How 9 giant wealth managers do revenue sharing

Asked how the industry practice of revenue sharing served their clients' best interest, nine of the largest wealth management firms dodged the question.

Instead — as shown in the below slideshow — the representatives for Ameriprise, LPL Financial, UBS, Morgan Stanley, Edward Jones, Merrill, JPMorgan Chase, Wells Fargo and Raymond James either referred Financial Planning to their companies' disclosures, declined to comment or didn't answer the email inquiry. That was hardly surprising, considering that revenue sharing and other industry conflicts of interest frequently draw regulatory scrutiny.

But even officials at the Securities and Exchange Commission — the regulatory agency responsible for overseeing Wall Street and ensuring that conflicts of interest like revenue sharing are properly disclosed and managed across the industry — declined to comment, too. 

So FP turned to knowledgeable experts to explain revenue sharing, in which mutual fund companies make payments to wealth management firms that recommend their products. The practice creates conflict of interest, as wealth firms and their financial advisors may be incentivized to nudge clients toward funds that pay the most revenue sharing over funds that may be a better fit for the client.

READ MORE: The lucrative, murky revenue sharing between fund and wealth managers

The practice began decades ago, when asset management firms were seeking space on the investment menus offered by independent advisors to their clients, according to Mark Quinn, director of regulatory affairs with Los Angeles-based Cetera Financial Group. The separation of the product issuers from their distribution channels in the form of independent wealth managers created a need "to fill in that revenue gap" and "get additional market share," Quinn said. 

Today, the payments work differently than in the past.

"The top tier of sponsors, they all pay the same," Quinn said. "The potential conflict that could have arisen out of one sponsor paying more than another, that doesn't really exist in the way that it would have 15 or 20 years ago." 

Regardless, the total scope of revenue sharing across the industry remains difficult, if not impossible, to determine. Some say it should be banned completely.

"Investors shouldn't need to be a financial expert to save for retirement any more than they should need to be an aerospace engineer to choose a safe flight," Corey Frayer, the director of investor protection with the Consumer Federation of America, said in an email. "The financial sector is consistently more profitable than any other but it never seems to be enough. Disclosure is a critical feature of price discovery because it provides a like-for-like comparison among similar financial instruments but it's not as effective a tool for comparing complex and bespoke arrangements like revenue sharing agreements."

Many unknowns remain about revenue sharing, including its total amount, how exactly it differs from other types of payments between product issuers and wealth firms, and whether regulators will ever ban it. 

With all that murkiness, planners should simply strive to inform themselves and their clients as much as possible about revenue sharing and other conflicts, according to Sara Grillo, an advisor lead generation consultant who teamed up with planners in launching a professional network called the Transparent Advisor Movement in 2022. Grillo said some advisors and industry professionals may be afraid to discuss the topic at all.

"Being a better financial advisor comes down to things like this — doing the things that you're scared about," Grillo said. "You can only be better by having these dialogues."

Scroll down the slideshow for a glimpse into the disclosures about revenue sharing at nine of the largest firms in wealth management. Click here to read FP's accompanying deep-dive feature on revenue sharing, "The lucrative, murky revenue sharing between fund and wealth managers." And follow this link to compare the disclosures below to those of the same companies from two years ago.

Ameriprise

Ameriprise financial bloomberg
Disclosure explanation: "[Our affiliate American Enterprise Investment Services] receives a variety of payments for cost reimbursement services from products sponsored or managed by affiliated investment advisers and by non-proprietary product companies, which reimburse the costs of client beneficial services provided by Ameriprise Financial Services and/or AEIS," according to the firm. "The most significant of these payments are reimbursement for marketing and sales support received from the product companies. If Ameriprise Financial Services and/or AEIS did not receive this compensation, Ameriprise Financial Services would likely charge higher fees or other charges to clients for the services provided."

Names/numbers: At least 30 "full participation firms" pay Ameriprise an asset-based "cost reimbursement" payment of as much as 20% per year for client investments in their mutual funds. In 2023, the company received more than $337 million in such payments, with an affiliate under common ownership, Columbia Management Investment Distributors, paying more than double any other company at $64.2 million. Affiliates of Fidelity Investments ($29.2 million), MFS Investment Management ($26.2 million), JPMorgan Chase ($21.6 million) and BlackRock ($17.4 million) rounded out the top five.

Company response: Representatives for the company declined to comment.

LPL

lpl-financial
Disclosure explanation: "LPL has conflicts of interest like all financial services companies," according to the firm. "As an LPL customer, it is important to understand that LPL's receipt of third party compensation creates a conflict of interest for LPL, which means that there is an incentive for LPL and its financial professionals to recommend investment products that pay third party compensation. LPL receives significantly more third party compensation from the product sponsors for which LPL's clients have the largest holdings, which creates a conflict of interest for LPL to promote and recommend these product sponsor's investments. Additionally, LPL generally receives higher rates of third party compensation from investments with higher management fees, which creates an incentive for LPL to promote or recommend these investments." 

Names/numbers: Product sponsors pay LPL up to 0.25% of the level of client assets in their mutual funds for "marketing support payments to incentivize LPL to promote their products, and [to] receive preferential treatment as a result of these payments," according to the firm. ETF sponsors provide up to 0.20% depending on their expense ratios, plus a flat fee of up to $1 million tied to asset levels. Each type of sponsor sends LPL an additional $10 for every brokerage-account trade investing in their product. 

Company response: The company didn't respond to emails seeking comment.

UBS

UBS
Disclosure explanation: "UBS Financial Services receives additional compensation in connection with the mutual funds it offers to you and in which your assets are invested," according to the firm. "This compensation is a result of distribution, shareholder servicing, administration, marketing or revenue sharing agreements we have with the sponsors of those securities."

Names/numbers: Fund sponsors generally pay UBS up to 0.15% per year of the assets held in stock vehicles and 0.10% for bond investments. Money-market sponsors pay the firm as much as 0.11% for "for assets held in UBS accounts that are not retirement assets in discretionary advisory programs."

Company response: Representatives for the company declined to comment.

Morgan Stanley

Morgan Stanley
Disclosure explanation: "Morgan Stanley charges each fund family we offer a mutual fund support fee, also called a revenue-sharing payment, on client account holdings in fund families generally according to a tiered rate which increases along with the management fee of the fund so that lower management fee funds pay lower rates than those with higher management fees," according to the firm.

Names/numbers: The fund firms pay as much as 0.12% of assets. 

Company response: Representatives for the company declined to comment.

Edward Jones

Edward Jones
Disclosure explanation: "Edward Jones receives payments known as revenue sharing from certain mutual fund companies, 529 plan program managers and insurance companies (collectively referred to as 'product partners')." according to the firm. "We do not receive revenue sharing payments on assets within investment advisory programs. We want you to understand that Edward Jones' receipt of revenue sharing payments creates a potential conflict of interest in the form of an additional financial incentive and financial benefit to the firm, our financial advisors and equity owners in connection with the sale of products from these product partners."

Names/numbers: An affiliate of American Funds paid Edward Jones $124.9 million in revenue sharing as far and away the largest contributor to the $315.3 million collected by Edward Jones across mutual fund and 529 savings plans firms. Distribution arms of MFS ($39.7 million), Franklin Templeton Investments ($27.7 million), Invesco ($26.9 million) and JPMorgan ($24.8 million) provided the next highest revenue sharing payments last year. Across 16 fund families, their revenue-sharing rates ranged from $3.50 per $10,000 "of eligible Product Partner assets held by clients at Edward Jones)" paid by American Funds to $13 for most of the asset managers.   

Company response: Representatives for the company declined to comment beyond what is available in the disclosures.

Merrill

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Disclosure explanation: "On our brokerage platform, we only make available and recommend mutual funds from sponsors that pay us marketing services and support fees," according to Merrill's disclosure. "The amount of marketing services and support fees that we receive varies and is based on (1) client purchases of mutual funds and certain 529 plans, and/or (2) total client assets in mutual funds and certain 529 plans, and/or (3) fixed fee arrangements."

Names/numbers: Fund sponsors make revenue sharing payments of up to 0.25% on mutual fund purchases and 10% per year in asset-based fees flowing to Merrill, the company's guide for mutual fund investors stated. In 2023, only BlackRock reached the highest rung of more than $60 million in "marketing services and support fees" to Merrill, with American Funds and Federated Hermes between $10 million and $19,99 million and Fidelity and Franklin Templeton between $5 million and $9.9 million.   

Company response: The company didn't respond to emails seeking comment.

JPMorgan Chase

jpmorgan
Disclosure explanation: "We may allow representatives of all our approved mutual funds, including the JPMorgan Funds, access to advisors for educational and promotional purposes, subject to conditions imposed by us," according to the mutual fund investors guide for JPMorgan Wealth Management. "Some funds allocate more resources for these purposes, which could cause advisors to become more familiar with those funds and focus on them when meeting with clients. Funds or their affiliates may pay for sales meetings, seminars and conferences we hold in conducting our business, subject to conditions we impose. The extent to which a fund is willing to pay for these activities is solely determined by the fund's advisers or affiliates, not by us."

Names/numbers: Generally, mutual fund purchases by brokerage customers bring a revenue sharing payment of up to 0.25% and a recurring charge of as much as 0.09%. The appendix of the document listed 25 firms paying revenue sharing and a disclaimer that "the aforementioned revenue share payments from fund partners are not a factor in J.P. Morgan Securities' decision of what funds are included on the firm's approved or solicitation list." 

Company response: Representatives for the company declined to comment.

Wells Fargo

Wells Fargo
Disclosure explanation: "Revenue sharing is paid by a mutual fund's investment advisor, distributor, or other fund affiliate to Wells Fargo Advisors for providing continuing due diligence, training, operations and systems support, and marketing to financial advisors and clients with respect to mutual fund companies and their funds," according to the firm's mutual fund guide. "Wells Fargo Advisors receives different revenue sharing rates from each fund family, and may receive different revenue sharing rates for certain funds within a particular fund family."

Names/numbers: Most mutual fund managers pay up to 0.20% each year per client assets, although some of them provide "a negotiated, fixed annual amount for revenue sharing, regardless of the amount of assets held in client accounts or in new sales to clients," the firm's disclosure read. Offshore fund complexes send up to 0.55% on client assets each year.   

Company response: Representatives for the company directed inquiries about Wells Fargo's revenue sharing to p. 14 of the fund disclosure document, "Guide to Investing in Mutual Funds."

Raymond James

Raymond James
Disclosure explanation: "The services provided to companies participating in the [Education & Marketing Support Program] include, but are not limited to, providing detailed mutual fund information to financial advisors, assisting mutual fund companies with strategic planning support, inclusion in the No Transaction Fee Program, and providing opportunities for assisting with professional development workshops, study groups, and other educational events and conferences," according to the firm's mutual fund guide. "The level of support and types of services provided by Raymond James are commensurate with the tier level and increase at the higher tiers." 

Names/numbers: The possible level of marketing support payments "(also known as revenue sharing fees) that Raymond James receives from a particular mutual fund group/family" run as high as 0.30% per year, the firm stated. "These payments are generally not disclosed in detail in a particular mutual fund's prospectus or [supplementary document]." In a listing of its 14 "premier" product sponsor partners that pay the firm revenue sharing and those at the lower "preferred" and basic levels, the company noted that the many with an asterisk by the fund family's name "also have agreed to provide additional revenues" in exchange for Raymond James waiving a $15 processing fee for transactions. 

Company response: The company didn't respond to emails seeking comment.
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