Compensation

Voya Financial Advisors, Inc. (“VFA” or “we”), through registered representatives and investment adviser representatives (“financial advisors”), makes a wide variety of securities products, investment advisory products and services, and insurance products, including mutual funds and variable and indexed annuity contracts, available to you. For non-investment advisory products, you will pay either a commission, a sales charge when you purchase your investments (such as for Class A shares of a mutual fund), or a sales charge may be built into the expenses of the product and/ or charged to you when you sell (such as for Class B or C shares of a mutual fund). For investment advisory products and services, an investment advisory fee, in addition to other fees and expenses, is deducted from your account either monthly or quarterly. VFA is paid by the product custodian, issuer, or affiliates thereof, and part of that payment goes to your financial advisor. Your sales charges, fees and expenses, and the sales commissions paid to us and our financial advisors, differ among classes of investment, and may depend on the amount of money you invest. Sales charges, and information about expenses, are explained in the product’s prospectus. Other firms may offer you a larger selection of securities products, or investment advisory products and services. Further, other firms may offer the same or similar products and services as those offered through VFA, but for a lower cost.

All fees paid to VFA in the form of sales loads, commissions, or investment advisory fees are separate and distinct from the fees and expenses charged by mutual funds and/or exchange traded funds (“ETFs”) to their shareholders. The fees and expenses of mutual funds and ETFs are described in each fund's prospectus. These fees will generally include a management fee and other fund expenses and may include asset based sales charges, service fees, and/or distribution fees (“12b-1 fees”). In most cases, mutual fund companies offer multiple share classes of the same mutual fund. Some share classes of a fund charge a higher internal expense, including but not limited to 12b-1 fees, whereas other share classes of the same fund charge a lower internal expense, with or without 12b-1 fees.

Institutional and investment advisory share classes typically have lower expense ratios, do not charge 12b-1 fees, and are less costly for a customer to hold than Class A shares or other share classes that are eligible to purchase. Mutual funds that offer institutional share classes, investment advisory share classes, and other share classes with lower expense ratios are available to customers who meet specific eligibility requirements that are described in the mutual fund’s prospectus or in its statement of additional information. These eligibility requirements include, but may not be limited to, investments meeting certain minimum dollar amount thresholds and accounts that the fund considers qualified, fee-based programs. The receipt by VFA of 12b-1 fees presents a conflict of interest because it gives VFA and its financial advisors an incentive to recommend mutual funds for accounts based on the compensation received rather than on customer needs. You should be aware of this conflict and discuss with your financial advisor whether mutual funds selected or to be selected for your account pay a 12b-1 fee.

The lowest-cost mutual fund share class for a particular fund may not be offered through VFA or made available by VFA for purchase within specific account types. You should never assume that your funds will be invested in the share class with the lowest possible expense ratio or cost. VFA urges customers to discuss with their financial advisor whether a lower-cost share class is available for their particular account, and why the particular fund(s) or other investments that will be purchased or held in their account are appropriate for them considering their expected holding period, investment objective, risk tolerance, time horizon, financial condition, amount invested, trading frequency, and the amount of other fees charged.

Customers should also ask their financial advisors whether the customer will pay transaction charges for fund purchases and sales, whether the customer will pay higher internal fund expenses in lieu of transaction charges that could adversely affect long-term performance, and the relevant tax considerations of the mutual fund share class(es) or investment(s) selected for the customer’s account. VFA, through its financial advisors, may recommend, select, or continue to hold a mutual fund share class that charges customers higher internal expenses than other, lower cost, share classes available for the same fund.

For example, in certain circumstances, VFA offers retirement share, or “R Share” classes to retirement plan customers, where available, and if the requirements for use of such class in the product’s prospectus or statement of additional information are met, but does not offer R Share classes to non-retirement plan customers, despite R Shares being available, in certain circumstances, to non-retirement plan customers and generally being less costly than the share classes VFA offers to its customers. Other mutual fund share classes, such as “clean shares” are also available but not used by VFA because such mutual fund share classes do not pay additional revenue to VFA. Such other share classes are available to you through other investment firms, which would result in lower cost to you.

Product Partners Program

VFA participates in Voya Financial, Inc.'s Product Partner Program. This program enables participating investment product providers ("Product Partners") to receive services and value from VFA through reporting, marketing/sponsorship/engagement opportunities with VFA and its financial advisors, enhanced communication, education, access to key contacts at VFA, and relationship management. Participation in the Product Partners Program is contingent upon the products offered by the potential Product Partner meeting VFA's product standards and the payment of fees to VFA, as discussed below. Affiliates of VFA may be Product Partners. Product Partners may also participate in Pershing's FundVest program.

The FundVest mutual fund program (the "FundVest Program") was established and is maintained by Pershing LLC, VFA's clearing firm ("Pershing"). FundVest Program transaction charges are waived for purchases of mutual funds that would normally carry a transaction charge, which provides VFA advisors with an incentive to recommend a FundVest mutual fund. Pershing, in its sole discretion, may add or remove mutual funds from the FundVest Program without prior notice.

Product Partners attend or sponsor education and training meetings, either in conjunction with a Product Partner’s participation level in the Product Partners Program or in exchange for an additional fee to VFA through the Product Partner Engagement Program. Non partners are also permitted to attend sponsor education and training meetings through the Product Partner Engagement Program in exchange for a fee, at the sole discretion of VFA.

In general, for a product to be included on VFA’s approved product shelf, the product sponsor must participate in the Product Partners Program by paying the applicable fee, as described below. There are, however, product sponsors that do not pay to participate in the Product Partners Program, and whose products are permitted on the VFA approved product shelf. VFA reserves the right to not include product sponsors on its product shelf, therefore not permitting you to purchase certain products through VFA, if the product sponsor does not participate in the Product Partners Program. This creates a conflict of interest, as VFA chooses which products to make available to you based on the remuneration paid to VFA by the sponsors of those products. This conflict results in VFA recommending financial products and services to you that are more expensive than similar products and services you could obtain elsewhere.

Product Partners pay a fee to VFA to compensate VFA for the opportunities offered through the Product Partners Program, which are conditioned on participating in the Product Partners Program at a particular Product Partner fee level. The fee is based on a number of factors, including but not limited to the amount of VFA customer assets held in the Product Partner’s products, and is calculated for each Product Partner. The additional compensation VFA receives in connection with the sale of Product Partner products poses a conflict of interest for VFA to promote such products over other products as to which VFA does not receive such additional compensation. Customers are able to purchase, though other firms, Product Partner products, other products and services offered through VFA, or similar products and services, for a lower cost.

VFA from time-to-time adds or removes specific firms from its Product Partners Program. Certain products offered by the Product Partners listed are not offered through VFA’s investment advisory program. Below is the current list of Product Partners:

Mutual Fund/Exchange Traded Fund Product Partners:

  • Alger Funds
  • AllianceBernstein (AB) Investments
  • Allianz Global Investors
  • Amana Funds (Saturna Capital)
  • American Century Investments
  • Amundi Pioneer Asset Management
  • Aquila Group of Funds
  • Buffalo Funds
  • Columbia Threadneedle Investments
  • Davis Funds / Selected Funds / Clipper Funds
  • DWS Funds / Deutsche Asset Management
  • Doubleline Funds
  • Federated Investors
  • Franklin Templeton Investments
  • Invesco Funds
  • Janus Henderson Funds
  • Legg Mason Funds
  • Lord Abbett Funds
  • MFS Investment Management
  • Natixis Investment Managers
  • Neuberger Berman Funds
  • Oppenheimer Funds
  • Pacific Funds
  • Principal Funds
  • Prudential Global Investment Management
  • Putnam Investments
  • Sierra Mutual Funds
  • Swan Global Investments
  • T. Rowe Price Funds
  • Thornburg Investment Management
  • Transamerica Mutual Funds
  • Victory Capital Management
  • Virtus Investment Partners
  • Wells Fargo Asset Management
  • WisdomTree Exchange Traded Funds

Insurance Product Partners:

  • Allianz Life
  • AXA Equitable Insurance
  • Brighthouse Financial
  • Forethought Life Insurance Company
  • Great American Insurance Group
  • Jackson National Life Insurance
  • Midland National Life Insurance Company
  • Nationwide Life and Annuity Company
  • Pacific Life Insurance Company
  • Protective Life Insurance Company
  • Pruco Life Insurance Company (Prudential)
  • Transamerica Life Insurance Company

Third Party Platform Partners:

  • AssetMark, Inc.
  • Flexible Plan Investments, Ltd.
  • SEI Investment Management

Mutual Fund Platforms:

  • FundVest® Mutual Funds

Alternative Investment Marketing Reallowance

In addition to the Product Partners described above, certain distributors of units in SEC-registered public and non-SEC registered non-public non-traded Real Estate Investment Trusts and Direct Participation Programs, shares of non-traded common stock, corporations, and shares of Regulation D offerings may pay additional amounts to VFA to compensate VFA for enhanced marketing and training opportunities. The payment of this additional compensation to VFA by these distributors poses a conflict of interest by creating a financial incentive for VFA to promote these products over other products.

The additional amounts distributors pay VFA vary from one to another and from one product to another. For example, a significant portion of these payments can be calculated as a fixed amount or as a percentage of product sales (up to a maximum of 1.5%, which is $150 on a $10,000 investment). Please read the prospectus, statement of additional information and your offering memorandum for each product to learn more about these payments. While your financial advisor receives a commission for selling one of these products, he or she does not receive additional compensation based on the payment of marketing reallowance. Your financial advisor may attend a training and education meeting to learn more about these products, the investment features they contain, and general industry or market trends.

Below is the current list of companies that issue alternative investments or interval funds that participate in the Product Partners Program and compensate VFA for enhanced marketing and training opportunities:

  • Bluerock Capital Markets
  • CION Investments
  • CIM (Cole)
  • FS Securities (Franklin Square)
  • Griffin Capital
  • Hines Securities, Inc.
  • Inland Real Estate
  • Resource Real Estate (C-III Capital Partners)

Below is a current list of companies that issue alternative investments or interval funds and compensate VFA for enhanced marketing and training opportunities through marketing reallowance only:

  • Advisors Asset Management
  • Altegris
  • Dividend Capital Securities, Inc.
  • Voya/Pomona Investments

VFA has entered into arrangements outside of the Product Partners Program for the following product sponsors:

Voya Investment Management (“Voya IM”): While Voya IM receives opportunities similar to those received by non-affiliated Product Partners, Voya IM’s arrangement with VFA is not subject to the Product Partners Program. VFA receives compensation from Voya IM based a percentage of assets invested in funds for which Voya IM acts as investment manager. Though the amount of compensation paid to VFA by Voya IM will vary each year, the compensation will represent a sum of up to .51% of VFA customer assets held in funds for which Voya IM acts as investment manager, subject to certain exceptions based upon the fund, the share class of the fund, or the account type in which the fund is held.

Voya Retirement Insurance and Annuity Company (“VRIAC”): While VRIAC receives opportunities similar to those received by non-affiliated Product Partners, VRIAC’s arrangement with VFA is not subject to the Product Partners Program. VFA receives compensation from VRIAC based upon a) new sales of Voya Select Advantage accounts, and b) VFA customer assets invested in Voya Select Advantage accounts. Though the amount of compensation paid to VFA by VRIAC will vary each year, the annual compensation will represent a sum of 0.25% of sales by VFA of Voya Select Advantage accounts, and 0.05% of VFA customer assets held in Voya Select Advantage accounts.

American Funds: While American Funds Distributors receives opportunities similar to Product Partners, its arrangement with VFA provides that the amount of compensation to VFA will be determined based upon a number of factors, including the level of assets invested in American Funds, net sales, and American Funds’ Distributors assessment of the quality of the relationship with VFA. Though the amount of compensation paid to VFA by American Funds Distributors will vary each year, the compensation will represent a sum of up to .10% of the previous year’s American Funds sales by VFA, and up to .02% of VFA customer assets held at American Funds.

VFA Strategic Partner Program

Prior to January 1, 2018, VFA maintained the Strategic Partner program. VFA is still subject to certain Strategic Partner agreements and will continue to receive payments from product sponsors participating in the Strategic Partner Program. VFA expects to accrue payments from the following product sponsors under the Strategic Partner program:

Mutual Fund Sponsors

  • BlackRock Investment Management
  • Fidelity Institutional Asset Management
  • Hartford Funds
  • JP Morgan Asset Management
  • PIMCO Funds

Variable Annuity Sponsors

  • American General Life Insurance Company (AIG SunAmerica)
  • Hartford Life Insurance
  • Lincoln Financial Group
  • Venerable Annuity (Voya Insurance and Annuity Company)

Third-Party Platform Partners

  • Loring Ward

Other Compensation and Reimbursements

As a VFA customer, you may be invited to attend seminars or training and educational meetings. If you attend a training or educational meeting with your financial advisor and a product sponsor is present, you should assume that the product sponsor has paid for all or a portion of the cost of the meeting or event, including the cost of travel to the event, and any meals or accommodations offered. Additionally, product sponsors may provide business entertainment or nominal gifts to VFA’s financial advisors and its employees.

From time to time, product sponsors will reimburse VFA’s financial advisors for the purchase of software that the financial advisors use in conducting securities business. This reimbursement creates a conflict of interest as it incentivizes the financial advisor receiving such reimbursement to recommend the products of the product sponsor offering reimbursement.

Companies that are not Product Partners may at times send VFA payments in recognition of VFA's efforts in educating its financial advisors regarding such companies' products, which payments pose a conflict of interest by incentivizing VFA to promote such products over other products.

VFA offers its financial advisors incentive programs through which financial advisors are eligible to receive awards, including but not limited to trips, bonuses, and other non-cash items. These incentive programs are based on securities product sales or assets retained through and on behalf of VFA. All incentive awards are pre-approved by VFA, administered according to its procedures, and are based on total production or asset retention for all products and services. From time to time, VFA will weigh certain products or services more heavily in its calculations for purposes of qualifying for such incentives. For example, VFA may weigh investment advisory programs assets under management more heavily than other sales. Such weighting provides incentives for your financial advisor to recommend such weighted products or services over others with less weighting. The existence of these incentive programs and the possibility of receiving incentive awards create a conflict of interest, as they incentivize financial advisors to sell customers products through VFA, and retain customer assets with VFA.

Some of VFA’s home office management and certain other employees receive a portion of their employment compensation based on sales of products of Product Partners, including Voya affiliates. Certain classes of investments, whether issued by a Product Partner or not, pay higher rates of compensation than other classes of investments.

VFA holds competitions throughout the course of the calendar year that award tuition rebates and prizes to the top five investment adviser representatives based on assets under management. Tuition rebates and prizes provided to the top five investment adviser representatives are worth between $400-$500 and $500, respectively for each investment adviser representative. The existence of such contest(s) create a conflict of interest for your investment adviser representative, as he or she is incentivized to increase his or her assets under management to qualify for the prizes associated with the contest(s).

VFA financial advisors may use the AssetMark Platform, which may allow VFA, subject to negotiation with AssetMark, to receive certain allowances, reimbursements or services from AssetMark in connection with VFA investment advisory services to its customers, as described in Appendix 1 of the AssetMark Platform Disclosure Brochure. Under AssetMark’s Gold/Platinum Premier Consultant Program, VFA would be entitled to receive a quarterly business development allowance for reimbursement for qualified marketing/practice management expenses incurred by VFA. These amounts can range from $500 to $50,000 annually, depending on the amount of the VFA financial advisor’s customer assets managed within the AssetMark Platform. In addition to the fee reductions and/or allowances granted VFA by AssetMark, AssetMark may agree to provide VFA or its financial advisors with organizational consulting, education, training and marketing support.

Pursuant to an agreement with Pershing, Pershing reimburses VFA for transition fees incurred in moving new customer assets to the Pershing platform. Additionally, pursuant to its agreement with Pershing, VFA is credited $5.00 of each annual maintenance fee as revenue sharing for Individual Retirement Accounts ("IRA") held on the Pershing platform. This reimbursement and credit creates a conflict of interest, as it incentivizes VFA to custody assets, including IRA accounts, on the Pershing platform as opposed to another custodian that neither reimburses VFA for transition fees nor credits VFA a portion of the annual IRA maintenance fee.

Pershing also provides compensation to VFA based upon the assets of VFA customers that are held in money market mutual funds on the Pershing platform. This creates a conflict of interest, as it incentivizes VFA to retain customer assets in money market mutual funds on the Pershing platform.

Through an agreement with Pershing, VFA is paid a percentage fee by Pershing on all assets (mutual funds, exchange traded funds, equities, bonds and other assets) above a certain threshold custodied at Pershing by VFA customers. VFA receives this percentage fee payment from Pershing in addition to any payments it may receive on such assets from the Product Partner Program. In addition, Pershing pays VFA a per account fee for each customer account of VFA held at Pershing. These payments create a conflict of interest between VFA and its customers, as these payments provide VFA with an incentive to recommend investing through Pershing as opposed to another investment platform that does not provide VFA with such fees. You are be able to purchase the same or other similar securities, products and services at another broker-dealer or investment adviser, but for a lower cost.

Pursuant to an agreement with Advisors Asset Management (AAM), VFA receives ten percent (10%) of the markup or markdown assessed by AAM on bond transactions that it helps facilitate for VFA customers. The receipt of this revenue creates a conflict of interest, as it incentivizes VFA to utilize the services offered by AAM in effecting bond transactions in customer accounts.

VFA's financial advisors receive 100% of the commission payout from the sale of variable universal life insurance (“VUL”) issued by VFA's affiliated insurers (“Proprietary VUL”). Proprietary VUL business commissions are paid directly from the respective Voya insurer to the financial advisor. This payment method differs from commission payments of non-proprietary VUL business, from which VFA receives a percentage of the commission and pays the remaining commission to the financial advisor. The receipt by the financial advisor of 100% of the Proprietary VUL commissions creates a conflict of interest, as it incentivizes financial advisors to sell Proprietary VUL business instead of non-proprietary VUL business.

VFA’s phone service financial advisors offer certain managed account services to customers who were or are participants of various plans that are recordkept by VFA’s affiliates. Sales of such managed account services that are produced by VFA’s phone service financial advisors may generate referral payments to the agent of record for the existing Voya product. Where that is the case, VFA and the agent of record may enter into rules of engagement that govern how rollover sales opportunities will be allocated between VFA’s phone service financial advisors and the agent of record. Typically, low balance rollover opportunities are allocated to VFA’s phone service financial advisors and higher balance opportunities are allocated to the agent of record. VFA, through its financial advisors, concentrates its rollover sales efforts on certain proprietary products and services. Alternative products and services are available through other distributors.

VFA provides forgivable promissory notes to certain financial advisors as an incentive to join VFA. The promissory notes are offered to financial advisors at VFA's discretion and vary in amount and terms. Principal amounts loaned to financial advisors are based, in part, on the amount of customer assets that VFA anticipates will be transferred to VFA by the financial advisor. The principal amounts are loaned either upon joining VFA, or partly upon joining, with the remaining amount loan upon a certain threshold of assets being moved to VFA. Loaned amounts pursuant to a promissory note are forgiven at regular intervals based on a financial advisor’s continued affiliation in good standing with VFA. A financial advisor is responsible for paying back any amounts owed if he or she fails to abide by the terms of the promissory note, including but not limited to failure to maintain securities licensure or affiliation with VFA. VFA offering forgivable promissory notes to financial advisors creates a conflict of interest as it incentivizes financial advisors to select VFA to service your account(s), and remain with VFA for the duration of the promissory note’s forgiveness terms, instead of another firm that may not offer promissory notes, but may offer the same or similar services of VFA for a lower cost.

VFA does from time to time add or delete Product Partners. You can view the most up-to-date list of Product Partners by visiting this website, by requesting a list from your financial advisor, or by calling 800.356.2906.