INTRODUCTION
RNR Securities, L.L.C. ("RNR" or"the Firm") is a broker-dealer registered with the Securities and Exchange Commission ("SEC") and member of the Financial Industry Regulatory Authority ("FINRA"). RNR transacts business in various types of securities, including mutual funds, variable annuities, and non-traded real estate investment trusts, which are classified as Alternative Investments. RNR maintains a network of individuals, referred to as "financial professionals," who offer brokerage services to their customers.
Some of RNRs financial professionals are investment adviser representatives ("IARs") of R&R Financial Planners, Inc. ("R&R"), an affiliated SEC Registered investment adviser. R&Rs financial professionals are generally independent contractors and receive a share of the revenue they generate through the Firm. Although some financial professionals offer both brokerage and investment advisory services, some only offer brokerage services. When you are discussing services with a financial professional, you should ask what capacity the financial professional is acting or will be acting – as a broker-dealer registered representative or an investment adviser representative ("IAR") – when providing services to you. This disclosure discusses important information regarding financial professionals who act as registered representatives of RNR'sbroker-dealer.
For more information about R&R and the services financial professionals provide when they act as IARs, please visit our website www.randrfinanicalplanners.com.
Like all financial services providers, RNR and its FPs face conflicts of interest in the normal course of business. RNR and its FPs are compensated indirectly from investment product sponsors and other third parties in connection with investments made by RNR customers. When customers place a transaction with us, we may get paid an upfront commission or sales load at the time of the transaction and in some cases a deferred sales charge. If we are paid an upfront commission, it means that we have an economic incentive to place more transactions for customers. The compensation described in this disclosure represents the maximum gain we receive on an investment before subtracting any of expenses.Please also note that not all of the conflicts described in this disclosure apply to a particular financial professional, or all the products and services we sell. The types and amounts of compensation we receive change over time. You should ask your financial professional if you have any questions about compensation, costs, fees, or conflicts of interest.
ITEM 1: SALES COMPENSATION
In a brokerage relationship, RNR and your financial professional receives sales compensation when investments are purchased; when additional amounts are added for investment; and for certain investments, on an ongoing basis for so long as the investment is held in your account. Such compensation can take the form of a separate charge paid in addition to the amount invested in the security, or it can be built into the product itself; and it can be paid all at once, or over time, or a combination of the two. In certain circumstances, sale compensation takes the form of trails, or 12b-1 fees, from the issuer and/or sponsor of the issuer which are calculated as an annual percentage of the assets invested in the mutual fund, annuity or alternative investment.
Your financial professional does not have the discretion to make investments for you without your approval. This means that you make the decision to make the investment before the investment is made. If your financial professional recommends that you buy or sell an investment product, they must have a reasonable basis for believing their recommendation is in your best interest.RNR does not provide ongoing monitoring of your account.
COMMISSIONS AND SALES CHARGES
A commission,which also may be called a sales load, sales charge, or placement fee, is typically paid at the time of the purchase or sale and can reduce the amount available to invest or can be charged directly against the investment.
Commissions are often calculated on the amount of assets invested. RNR receives the commission or sales charge and retains a portion and pays the remainder to your financial professional. In some cases, a portion of the commission or sales charge is retained by the investment's sponsor. Commissions vary from product to product, which creates an incentive to sell a higher commission security rather than a lower commission security.
For more specific information about other commissions, sales charges or concessions that apply to a particular transaction, please refer to the investment prospectus or other offering document. The maximum and typical commissions for common investment products are listed below.
TRAIL COMPENSATION
RNR and its financial professionals receive ongoing compensation from certain investment products such as mutual funds, annuities, and alternative investments. This compensation is commonly known as trails, or 12b-1 fees, and is typically paid from the assets of the investment product under a distribution or servicing arrangement with the investment sponsor and is calculated as an annual percentage of assets invested by RNR customers.The more assets you invest in the product, the more we will be paid in these fees. Therefore, we have an incentive to encourage you to increase the size of your investment. The number of trails received varies from product to product. This creates an incentive to recommend a product that pays a higher trail rather than a lower trail. We also have an incentive to recommend a product that pays trails (regardless of amount) rather than products that do not pay trails.
For more information about trail compensation received with respect to a particular investment, please refer to the prospectus or offering document for the investment.
RNR FEES AND OTHER CHARGES
RNR does not charge any miscellaneous fees to clients.
RNR and financial professionals receive compensation from investment product sponsors and other third parties in connection with investments that RNR customers make in securities such as mutual funds, annuities, and alternative investments. Some types of third-party compensation are received by RNR and shared with financial professionals, and other types are retained only by RNR.
NON-CASH COMPENSATION
RNR, RNR employees, and financial professionals may receive non-cash compensation from investment sponsors and other financial institutions that is not in connection with any particular customer or investment. Compensation includes such items as gifts valued at less than $100 annually; an occasional dinner or ticket to a sporting event; or reimbursement in connection with customer workshops or events, marketing or advertising initiatives; and transition costs, including services for identifying prospective customers.
Investment sponsors or other financial institutions may also pay or reimburse RNR and/or its financial professionals for the costs associated with educational meetings, conferences, product workshops or training events that may be attended by RNR employees and financial professionals. Investment sponsors or other financial institutions also pay or reimburse for RNR sponsored conferences and events.
BONUS PAYMENTS FROM INVESTMENT SPONSORS Certain insurance companies offer financial professionals bonus payments, often called persistency or retention bonuses, based on the amount of customer assets that the financial professional has placed in the insurance company's products. Although RNR does not participate in these bonus programs, RNR may accept and share these payments on a one-time basis with a financial professional who recently joined RNR and are entitled to such payments through the financial professional's former brokerage firm.
LEAD GENERATION
Although it hasn't done so to date, RNR may enter into lead generation, marketing and/or referral arrangements with third parties and other financial intermediaries, including for the purpose of introducing new financial professionals to RNR. These arrangements would be negotiated on a case-by-case basis.
RNR generally compensates financial professionals pursuant to an independent contractor agreement, and not as employees. Described below are the compensation and other benefits that independent contractor financial professionals receive from RNR.
CASH COMPENSATION RNR typically pays a financial professional a percentage of the revenue generated from sales of products and services. The percentage paid can vary (typically between 70% to 92%) depending on the agreementwithRNR and can be more or less than what would be received at another brokerage firm. Compensation is based on the level of production or revenue generated. Therefore, the financial professional has a financial incentive to generate additional revenue by generating more trades in your account.
OTHER BENEFITS Financial professionals are eligible to receive other benefits based on the revenue generated from sales of products and services. These benefits present a conflict of interest because the financial professional has an incentive to remain a registered representative of RNR in order to maintain these benefits. These benefits include eligibility for practice management support and enhanced service support levels that confer a variety of benefits, conferences (e.g., for education, networking, training, and personal and professional development), free or reduced-cost marketing materials, reimbursement or credits of fees that financial professionals pay to RNR for items such as administrative services or technology, and payments that can be in the form of repayable or forgivable loan and other non-cash compensation.
FINANCIAL PROFESSIONAL'S OUTSIDE BUSINESS ACTIVITIES
Financial professionals are permitted to engage in certain RNR approved business activities other than the provision of brokerage services through RNR, and in certain cases, a financial professional receives more compensation, benefits and non-cash compensation through the outside business than through RNR. Some financial professionals are insurance agents, and some financial professionals refer customers to other service providers and receive referral fees. As an example, a financial professional could provide advisory or financial planning services through an unaffiliated investment advisory firm, sell insurance through a separate business, or provide third- party administration to retirement plans through a separate firm. If a financial professional provides investment services to a retirement plan as a representative ofRNR and also provides administration services to the plan through a separate firm, this typically means the financial professional is compensated from the plan for the two services.
In addition, a financial professional may sell insurance through an insurance agency not affiliated with RNR. In those circumstances, the financial professional would be subject to the policies and procedures of the third-party insurance agency related to the sale of insurance products and would have different conflicts of interest than when acting on behalf of RNR. A financial professional may earn compensation, benefits and non-cash compensation through the third-party insurance agency and may have an incentive to recommend you purchase insurance products away from RNR. If you engage with a financial professional for services separate from RNR, you may wish to discuss with them any questions you have about the compensation they receive from the engagement.
Additional information about your financial professionals outside business activities is available on FINRA's website at http://brokercheck.finra.org.
RECRUITMENT COMPENSATION AND TRANSITION ASSISTANCE
RNR does not currently offer recruitment compensation and transition assistance.
FEES CHARGED TO FINANCIAL PROFESSIONALS
RNR charges financial professionals various fees under its independent contractor agreement for, among other things, back-office support, compliance monitoring, insurance, certain outside business activity related supervision,technology, licensing and postage. In certain cases,these fees may be reduced based on the financial professional's overall business production, which gives the financial professional an incentive to recommend that you invest more in your account or engage in more frequent transactions.
COMPENSATION FOR OTHER SERVICES
RNR and financial professionals can offer various types of products from various product sponsors and earn differing amounts of compensation depending on the product and sponsor. This variation in compensation can incentivize a financial professional to recommend products or sponsors that generate more compensation for RNR and the financial professional than others.
ROLLOVERS If a customer decides to roll assets out of a retirement plan, such as a 401(k) plan, into an individual retirement account (IRA), we have a financial incentive to recommend that a customer invests those assets with RNR, because we will be paid on those assets, for example, through commissions, fees and/or third-party payments. A customer should be aware that such fees and commissions likely will be higher than those the customer pays through the plan, and there can be custodial and other maintenance fees. As securities held in a retirement plan are generally not transferred to an IRA, commissions and sales charges may be charged when liquidating such securities prior to the transfer, in addition to commissions and sales charges previously paid on transactions in the plan.
TERMINATION
RNR has an obligation to supervise financial professionals and may decide to terminate a financial professional's association with RNR based on performance, a disciplinary event, or other factors. The amount of revenue a financial professional generates creates a conflict of interest when considering whether to terminate a financial professional.
OTHER FINANCIAL INDUSTRY AFFILIATIONS
RNR is affiliated with other financial services companies. RNR and R&R are affiliated companies. In addition, IARs of R&R may be registered representatives of RNR. Because of the affiliation, RNR has an incentive to recommend R&R advisory programs over other programs and services.
RNR and R&R are also affiliated with R&R Financial Planners, Inc("R&R"), an insurance agency and marketing organization, offering third-party insurance products. Registered representatives of RNR and IARs of R&R may offer insurance products through R&RI and, therefore, have an economic incentive to recommend insurance products over other products or services.
In Part I above, we discussed conflicts of interest, some of which were associated with compensation and fees received by RNR and/or your financial professional. This section references and incorporates documents with additional details about compensations and fees.
PRODUCT COSTS In addition to the sales charges and fees that you pay in connection with purchase and sales of investment products, the products themselves often have fees and/or expenses that you should also consider when determining whether to invest.
These product costs can be significant and are disclosed in the product's prospectus or offering documentation, but for the more common products are typically as follows:
Mutual Funds. All mutual funds have internal operating costs typically referred to as an expense ratio, management fee, or operating expense. This fee is deducted from the total assets of the fund before your share price is determined. Class A Shares, front-end loaded purchases, are subject to an initial sales charge that is a percentage of the offering price and may be subject to 12b-1 fees. A 12b-1 fee is anannual marketing or distribution fee on a mutual fund and is generally between 0.25% and 0.75%, the maximum permitted by regulation, of a fund's net assets. Class A shares generally qualify for reduced sales loads based on certain volume purchases, called breakpoints, rights of accumulation and letters of intent.
For Additional Information:
529 Plans. All 529 College Savings Plans have fees and expenses. Not only do these charges vary among 529 Plans, but they also can vary within a plan. Like mutual funds, a college savings plan may offer more than one class of shares. Often referred to as A, B, or C classes, each class has different fees and expenses which are described in detail in the offering document for the plan.
The following are some of the most common fees, charges, and expenses found in college savings plans:
Annuities. As noted above, annuities are different from other products in that commissions are built into the pricing of the product. The average fee on a variable annuity varies depending on the operations selected by the investor. In addition, variable annuities have a mortality and expense fee, underlying investment option management fees, and administrative costs.
Alternative investments. Annual expenses on alternative investments typically do not exceed 2.5% and may include various types of management and other fees.
This section is designed to provide you with the tools to better understand all of the products and services available through RNR. The products and services that are available are not always the least expensive available in the broader marketplace.
PRODUCT RISKS AND DISCLOSURES
Risk is inherent in any investment in securities, and we do not guarantee any level of return on investments, nor can we assure you that your investment objectives will be achieved. The risks discussed below vary by investment style or strategy and may or may not all apply. All strategies involve risk, and generally, the more aggressive the investment strategy selected, the more likely the portfolio will contain larger weights in riskier asset classes than a less aggressive investment strategy. There is no guarantee that a chosen investment strategy will meet your financial goals or objectives. You should review prospectuses and disclosure documents for the securities purchased as they contain important information about the risks associated with investing in such securities.
There are inherent risks in investing, including the potential loss of principal. Investment markets will fluctuate and there is no guarantee that an implemented strategy will produce the desired results. Past performance is not a guarantee of future results. Diversification does not guarantee against loss of principal. Dollar Cost Averaging does not ensure that you will buy at lower prices.