PRINCOR
FINANCIAL
SERVICES
CORPORATION
Member of the Principal Financial Group®
A Registered Investment Adviser
711 High Street
Des Moines, IA 50392-0200
(888) 774-6267
SEC File Number
801-54949
Disclosure Brochure
November 2007
___________________________________________________________
PRIVACY NOTICE
This Notice is provided on behalf of the following companies of the Principal Financial Group: Principal Life Insurance Company Princor Financial Services Corporation Principal Investors Fund, Inc. Principal Funds Distributor, Inc. Principal Life Insurance Company Variable Life Separate Account Principal Life Insurance Company Separate Account B Principal Global Investors, LLC Principal Global Investors Trust Principal Real Estate Investors, LLC Principal Commercial Acceptance, LLC Principal Commercial Funding, LLC Principal Trust Company Spectrum Asset Management, Inc. Columbus Circle Investors Post Advisory Group, LLC Employers Dental Services, Inc. Professional Pensions, Inc. JF Molloy & Associates, Inc. Principal Wellness Company
PROTECTING YOUR PRIVACY
This Notice is required by law. It tells how we handle personal information.
This Notice applies to:
• people who own or apply for our products or services for personal use.
• employee benefit plan participants and beneficiaries. Please note that in this Notice, “you” refers to only these people. The Notice does not apply to an employer plan sponsor or group policyholder.
WE PROTECT INFORMATION WE COLLECT ABOUT YOU
We follow strict standards to safeguard personal information. These standards include limiting access to data and regularly testing our security technology.
HOW WE COLLECT INFORMATION
We collect data about you as we do business with you. Some of the sources of this data are as follows:
• Information we obtain when you apply or enroll for products or services. You may provide facts such as your
name; address; Social Security number; financial status; and, when applicable, health history.
• Information we obtain from others. This may include
claim reports, medical records, when applicable, credit reports, property values and similar data.
• Information we obtain through our transactions and experience with you. This includes your claims history,
payment and investment records, and account values and balances.
• Information we obtain through the Internet. This
includes data from online forms you complete. It also includes data we collect when you visit our websites.
HOW WE SHARE INFORMATION Within the Principal Financial Group
We may share personal information about you or about former customers, plan participants or beneficiaries within the Principal Financial Group for several reasons, including:
• to assist us in providing service; • to help design and improve products;
• to offer products and services that may be of interest to you; or
• with your consent, at your request or as allowed by law.
With Others
In the course of doing business we may share data with others. This could include personal information about you or about former customers, plan participants or beneficiaries. Personal information may be shared with others for the following reasons:
• in response to a subpoena, • to prevent fraud,
• to comply with inquiries from government agencies or other regulators, or
• for other legal purposes.
We also may share personal information:
• with others that service your accounts, or that perform services on our behalf;
• with others with whom we may have joint marketing agreements. These include financial services companies (such as other insurance companies, banks or mutual fund companies); and
MEDICAL INFORMATION
We do not share medical information among companies of the Principal Financial Group or with others except:
• when needed to service your policies, accounts, claims or contracts;
• when laws protecting your privacy permit it; or • when you consent.
ACCURACY OF INFORMATION
We strive for accurate records. Please tell us if you receive any incorrect materials from us. We will make the appropriate changes.
COMPANIES WITHIN THE PRINCIPAL FINANCIAL GROUP
Several companies within the Principal Financial Group are listed at the top of this Notice. The companies of the Principal Financial Group are leading providers of retirement savings, investment, and insurance products.
MORE INFORMATION
You may write to us if you have questions about our Privacy Notice. Contact our Privacy Officer at P.O. Box 14582, Des Moines, Iowa 50306-3582.
Receipt of this notice does not mean your application has been accepted.
We may change our privacy practices at times. We will give you a revised notice when required by law.
Our privacy practices comply with all applicable laws. If a state’s privacy laws are more restrictive than those stated in this Notice, we comply with those laws.
Your agent, broker, registered representative, consultant or advisor may have a different privacy policy.
CALIFORNIA PRIVACY NOTICE
This Notice is provided on behalf of the following companies of the Principal Financial Group: Principal Life Insurance Company Princor Financial Services Corporation Principal Investors Fund, Inc. Principal Funds Distributor, Inc. Principal Life Insurance Company Variable Life Separate Account Principal Life Insurance Company Separate Account B Principal Global Investors, LLC Principal Global Investors Trust Principal Real Estate Investors, LLC Principal Commercial Acceptance, LLC Principal Commercial Funding, LLC Principal Trust Company Spectrum Asset Management, Inc. Columbus Circle Investors Post Advisory Group, LLC Employers Dental Services, Inc. Professional Pensions, Inc. JF Molloy & Associates, Inc. Principal Wellness Company
PROTECTING YOUR PRIVACY
This Notice is required by law. It tells how we handle personal information.
This Notice applies to individual residents of California who: • own or apply for our products or services for personal use.
• are employee benefit plan participants and beneficiaries. Please note that in this Notice, “you” refers to only these people. The Notice does not apply to an employer plan sponsor or group policyholder.
WE PROTECT INFORMATION WE COLLECT ABOUT YOU
We follow strict standards to protect personal information. These standards include limiting access to data and regularly testing our security technology.
HOW WE COLLECT INFORMATION
We collect data about you as we do business with you. Some of the sources of this data are as follows:
• Information we obtain when you apply or enroll for products or services. You may provide facts such as your
name; address; Social Security number; financial status; and, when applicable, health history.
• Information we obtain from others. This may include
claim reports, medical records, credit reports and similar data.
• Information we obtain through our transactions and experience with you. This includes your claims history,
payment and investment records, and account values. • Information we obtain through the Internet. This
includes data from online forms you complete. It also includes data we receive when you visit our website.
HOW WE SHARE INFORMATION
We may share personal information about you or about former customers, plan participants or beneficiaries among companies within the Principal Financial Group or with others for several reasons, including:
• to assist us in servicing your account;
• to protect against potential identity theft or unauthorized transactions;
• to comply with inquiries from government agencies or other regulators, or for other legal purposes;
• with your consent, at your request or as allowed by law.
MEDICAL INFORMATION
We do not share medical information among companies of the Principal Financial Group or with others except:
• when needed to service your policies, accounts, claims or contracts;
• when laws protecting your privacy permit it; or • when you consent.
ACCURACY OF INFORMATION
We strive for accurate records. Please tell us if you receive any incorrect materials from us. We will make the appropriate changes.
COMPANIES WITHIN THE PRINCIPAL FINANCIAL GROUP
MORE INFORMATION
You may write to us if you have questions about our Privacy Notice. Contact our Privacy Officer at P.O. Box 14582, Des Moines, Iowa 50306-3582.
Receipt of this notice does not mean your application has been accepted.
We may change our privacy practices at times. We will give you a revised notice when required by law.
Our privacy practices comply with all applicable laws.
Your agent, broker, registered representative, consultant or advisor may have a different privacy policy.
Disclosure Brochure
TABLE OF CONTENTS
I.
Introduction ...
II.
Advisory Services and Fees ...
III. Advisory Clients and Types of Investments ...
IV. Methods of Analysis, Sources of Information, and Investment Strategies ...
V.
Education, Business Standards and Code of Ethics...
VI. Education and Business Background...
VII. Other Business Activities...
VIII. Other Financial Industry Activities or Affiliations...
IX. Participation or Interest in Client Transactions ...
X.
Conditions for Managing Accounts ...
XI. Review of Accounts and Reports to Clients ...
XII. Investment or Brokerage Discretion ...
XIII. Additional Compensation ...
I. INTRODUCTION
Princor Financial Services Corporation (“Princor,” “we” or “us”) is federally registered with the Securities and Exchange Commission (“SEC”) as an investment adviser and is a member broker/dealer with the Financial Industry Regulatory Authority (“FINRA”). Princor is registered or licensed to conduct business in all fifty states and the District of Columbia.
Princor began its operation in 1968, and is headquartered in Des Moines, Iowa. Princor is a member company of the Principal Financial Group, a family of financial services companies offering businesses, individuals and institutional clients a wide range of financial products and services including retirement and investment services, life, disability and health insurance and annuities.
II.
ADVISORY SERVICES AND FEES
A. Advice Incidental to Brokerage Services
Princor’s principal business activity is acting as a securities broker/dealer. When acting as a broker/dealer, Princor may provide securities-related advice to its brokerage clients that is incidental to the brokerage services provided (“incidental advice”) and for which Princor does not receive any special compensation (i.e., compensation other than the usual and customary brokerage commissions). Brokerage services and incidental advice are provided by individuals who are Registered Representatives of Princor (“Broker/Dealer Representatives”). Princor does not consider clients who receive only brokerage services (“Brokerage Services Clients”) or such incidental advice from our Broker/Dealer Representatives to be Investment Advisory Clients (“Advisory Clients”).
B. Advisory and Solicitor Services
Princor authorizes individuals who are registered as investment adviser representatives of Princor (“Adviser Representatives”) in writing to act on its behalf to offer services as described below, collectively referred to as “Advisory Services”. Princor allows all of its Adviser Representatives to use either Investment Adviser Representative or Financial Advisor titles when offering Advisory Services. Some Adviser Representatives are permitted to use the title of Financial Planner if they engage in certain levels of fee based financial planning service. Adviser Representatives are also Broker/Dealer Representatives. Princor’s Advisory Clients may also be Princor’s Brokerage Services Clients.
Advisory Services
When acting as an investment adviser, rather than a broker/dealer or as a solicitor for investment management firms unaffiliated with Princor (“Unaffiliated Advisors”), Princor offers the following types of services to its Advisory Clients:
1) Mutual Fund Asset Allocation Services sponsored by Princor;
2) Mutual Fund Asset Allocation Services sponsored by Unaffiliated Advisors; 3) Portfolio Management Services sponsored by Unaffiliated Advisors;
4) Impersonal Advisory Services (i.e., services that do not purport to meet the objectives or needs of specific individuals or accounts), usually through educational seminars for which Princor charges a fee (“Seminar Services”);
5) Financial Planning Services for which Princor charges an hourly or flat rate fee;
6) Executive Planning Services through a web-based financial planning and account aggregation service provided by a third party vendor not affiliated with Princor;
7) A non-discretionary wrap program where Advisory Clients receive investment advice, brokerage and custodial services for a single fee; and
Solicitor Services
When acting as a solicitor, rather than a broker/dealer or investment adviser, Adviser Representatives refer clients to Unaffiliated Advisors that offer mutual fund asset allocation services, portfolio management services or both in exchange for a solicitor’s fees paid by the Unaffiliated Advisor firms to Princor. These referral arrangements are conducted in accordance with the Rule 206(4)-3 under the Investment Advisers Act of 1940. Depending on the program, Princor can provide some or all of the following services:
1) Assist Advisory Clients in evaluating their financial circumstances and objectives and determining which service best matches those objectives;
2) Assist Advisory Clients in selecting the model portfolio available through mutual fund asset allocation services (when applicable);
3) Assist Advisory Clients in selecting an investment manager available through portfolio management services (when applicable);
4) Assist Advisory Clients in the completion and delivery of necessary paperwork to open the account; and 5) Contact the Advisory Client on an annual basis to determine whether there have been any changes to the
Advisory Client’s financial situation and/or investment objectives.
Adviser Representatives are available to Advisory Clients on an ongoing basis to receive instructions and to convey to the Unaffiliated Advisor any changes in the Advisory Clients’ financial circumstances and/or investment objectives. Upon request, Adviser Representatives will conduct a review of the Advisory Clients’ accounts to determine whether the Unaffiliated Advisor has managed the account in a manner consistent with the Advisory Service’s investment objectives and policies. Princor does not participate in the creation or management of any of the portfolios offered by the Unaffiliated Advisors.
Investment and advisory products and services offered or recommended by Princor or its Adviser Representatives are subject to risks associated with investing in securities and will not always be profitable. Princor and its Adviser Representatives do not guarantee the results of any advice or recommendations, nor do they guarantee that the investment objectives of Advisory Clients will be met in any program, service or product it provides or offers.
C. Princor Advisory Programs
Principal Premier Asset Allocation Program
a. Services Provided
Princor sponsors the Principal Premier Asset Allocation ProgramSM (referred for purposes of this Subsection as “Principal Premier” or as “Program”). Principal Premier is a discretionary mutual fund asset allocation service using no-load and load-waived mutual funds. Princor uses asset allocation tools and investment research from Ibbotson Associates Advisors, LLC (“Ibbotson”), also a registered investment adviser, as the primary resource in delivering the Principal Premier service. Ibbotson has developed the asset allocation models for Principal Premier. It utilizes its proprietary research and screening processes to design mutual fund portfolios consistent with these asset allocation models. Ibbotson screens no-load and load-waived mutual funds in selecting the funds included in these mutual fund portfolios and updates its research on a quarterly basis.
Princor has relied on Ibbotson’s determination that the overall performance of PIF merits its inclusion in Program Model Portfolios. In offering these funds in the Program, Princor believes that it has complied with standards of fiduciary duty that require it to act solely in the best interest of the client when making investment recommendations.
Adviser Representatives who are agents with Principal Life Insurance Company are required to meet certain sales levels necessary to maintain their benefit package with Principal Life, which includes health insurance, stock incentives, pension, and other benefits. Sales of Princor Advisory Programs will count towards those sales levels. Sales of the mutual fund asset allocation programs sponsored by the Unaffiliated Advisors described in Part D, E and F of this Disclosure Brochure do not. Therefore, these Adviser Representatives have a potential conflict of interest in offering Principal Managed Portfolio and Principal Premier over such other programs.
Under the Program, a prospective client selects a mutual fund portfolio suited to the client’s investment objectives, risk profile and tax situation as reflected on an investor questionnaire. Princor utilizes a questionnaire and a scored answer system (“risk tolerance questionnaire”) developed by Ibbotson for this Program that is used to match the prospective client to a mutual fund portfolio suited to the client’s investment objectives. Princor does not take part in the design of the mutual fund portfolios or development of the asset allocation tools in this Program. Ibbotson’s investment research, risk tolerance questionnaire and other asset allocation tools are relied upon by Princor in the Program to ensure that the asset allocation models and the mutual fund portfolios appropriately meet prospective investors’ investment objectives and risk tolerance.
Princor will execute the mutual fund trades for the Program accounts. Pershing, LLC must clear all trades in the Program accounts. Principal Premier clients receive a confirmation upon each Principal Premier trade, an account statement no less frequently than quarterly and monthly for every month in which there is brokerage activity in their Program account, and mutual fund prospectuses from Pershing, LLC. Pershing LLC also provides the custodial services for assets invested within the Program. Princor will not take custody of Principal Premier client account assets. All dividends and other distributions from Program account assets will be managed in accordance with instructions given on the Program account opening forms.
b. Mutual Fund Selection and Performance Reporting
Ibbotson reviews the Principal Premier asset allocation models and the mutual fund portfolios on an ongoing basis. In choosing the specific mutual funds, Ibbotson uses returns-based style analysis as the primary tool to evaluate fund investment style as well as the style-adjusted risk and returns characteristics of a mutual fund. Ibbotson reviews the selected funds quarterly and the asset allocation models annually. Each Principal Premier account is reviewed once a month to determine if the portfolio is still in balance with the original targeted allocation percentages for each asset class. If the account is out of balance, it will be rebalanced to the original target allocation. Ibbotson sets drift parameters on each model portfolio unique to the different asset classes within the model.
c. Program Fee
The Program fee schedule payable by Principal Premier clients is set forth below and is expressed in terms of an annual percentage of the account asset value:
Asset Value $0-$500,000 > $500,000-$1,000,000 >$1,000,000-$5,000,000 >$5,000,000
Program Fee 1.75% 1.50% 1.00% .75%
Amounts reaching a breakpoint do not realize the benefit on total account assets; Program fee reductions apply only to amounts in excess of the breakpoint level. Except for certain client charges as specified below, the Program fee covers the provision of initial and ongoing investment advisory services, execution and clearing of securities transactions, account administration and custody of assets invested in the Program. Princor pays a portion of the total Program fee to Ibbotson to compensate it for ongoing asset allocation modeling, investment research, mutual fund portfolio design and asset allocation tools updates, and to Lockwood for ongoing account administration services and for rights to use the Principal Premier client website. Except for the first four month period beginning with the date the account is opened (“inception quarter”), Principal Premier accounts are assessed the Program fee quarterly, in advance, based on the market value of account assets as of the last business day of the previous quarter. The Program fee in the inception quarter is charged on a prorated basis to reflect the number of days in the inception quarter the assets are to be on deposit in the Program, and is based on the initial amount deposited. In the event of termination of an account, unearned Program fees are refunded to the client by Princor on a pro rata basis; however, due to the administrative costs of establishing Principal Premier accounts, an early account closing fee of $500.00 will be applied to accounts terminated within the first four full calendar quarters following the date the account was opened. The Program fee is negotiable.
Princor does discount the Program Fee to customers meeting certain criteria, such as having existing insurance, banking, or investment relationships with Princor or its affiliates, or having an immediate family relation that is an Advisory Representative. Princor will also discount its Program fees for competitive reasons. Princor may negotiate Program Fee reductions with prospective customers and existing customers in other situations upon customer request.
Princor absorbs any SEC and exchange fees arising from account activity. Custodial and maintenance fees normally applicable to individual retirement accounts and qualified retirement plans for which Pershing acts as Custodian are waived. One-time fees related to the termination of individual retirement accounts for which Pershing acts as Custodian apply. Cash balances in the Principal Premier client accounts are automatically swept to a money market fund. If the money market fund balance or other cash equivalent funds in the Program accounts are not sufficient to pay the Program fee, the difference will be paid by redemption of the client’s mutual fund holdings in the Program accounts on a pro-rata basis. The values in Program accounts held by related persons may be aggregated for purposes of determining the Program fee. Generally, the minimum initial investment in the Program is $100,000.
The mutual funds held in the Program accounts also incur investment management fees, 12b-1 distribution fees and other operating fees and expenses. These fees decrease potential Fund and Program account positive returns and increase potential negative returns. The Program client pays internal expenses of
A client could invest in the mutual funds in the Model Portfolios directly without the services of Princor and would not incur a Program fee. This Program may cost the client more or less than purchasing such services separately, assuming that similar services could be purchased directly from the various providers thereof. Additionally, providers of mutual fund investment management portfolios such as the Program may not be able to offer such services for individual client accounts for the account minimums typically associated with mutual fund asset allocation programs or, if so, only at a higher cost because such service providers do not enjoy the economies of scale associated with providing services to clients of mutual fund asset allocation programs.
Principal Managed Portfolio
a. Services Provided
Princor sponsors the Principal Managed PortfolioSM (referred for purposes of this Subsection as “Managed Portfolio” or “Program”). Managed Portfolio is a discretionary mutual fund asset allocation service using the mutual funds of Principal Investors Fund, Inc. (“PIF”) and other mutual fund families that are not affiliated with Princor. Princor uses asset allocation tools and investment research from Ibbotson Associates Advisors, LLC (“Ibbotson”), also a registered investment adviser, as the primary resource in delivering the Managed Portfolio Program. Ibbotson has developed the asset allocation models for Managed Portfolio. It utilizes its proprietary research and screening processes to design mutual fund portfolios consistent with these asset allocation models. Ibbotson screens and updates its research on a quarterly basis. Princor does not recommend, select or play any role in Ibbotson’s selection of the
specific funds comprising the Managed Portfolios, however, Princor is one of the distributors of the mutual funds of PIF. Certain affiliates of Princor have a financial interest in the mutual funds of PIF. These mutual funds are managed and in some cases sub-advised by affiliates of Princor. PIF pays investment management fees to these affiliates. Although Princor does not directly receive these payments, Princor has a conflict of interest between its duty to act in the best interest of its clients and any interest it may have in generating advisory fees for its affiliates by including PIF in the Program. However, Princor has relied on Ibbotson’s determination that the performance of the mutual funds of PIF merits including these funds in the Program asset allocation models. In addition, Adviser Representatives who are agents with Principal Life Insurance Company are required to meet certain sales levels necessary to maintain their benefit package with Principal Life, which includes health insurance, stock incentives, pension, and other benefits. Sales of Princor Advisory Programs will count towards those sales levels. Sales of the mutual fund asset allocation programs sponsored by the Unaffiliated Advisors described in Part D, E and F of this Disclosure Brochure do not. Therefore, they have a potential conflict of interest in offering Principal Managed Portfolio and Principal Premier over such other programs.
Princor will execute the mutual fund trades for the Program accounts. Pershing, LLC must clear all trades in the Program accounts. Managed Portfolio clients receive a confirmation upon each Program trade, an account statement no less frequently than quarterly and monthly for every month in which there is brokerage activity in their Program account, and mutual fund prospectuses from Pershing, LLC. Pershing LLC also provides the custodial services for assets invested within the Program. Princor will not take custody of Managed Portfolio client account assets. All dividends and other distributions from Program account assets will be managed in accordance with instructions given on the Program account opening forms.
b. Mutual Fund Selection and Performance Reporting
Ibbotson researches, screens and selects certain mutual funds of PIF as well as mutual funds not affiliated with Princor to create the mutual fund portfolios available in the Program. The only mutual funds other than PIF that are included in the Program are municipal bond funds comprising the fixed income component in the tax sensitive non-qualified model portfolios. There is no broad screening of mutual funds in this Program by Ibbotson and only a limited number of mutual funds other than PIF will be included. Ibbotson reviews the asset allocation models and the mutual fund portfolios on an ongoing basis. In choosing the specific mutual funds, Ibbotson uses returns-based style analysis as the primary tool to evaluate fund investment style as well as the style-adjusted risk and returns characteristics of a mutual fund. Ibbotson reviews the selected funds on a quarterly basis and the asset allocation models on a yearly basis. Each Managed Portfolio account is reviewed once a month to determine if portfolio is still in balance with the original targeted allocation percentages for each asset class. If the account is out of balance, it will be rebalanced to the original target allocation. Ibbotson sets drift parameters on each model portfolio unique to the different asset classes within the model.
Quarterly performance reports are made available to the client. These are produced by Lockwood Advisors, Inc., which is an affiliate of Pershing, LLC. These performance reports are intended to inform clients as to how their selected mutual fund portfolios in the Managed Portfolio have performed for the reporting period, both on an absolute basis and compared to leading investment indices.
c. Program Fee
The Program fee schedule payable by Managed Portfolio clients is set forth below and is expressed in terms of an annual percentage of the account asset value:
Asset Value $0-$250,000 >$250,000-$500,000 > 500,000-$1,000,000 >$1,000,000
Program Fee 1.50 % 1.25% 1.00% .75%
Amounts reaching a breakpoint asset level do not realize the benefit on total account assets; Program fee reductions apply only to amounts in excess of the breakpoint asset level. Except for certain client charges as specified below, the Program fee covers the provision of initial and ongoing investment advisory services, execution and clearing of securities transactions, account administration and custody of assets invested in the Program. Princor pays a portion of the total Program fee to Ibbotson to compensate it for ongoing asset allocation modeling, investment research, mutual fund portfolio design and asset allocation tools updates, and to Lockwood for ongoing account administration services and for rights to use the Managed Portfolio client website.
termination of an account, unearned Program fees are refunded to the client by Princor on a pro rata basis; however due to the administrative costs of establishing Managed Portfolio accounts, an early account closing fee of $500.00 will be applied to accounts terminated within the first four full calendar quarters following the date the account was opened. The Program fee is negotiable. Princor does
discount the Program Fee to customers meeting certain criteria, such as having existing insurance, banking, or investment relationships with Princor or its affiliates, or having an immediate family relation that is an Advisory Representative. Princor will also discount its Program fees for competitive reasons. Princor may negotiate Program Fee reductions with prospective customers and existing customers in other situations upon customer request.
Princor absorbs any SEC and exchange fees arising from account activity. Custodial and maintenance fees normally applicable to individual retirement accounts and qualified retirement plans for which Pershing acts as Custodian are waived. One-time fees related to the termination of individual retirement accounts for which Pershing acts as Custodian apply. Cash balances in the Managed Portfolio client accounts are automatically swept to a money market fund. If the money market fund balance or other cash equivalent funds in the Program accounts are not sufficient to pay the Program fee, the difference will be paid by redemption of the client’s mutual fund holdings in the Program accounts on a pro-rata basis. The values in Program accounts held by related persons will be aggregated for purposes of determining the Program fee. Generally, the minimum investment in the Program is $25,000.
The mutual funds held in the Program accounts also incur investment management fees. These fees decrease potential fund and Program Account positive returns and increase potential negative returns. The
Program client pays internal expenses of the funds, which are in addition to the Program fee paid to Princor. The mutual funds included in Managed Portfolio other than PIF may pay certain fees to Princor, including, but not limited to distribution fees paid pursuant to distribution and shareholder servicing plans adopted by the funds under Rule 12b-1 of the Investment Company Act of 1940. Princor will retain these distribution and shareholder servicing fees. Because Princor receives compensation from these mutual fund companies, Princor has a conflict of interest in including these funds in the Program. However, Princor has relied on Ibbotson’s determination that the overall performance of these funds, after taking into accounts such payments, merits inclusion in the Program’s Model Portfolios.
This Program may cost the client more or less than purchasing such services separately, assuming that similar services could be purchased directly from the various providers thereof. Additionally, providers of mutual fund investment management portfolios such as the Program may not be able to offer such services for individual client accounts for the account minimums typically associated with mutual fund asset allocation programs or, if so, only at a higher cost because such service providers do not enjoy the economies of scale associated with providing services to clients of mutual fund asset allocation programs.
Principal Advisory Select Portfolios
Principal Advisory Select Portfolios is a non-discretionary advisory program sponsored by Princor that assists Advisory Clients with asset allocation utilizing a broad array of eligible investments such as mutual funds, individual equities and fixed income investments and exchange traded funds. The details of this program are contained in Part II, Schedule H of Princor's Form ADV.
Upon request, Princor may accept appointments from Advisory Clients to provide asset management services on a non-discretionary basis. The advice will be tailored to the stated objectives and requests of the Advisory Client, including any investment policies, guidelines or restrictions they dictate to Princor. The non-discretionary asset management services may include any or all of the following:
• Asset allocation analysis, including a review of the Advisory Client’s investment objectives with the development of investment portfolios designed to meet those objectives
Advice may be given on existing client investments such as mutual funds, exchange traded funds, registered individual equity issues traded on United States exchanges, fixed income issues and cash equivalents, including certificates of deposit and money market fund shares. Princor will generally not open accounts or accept existing portfolios for management with less than $500,000 in assets. Fees are based on a percentage of the value of the Advisory Client’s account. The fee is due and payable quarterly in advance and is based on the value of the account assets as of the close of business on the last business day of the preceding quarter. The annual fee for the non-discretionary asset management service will not exceed 2.0%. This fee is negotiable and as a result clients with similar assets may have differing fee schedules. Generally, Princor’s investment management fee is the only charge Princor will apply to the account. The custodial charges and brokerage fees are generally waived by Princor when providing this service. However, in no event will the fee cover certain fees charged by third parties, such as (i) management fees and expenses charged by mutual funds and exchange traded funds that may be held in an account; (ii) odd-lot differentials, American Depositary Receipt fees and exchange fees, transfer fees and other fees imposed by law; and (iii) redemption fees imposed by certain mutual funds.
Princor may receive payments from others in connection with the management of these accounts, including distribution and shareholder servicing fees from mutual funds if they held in these accounts. To the extent permitted by law, Princor will retain these payments. In addition, please refer to the preceding section entitled “Principal Managed Portfolio”, subsection “a” for a discussion of the conflicts of interest that are created when mutual funds managed by Princor’s affiliates are included in these accounts.
D. AssetMark Investment Services
Princor offers an investment advisory system known as AssetMark Investment Services (“AssetMark”). This system offers asset allocation model portfolios and portfolio management services. Asset allocation model portfolios of mutual funds, exchange traded funds and variable annuity sub-accounts designed to satisfy a gradient of risk/return assumptions (“Asset Mark Model Portfolios”) are available. The AssetMark Model Portfolios are composed by a group of independent investment strategists that have no direct contractual relationship with Princor or clients utilizing the AssetMark system, make no analysis of the clients’ circumstances or objectives, and do not tailor the AssetMark Model Portfolios to any specific client’s need. When Princor advises its Advisory Clients who invest in these AssetMark Model Portfolios, Princor uses information, research, asset allocation methodology and investment strategies of various institutional strategists who are under contract with AssetMark. However, Princor does not select the securities comprising the AssetMark Model Portfolios nor does it retain any discretion to change the AssetMark Model Portfolios selected by the Advisory Client in any way. In addition to the AssetMark Model Portfolios, there are two different portfolio management services available through AssetMark. In both these services (the Consolidated and the Independently Managed Accounts programs), Princor introduces Advisory Clients to private account investment managers who provide discretionary management of individual portfolios of equity and/or fixed income securities.
Princor assists the Advisory Client in selecting the AssetMark Model Portfolio(s) that best suit the client’s objectives. The Advisory Client then specifically directs the account to be invested in accordance with the chosen AssetMark Model Portfolio. When the Advisory Client selects the AssetMark Model Portfolio, the Advisory Client further directs that the account be automatically adjusted to reflect any adjustment in the AssetMark Model Portfolio by the independent investment strategist. The Advisory Client receives confirmation of all transactions in the account and is free to terminate participation in the program and retain or dispose of any assets in the AssetMark account at any time. Princor’s Client Services Agreement governing the AssetMark system accounts does provide for the automatic rebalancing of an account based on changes made to the AssetMark Model Portfolio selected by the client by the independent investment strategist. Therefore Princor does exercise limited discretion with accounts invested in the AssetMark Model Portfolios.
to these aforementioned services. The Advisory Client gives investment discretion on these accounts to specific private account investment managers who are not affiliates of Princor.
Princor does not have custody of client assets invested into the AssetMark system. The Advisory Client has the choice of retaining several different qualified custodians. The Advisory Client receives trade confirmations for all transactions in the account and prospectuses from his or her custodian. They also receive monthly brokerage account statements from the custodians. AssetMark is the program administrator and record keeper for Princor. The Advisory Clients are free to terminate participation in the AssetMark system and retain or dispose of any assets in their custodial account at any time.
Princor is required to deliver the AssetMark Program Disclosure Statement (Schedule H) to all Advisory Clients at or before the time of executing an advisory agreement. Advisory Clients should thoroughly review the Program Disclosure Statement, as it has a detailed discussion of the AssetMark investment advisory system, compensation received by Princor and AssetMark under the system, the compensation that Princor pays to AssetMark Investment Services, Inc. for utilizing the system, and potential conflicts of interest between Princor and its Advisory Clients. In particular, Princor is entitled to receive a quarterly reimbursement from AssetMark Investment Services, Inc, for qualified marketing and/or business development expenses it incurs. The amount of such reimbursement is based on the total assets invested by Advisory Clients at the end of each calendar quarter in the AssetMark system as follows:
Asset Level Quarterly Reimbursement
$ 25 Million $ 1,250
$ 35 Million $ 1,750
$ 50 Million $ 2,500
$ 75 Million $ 3,750
$ 100 Million $ 5,000
Please refer to Section II. H for a discussion of fees payable to Princor under the AssetMark system.
E. Mutual Fund Asset Allocation Services
Princor, acting as a solicitor, currently refers Advisory Clients to six discretionary mutual fund asset allocation services. The following Unaffiliated Advisors offer these services:
1) Brinker Capital, Inc. (“Brinker”) – Destinations.
2) LWI Financial, Inc. f/k/a Loring Ward Advisor Services – Strategic Account Money Management Program (“SAMM”).
3) Aris Wealth Services, Inc. (“Aris”) – Asset Builder.
4) Symmetry Partners, LLC (“Symmetry”) - Symmetry Partners Portfolio Program. 5) Lindner Capital Advisors, Inc.
6) Genworth Financial Asset Management, Inc. – Mutual Funds Service
Princor has also entered into a solicitor’s agreement with CLS Investment Firm, LLC (“CLS”). Among other services, CLS offers Retirement Solutions, an investment program made available to participants in certain qualified plans administered by Nationwide Life Insurance Company or its affiliates. In this program, CLS provides investment management services for participants’ qualified plan asset balances invested in mutual funds and exchange traded funds. Only certain Advisory Representatives of Princor are permitted to refer participants to this Firm.
Princor, acting as investment adviser, may refer Advisory Clients to a number of mutual fund asset allocation services. The following Unaffiliated Advisors offer these services:
2) SEI Investment Management Corporation (“SEI”), Asset Management Program, a discretionary mutual fund asset allocation service. SEI acts as investment adviser and mutual funds of SEI are utilized in this program. 3) Morningstar® Managed Portfoliossm, a discretionary mutual fund asset allocation service offered by
Morningstar Investment Services, Inc.
4) Nationwide Best of America® Advisory Services Program – Select Investment Portfolios – a discretionary mutual fund asset allocation service offered by Nationwide Investment Advisors, LLC.
All of these mutual fund asset allocation services provide several model investment portfolios for different investment objectives and risk tolerances, from which the Advisory Client may select. The Advisory Client invests in shares of certain no-load mutual funds and/or loaded funds available at net asset value selected by the Unaffiliated Advisor for inclusion in its program. As these are discretionary programs, they allow the Unaffiliated Advisor to change the model investment portfolios at their own discretion. These mutual fund asset allocation programs charge an advisory fee equal to a percentage of the Advisory Client’s assets under management within the program. Princor also charges a fee for the advisory services provided in connection with these mutual fund asset allocation services. The services provided by Princor are outlined in its agreement with the Advisory Client. In addition to those advisory fees, the Advisory Client assets in these services will be invested in shares of mutual funds. Each fund will have its own, separate investment management fees and fund expenses (including redemption fees). As a shareholder of these funds, the Advisory Client will bear their proportionate share of these fees. These investment management fees decrease positive investment returns and increase negative investment returns of the programs. If Advisory Clients were to purchase shares of mutual funds directly, rather than through these programs, they would not pay an advisory fee. Further, Princor, in its function as a broker/dealer, makes available to its Brokerage Services Clients a non-discretionary asset allocation program utilizing the Principal Investors Funds that does not require payment of any advisory fees. Princor has referred clients to LWI Financial, Inc.’s Synervest Portfolio service. This is a discretionary, mutual fund asset allocation service using its proprietary SA Funds. Princor does receive fees on a quarterly basis that are calculated as a percentage of the value of the LWI Financial, Inc.’s client account and such are disclosed in the Synervest account agreement.
F. Portfolio Management Services
Princor, acting as a solicitor, currently refers Advisory Clients to seven discretionary portfolio management services. The following Unaffiliated Advisors offer these services:
1) Brinker Capital, Inc. (“Brinker”) – Core Asset Manager and Unified Managed Account Programs.
2) Aris Wealth Services, Inc. (“Aris”) – Wealth Manager, Wealth Registry, Tactical Asset and Style Allocation (TASA) and Investor’s Circle.
3) Vantage Investment Advisors.
4) Rochdale Investment Management – Private Client Program. 5) The Haverford Trust Company.
6) Curian Capital, LLC – Custom Style Portfolios.
7) Genworth Financial Asset Management – Privately Managed Portfolios, Genworth Multiple Strategies Portfolio Service and Active Return Opportunities Portfolio Service.
Princor has referred Advisory Clients for portfolio management services to Albert A. Caporaso & Associates, Inc. Princor does not currently refer new Advisory Clients to this Firm but still receives solicitor’s fees as a result of the referrals.
Princor acting as investment adviser may refer Advisory Clients to four portfolio management services. The following Unaffiliated Advisors offer these services.
this program.
2) Manning and Napier Advisory Advantage Corporation (“Manning and Napier”), a discretionary managed account service.
3) Lockwood Advisors, Inc. – Managed Account Link Program, a discretionary managed account service. In this program, the Advisory Client can select from a number of portfolio managers available through the Lockwood program.
4) Nationwide Investment Advisors, LLC. – Nationwide Best of America® Advisory Services Program – Multi-Style Investment Portfolios (“MSIP”) and Portfolio Review & Solutions (“PR&S”), of which PR&S is a program that combines access to discretionary separately managed accounts and mutual fund model portfolios. With all of these discretionary portfolio management services listed above, the Advisory Client, with the assistance of the Adviser Representative, analyzes the Advisory Client’s investment objectives and risk tolerance, then selects one of the individual equity or fixed income portfolios available in the program. The portfolios are managed by portfolio managers (and in the MSIP program, by portfolio managers and an overlay manager) who are not affiliated with Princor. The portfolios are managed on a discretionary basis (i.e., the portfolio manager determines the investments within an Advisory Client’s portfolio and makes the appropriate trades without prior notification to the Advisory Client). With all of these portfolio management services, Princor does not provide any investment advice with respect to the management of the portfolios and further information regarding all of these programs may be found in the Unaffiliated Advisors’ Form ADV and exhibits thereto or Disclosure Brochures.
G. Variable Annuity Asset Allocation Services
Through The Nationwide Best of America® Advisory Services Program – Select Investment Portfolios, Princor also makes available portfolios of variable annuity sub-accounts developed by Nationwide Investment Advisors, LLC. Princor acts in the capacity of an investment adviser in referring clients to this program. Nationwide Investment Advisors, LLC retains discretion to add and delete sub-accounts, modify sub-account allocations and rebalance client accounts. This program provides several portfolios for different investment objectives and risk tolerances, from which the Advisory Client may select with the assistance of the Advisory Representative.
H. Fees for Asset Allocation and Portfolio Management Services Programs sponsored
by Unaffiliated Advisors
The range of fees paid by Advisory Clients to Princor and/or the Unaffiliated Advisors for these Advisory Services is variable and depends both on the Advisory Service selected and the level of assets invested.
Where Princor acts as a solicitor, the total fees payable by the Advisory Client are described in the Unaffiliated Advisor’s Form ADV or Disclosure Brochure. The Unaffiliated Advisor will pay a portion of the fees it collects on its accounts to Princor as a solicitor’s fee. When Princor acts as an investment adviser in these programs, it will contract with the Advisory Client for a fee separately from the Unaffiliated Advisor. Princor’s portion of the fees are charged and collected from the Advisory Client’s assets under management by the Unaffiliated Advisor or custodian and remitted to Princor.
The annual fees Princor receives as either a solicitor or as an investment advisor are listed below along with the Advisory Service and the applicable sponsor:
For SAMM, LWAS pays Princor a solicitor’s fee equal to 60% of the advisory fees LWAS collects from its clients on the accounts referred by Princor.
For the Symmetry Partners Portfolio Program, Symmetry remits a solicitor’s fee to Princor of anywhere from .85% to 1.5% of the value of Symmetry’s client assets under management.
client (Equity, Balanced or Fixed Portfolios). Princor’s annual solicitor fees as a percentage of the value of the client assets in the solicited accounts range from .30% to 1.25% for accounts up to $1,000,000 in value; .25% to 1% for accounts over $1,000,000 and less than $3,000,000, and .25% to .75% for accounts over $3,000,000. For the Destinations Program, Brinker pays Princor a solicitor’s fee in a range from .60% to 1.00% of the value of Brinker’s client assets under management.
Vantage Investment Advisors remits a solicitor’s fee to Princor of anywhere from .55% to 1.05% of their client’s assets under management in accounts referred by Princor.
Aris remits a solicitor’s fee on their various programs to Princor of anywhere from .25% to 1.75 % of their client assets under management in accounts referred by Princor.
For the Private Client Program, Rochdale remits a solicitor’s fee to Princor of anywhere from .07% to 1.00% of their client’s assets under management at Rochdale.
The Haverford Trust remits a solicitor’s fee to Princor ranging from .65% to 1.5% of the value of Haverford's client assets under management. The solicitor fee amount is dependent on the levels of assistance Princor agrees to deliver to Haverford’s clients.
Albert A. Caporaso & Associates, Inc. pays Princor a solicitor’s fee that varies between .35% to .80% of their client’s assets under management.
Curian Capital, LLC remits a solicitor’s fee to Princor of up to 1.5% of the value of Curian’s client assets under management.
Lindner Capital Advisors, Inc. remits a solicitor’s fee to Princor equal to 60% of the advisory fees Lindner collects from its clients on the accounts referred by Princor.
CLS pays Princor a solicitor’s fee of up to .45% of the value of its plan participant client’s assets under CLS management.
Genworth Financial Asset Management, Inc. remits solicitor’s fee to Princor for clients referred in the following programs and amounts: Active Return Opportunities Portfolios Service and Genworth Multiple Strategy Portfolios - $0 to $499,999 = 1%; $500,000 to $999,999 = .8%; $1,000,000 to $4,999,999 = .5%; $5,000,000 and above = .3%; Privately Managed Portfolios (Equity) - $0 to $499,000 = 1%; $500,000 to $999,000 = .8%; $1,000,000 to $4,999,999 = .5%; $5,000,000 and above = .3%; Privately Managed Portfolios (Fixed Income) - $0 to$499,999 = .50%; $500,000 to $999,000 = .50%; $1,000,000 to $4,999,999 = .25%; $5,000,000 and above = .15%; Mutual Funds Service – from 46% to 52% of the advisory fees Genworth collects from its clients.
ManagersChoice Program
Where Princor acts as investment adviser with the ManagersChoice Program, the advisory fee is set by Princor as a percent of the asset value of the client’s account at the end of each quarter according to the following schedule (expressed as annualized fees):
$0 - $149,999 1.00% - 1.50% $150,000 - $249,999 .85% - 1.35% $250,000 - $499,999 .75% - 1.25% $500,000 - $749,999 .65% - 1.15% $750,000 - $999,999 .50% - 1.00% 1 million - 1,999,999 .45% - .95% $2 million - and up .35% - .85%
services were provided. The Advisory Client may terminate the agreement any time upon written notice. The Managers Funds may terminate the investment advisory service it provides to Princor though the ManagersChoice Program at any time upon written notice.
SEI Investment Management Corporation
Where Princor acts as investment adviser with the SEI managed accounts and asset allocation programs, the advisory fee is set by Princor as a percent of the asset value of the client’s account at the end of each quarter according to the following schedule (expressed as annualized fees):
$0 - $149,999 1.00% - 1.50% $150,000 - $249,999 .85% - 1.35% $250,000 - $499,999 .75% - 1.25% $500,000 - $749,999 .65% - 1.15% $750,000 - $999,999 .50% - 1.00% 1 million - 1,999,999 .45% - .95% $2 million - and up .25% - .85%
The fees within the ranges stated above are negotiable with Princor. The fee is collected quarterly in arrears. Fees are prorated based on the number of days for which services were provided. The Advisory Client may terminate this agreement any time upon written notice without penalty. SEI may terminate the investment advisory service it provides to Princor through the SEI Managed Account Program at any time upon written notice, without penalty. Upon termination, SEI will calculate and deduct any fees due pro-rated based upon the number of days the client account was open during that quarter. The SEI Funds assess separate advisory fees that are payable to the funds’ portfolio managers.
Morningstar® Managed Portfolioss
An annual Program fee is charged quarterly in arrears and is based on client’s average daily account asset value during the previous quarter; pro-rated for partial quarters.
The Program fee consists of two parts:
Morningstar Investment Services’ (MIS) Fee – which covers its discretionary investment management
services, back-office support (e.g., proposals and account-opening documents), communications to clients and their Adviser Representative, marketing activities and trading costs (e.g., brokerage commissions on ETF transactions);
Princor Fee – which covers assisting the Advisory Client in completing a questionnaire and other applicable account opening forms, determining suitability and the appropriate portfolio within the program, contacting the client at least annually to obtain any changes in their financial situation and acting as liaison between MIS and the Advisory Client.
The maximum total fee payable by the Advisory Client as a percent of the asset value of the client’s account at the end of each quarter according to the following schedule (expressed as annualized fees):
First Next Next Over
$500, 000 $500,000 $1,000,000 $2,000,000
Total Fee 1.50% 1.40% 1.30% 1.10%
MIS Advisory Fee .40% .35% .30% .20% Princor Fee 1.10% 1.05% 1.00% .90%
Manning and Napier
Princor acts as investment adviser with the Manning and Napier portfolios. Princor’s advisory fee is set as a percentage of the asset value of the client’s account at Manning and Napier. Princor charges between .15% and 1.25% annually as adviser in connection with the Manning and Napier portfolios. This fee is in addition to the portfolio management and custodial fees assessed the client by Manning and Napier. The fees in this range are negotiable depending on the size of the client’s account and the level of services provided to the particular client. Fees are payable to Princor semi-annually in advance and are billed pro-rata in the first six month period following the commencement date of Manning & Napier’s investment management contract with the client and thereafter billed on a semi-annual basis. Prepayment of fees is for less than six months and in the event of termination of the advisory agreement with Manning and Napier or Princor or both, all unearned fees shall be refunded to the client. Princor follows the minimum account size requirement set by Manning and Napier. The client may terminate their advisory agreement with Princor upon thirty days written notice to Princor without a penalty.
Lockwood Advisors, Inc. – Managed Account Link Program
Princor acts as investment adviser in conjunction with offering the Lockwood Managed Account Link Program. Princor’s advisory fee is set as a percentage of the asset value of the client’s account at the Lockwood Division of Pershing, LLC, an affiliate of Lockwood Advisors, Inc. Princor’s advisory fees are as follows (expressed as annualized fees):
$0 - $500,000 .50% - 1.00%
$500,000 - $1,000,000 .50% - .90% $1,000,000 - $5,000,000 .30% - .60% >$5,000,000 .10% - .50%
The fees in this range are negotiable depending on the size of the client’s account and the level of services provided to the particular client. This fee is in addition to the fees charged by the portfolio manager selected by the Advisory Client, the program fee assessed by Lockwood Advisors, LLC and the clearing, custodial and transaction fees charged by Pershing, LLC. Fees are billed from the date the account is opened through the end of that calendar quarter in advance. Thereafter, fees are billed in advance for the next calendar quarter based on the value of the assets at the end of the prior calendar quarter. An Advisory Client may terminate without penalty within five days of the execution of the investment advisory agreement. Otherwise, Clients may terminate the account at Lockwood at any time, in which case fees will be prorated through the termination date. The client may terminate their advisory agreement with Princor upon written notice to Princor without a penalty.
AssetMark Investment Services
Princor acts as investment adviser in conjunction with offering the AssetMark investment advisory system. Advisory Client fees in the AssetMark system are payable quarterly, in advance, based on assets under management. The maximum annual advisory fees charged by Princor under this service are reflected on the following schedule:
Mutual Fund and Variable Annuity Portfolios
Exchange Traded Funds and Individually Managed Accounts
Consolidated Managed Accounts
First $250,000 1.50% First $1,000,000 1.35% First $1,000,000 1.60%
Next $250,000 1.35% Next $2,000,000 1.00% Next $2,000,000 1.35%
Next $500,000 1.15% Next $2,000,000 0.85% Next $2,000,000 1.20%
Next $1,000,000 0.85% Over $5,000,000 0.65% Next $2,000,000 1.05%
Over $2,000,000 0.55%
Consolidated Managed Accounts, the fee shown is inclusive of Investment Manager Fee but exclusive of the custody and trading fee.
Princor’s advisory fee is negotiable. The advisory fees charged to the AssetMark accounts do not reflect the investment management fees, 12b-1 distribution fees and other operating fees and expenses of the mutual funds or the variable annuity sub-accounts. These fees decrease potential positive returns and increase potential negative returns of accounts in the AssetMark System. The Advisory Client pays these internal expenses of the mutual funds and variable annuity sub-accounts, which are in addition to the advisory fee paid to Princor and the custody and trading fees. Clients may terminate AssetMark accounts at any time and receive a full pro-rata refund of any unearned fees.
Nationwide Best of America® Advisory Services Program
Princor acts as investment adviser in conjunction with offering the Nationwide Best of America® Advisory Services Program. Advisory Client fees are payable quarterly, in advance, based on assets under management. The maximum annual advisory fees charged by Princor under this service are reflected on the following schedule:
Select Investment Portfolios and Portfolio Review and Solutions- Mutual Fund and Variable Annuity Sub-accounts
Portfolio Review and Solutions – Separately Managed Accounts or Mutual Fund Portfolios
Multi-Style Investment Portfolios
$0- $249,999 1.25% $0- $999,999 1.15% 0- $999,999 1.15% $250,000-$499,999 1.20% $1Million-$1,999,999 1.05% $1Million-$1,999,999 1.05% $500,000-$999,999 1.15% $2 Million- $4,999,999 0.90% $2 Million- $4,999,999 0.90% $1Million-$1,999,999 1.05% $5 Million- $9,999,999 0.75% $5 Million- $9,999,999 0.75% $2 Million- $4,999,999 0.85% $10 Million-$19,999,999 0.55% $10 Million-$19,999,999 0.55% $5 Million- $9,999,999 0.65% Over $ 20 Million 0.45% Over $ 20 Million 0.45% $10 Million-$19,999,999 0.45%
Over $20 Million 0.25%
The above do not include the fees assessed by the portfolio managers selected in the MSIP or in the PR&S programs or by Nationwide Investment Advisers, LLC (“Nationwide”) and are billed separately and disclosed separately in the Nationwide program documents. In addition, custody and certain trading fees assessed by broker dealers unaffiliated with Nationwide are not included above, and are billed separately by the Custodian to the Advisory Client, pursuant to the Custodian’s fee schedule.
Princor’s advisory fee is negotiable. The advisory fees shown also do not reflect the investment management fees, 12b-1 distribution fees and other operating fees and expenses of the mutual funds or the variable annuity accounts. The Advisory Client pays these internal expenses of the mutual funds and variable annuity sub-accounts, which are in addition to the advisory fee paid to Princor, Nationwide and the portfolio managers selected in the programs. The Advisory Client may also incur custodial and trading fees.
With all of the programs sponsored by Unaffiliated Advisors, comparable programs or services may be available from other sources for fees lower than those specified above. In addition to fees that may be negotiated with Princor, some of the Unaffiliated Advisor’s fees may be negotiable in some special circumstances involving assets at higher levels, as Princor and the product sponsor shall determine on a case-by-case basis. Account minimums may also be lower than those stated in certain circumstances.
I. Impersonal Advisory Services (Seminar Services)
common employer or membership in certain trade associations or unions. Princor may charge an attendance fee to the seminar attendees, their employer or other organization of which they are a member, or both. A portion of those fees may be used to cover the cost of printed materials distributed during the seminar and/or facilities and food expense. The fee is determined by the Adviser Representative and will not exceed $100 per attendee in most cases.
Preparation of seminar materials is generally done by publishers and distributors of investment program material who are not affiliated with Princor. Materials provide attendees with investment-related information as well as educational material regarding general financial principles that are not investment-related. The information does provide advice about specific securities or other investments and does not purport to meet the investment objectives or needs of specific individuals or accounts. Comparable seminars may be available from other sources at lesser or no cost.
J. Financial Planning Services
Princor offers fee-based financial planning to Advisory Clients. A Business Consulting or Financial Planning Report (“Business Report” or “Personal Report”, collectively “Reports”) is produced to assist Advisory Clients in the area of business or personal financial planning. The Business Report is generally suitable for Advisory Clients who own or control small to medium sized businesses with annual sales of more than $1,000,000, an approximate business value over $2,000,000 and/or under 100 employees. The Personal Report is generally suitable for Advisory Clients who have more than $75,000 in household income, or $100,000 in household investable assets or $250,000 in net worth, not including the value of their primary residence.
The Reports provide an analysis of financial areas selected by the Advisory Client, which can include, but is not limited to, any combination of the following: setting business exit objectives and contingency planning, net worth, budgeting and cash flow, retirement planning, asset allocation, survivor needs and disability planning. Princor uses a variety of sources of information to prepare the Reports, including a client questionnaire, government reports and publications, tax and financial planning publications and material prepared by Princor and other companies of the Principal Financial Group.
The Reports do not contain specific securities or other investment recommendations, but may contain informational reports generated from research and ratings agencies on securities already held by the Advisory Client. The source of information for these reports is limited to pre-approved sources other than Princor or the Adviser Representative. Certain historical statistical data, derived from the performance of various indices, may also be provided in order to give Advisory Clients information regarding the relative historical risks and returns of broad asset classes and the general asset allocation models available. Advisory Clients are not required to implement any of the suggestions contained in the Report. Similarly, there is no obligation, either before or after receiving a Report, for the Advisory Client to utilize Princor or the Adviser Representative to purchase any products or services offered by Princor or from its affiliated companies (such as insurance, banking, employee benefits or trust services). Should the Advisory Client choose to do so, certain conflicts of interest arise between Princor and the Advisory Client and Princor’s role will change. These matters are discussed in Section II.K below.
The Advisory Client must sign the Financial Planning or Business Consulting Client Service Agreement (“Planning Agreement”) and receive a copy of Princor’s Disclosure Brochure. If the Advisory Client cancels the Planning Agreement within five business days of receiving an executed copy of the agreement and a copy of Princor’s Disclosure Brochure, the Advisory Client will receive a complete refund of the fee paid. Thereafter, the Advisory Client may terminate the Planning Agreement at any time, but is responsible for any fees and expenses incurred by Princor and/or the Adviser Representative for Report preparation at rates disclosed in the Planning Agreement.
Representatives quote the fee for financial planning either on an hourly or flat fee basis. An hourly fee is based on the Adviser Representative’s hourly planning rate multiplied by the estimated number of hours the Adviser Representative will spend preparing and delivering the Report. A flat fee is subject to prior negotiation and agreement between the client and the Adviser Representative. The degree of detail and sophistication of the financial plan varies according to the individual client’s circumstances. The total fee to complete a Report will not exceed $5,000, except as approved in advance by Princor. The term of the Planning Agreement will not exceed 1 year from the date the Planning Agreement is executed by all parties.
The fees for this service are subject to prior negotiation and agreement between the client and the
Adviser Representative. Princor may waive the fees for Advisory Clients maintaining certain levels of
assets or contracts with Princor or affiliates of Princor. Under certain circumstances, such as where
administrative or other services are being provided or where additional sales are expected, a portion of
the total fee for a Report may be waived. Furthermore, a Report may be offered to Advisory Clients for
a discounted fee in certain circumstances; e.g., a grouping of products and services.
Comparable plans may be available from other sources at lesser or no cost.K. Executive Planning Services
Princor makes available the Financial Planning Services described above along with access to a personal internet site accessible by the Advisory Client (the “Website”) that offers account aggregation and document storage services. This personal internet site is hosted and maintained by a third party that is not affiliated with Princor. The Executive Planning Agreement and Terms of Services of the Website allows the Advisory Client access to these services, authorizes Princor and Princor’s Adviser Representative to access the Website, which offers the capability to collect and consolidate on a daily basis account information gathered from multiple accounts Advisory Client maintains with various third-party financial institutions. The system is designed to give the Advisory Client a single access point to their finances including various financial accounts, tax and legal documents, insurance coverages, specific goals, and strategic plans. Updated reports of asset values, asset allocation, retirement and estate planning issues are calculated daily. The service includes a Client web site to check key planning numbers and store personal documents for online retrieval.
The executive planning services are generally suitable for Advisory Clients who have more than $75,000 in household income, or $100,000 in household investable assets or $250,000 in net worth, not including the value of their primary residence. The fees for this service are subject to prior negotiation and agreement
between the client and the Adviser Representative. Princor may waive the fees for Advisory Clients maintaining certain levels of assets or contracts with Princor or affiliates of Princor. The term of the
Executive Planning Client Service Agreement will not exceed 1 year from the date the Agreement is executed by all parties. After the agreement has expired, a renewal agreement will be required in order for the Client to continue the service. The Reports prepared in connection with this service do not contain specific securities or other investment recommendations. As with the Financial Planning Services, Advisory Clients are not required to implement any of the suggestions contained in the Report, utilize Princor as a broker dealer to purchase any insurance products from our affiliate Principal Life Insurance Company, or to purchase any other products or services offered by Princor, its affiliate companies (such as banking, employee benefits or trust services) or other financial services companies through Princor’s Adviser Representative.
