit investment trust ( UIT ) cnsists f investment cmpany securities that invest in a fixed prtfli. The prtfli may include crprate, municipal, r gvernment bnds; mrtgage-backed securities; cmmn r preferred stck; r ther investment cmpany shares (i.e., mutual funds). The securities are purchased and held in a trust, usually until a disslutin date (r set date when the trust will terminate) that is established when the trust is created. Investrs in the UIT wn a fractinal, divided interest in the securities held by the trust and the distributin cming frm the trust. A UIT typically will make a ne-time public ffering f nly a specific, fixed number f units. A UIT usually issues redeemable securities (r units ), like a mutual fund, which means that the UIT will buy back an investr s units at the investr s request fr their apprximate net asset value (r hw much the units are wrth at the time f redemptin). A UIT will typically have a terminatin date that is established when the UIT is created. When a UIT terminates, any remaining investment prtfli securities are sld and the prceeds are divided and paid t the investrs based n hw many units they wned. A UIT des nt actively trade its investment prtfli. The UIT generally buys and hlds a relatively fixed prtfli f securities. The prtfli hldings fr a particular UIT are described in the prduct prspectus. If the securities in a UIT prtfli are called, mature, r are therwise redeemed, the prceeds are distributed amng investrs. Any distributin can impact the verall yield the custmer will receive. Fees and Expenses UITs charge an annual fee that is deducted frm either the value f the prtfli r the distributins frm the prtfli. In additin, UITs generally assess an initial sales charge. The sales charges, annual expenses and fees are detailed in the prduct prspectus Vlume Discunts As in the case f certain mutual fund share classes, UIT investrs may be eligible fr sales charge discunts based n the amunt f a single transactin. Yu shuld be aware that sme limited rights f accumulatin, depending n the terms and cnditins set frth in the prspectus, may exist with UITs. RETIREMENT PLANS Reps may prvide services t retirement plans thrugh Mutual f Omaha Retirement Services r apprved utside custdians. Reps may assist retirement plan spnsrs in determining a plan prvider t ffer services fr the participants f the plan. Reps may nt ffer recmmendatins n

10 the investment ptins fr retirement plans. Reps may prvide general investment educatin and supprt services t the participants f retirement plans. Fees and Expenses Retirement plan services typically include nging expenses such as administrative fees, management fees, cmmissins, advisry fees, slicitr fees, r 12b-1 service fees. Details regarding the fees and expenses may be fund in the plan dcuments. INVESTMENT ADVISORY PROGRAMS MOIS ffers varius advisry prgrams and investment tls, including financial planning services, referral f third-party mney managers, managed accunt services, and retirement plan services. Fllwing is a summary f MOIS advisry fferings. Mutually Fcused Prgram MOIS ffers financial planning services, including cmprehensive financial plans, financial plan reviews, and financial cnsultatins. Financial planning services are prvided based n yur current financial situatin and gals. Financial plans, reviews, and cnsultatins may be ne-time services r nging relatinships invlving a fee charged t yu. Mutually Managed Prgram The fllwing managed accunt services are ffered thrugh the Mutually Managed Prgram. Referral f Third-Party Mney Managers: MOIS wrks with unaffiliated third-party mney managers wh ffer asset management and ther investment advisry services t ur clients. The third-party mney managers are respnsible fr cntinuusly mnitring client accunts and placing trades when necessary. MOIS third-party-mney-manager fferings include mutual fund and ETF asset allcatin prgrams, separately managed accunts, and unified managed accunts. A third-party mney manager is engaged nly with yur prir cnsent Yu will have a separate agreement between yu and the mney manager Please nte that prir t investing, yu will be prvided, and shuld carefully review, the Frm ADV disclsure brchure fr MOIS, the Frm ADV disclsure brchure fr the mney manager and the Frm ADV Part 2B disclsure specific t yur Rep. These dcuments prvide current and backgrund infrmatin n MOIS, yur mney manager and yur Rep MOIS Managed Accunt Services: MOIS has an agreement with a third-party platfrm prvider, Envestnet Asset Management, Inc. (Envestnet), an SEC registered investment advisr. Envestnet prvides investment advisry and administrative services fr client accunts and allws clients t hld assets managed by multiple third-party mney managers

11 Yu may engage MOIS t prvide managed accunt services t a specific accunt r grup f accunts with investment hldings picked by yu and yur Rep The accunt will cnsist f a separate accunt(s) thrugh MOIS as intrducing brker-dealer and held by a qualified custdian under yur name The qualified custdian will maintain custdy f all funds and securities f the accunt MOIS Retirement Plan Services: MOIS ffers retirement plan services t emplyers spnsring qualified retirement plans thrugh arrangements with unaffiliated third-party mney managers r thrugh the Mutual f Omaha Retirement Services prgram. Fr additinal details regarding investment advisry prgrams ffered by MOIS, please reference the Frm ADV 2A. Yu shuld carefully cnsider the risks and expenses assciated with any prduct befre yu invest with MOIS. Please cntact yur Rep r ur hme ffice with any questins regarding yur investment r this dcument.