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Securian Financial

Bonds

Characteristics

Securian Financial Services, Inc. (Securian) offers a wide range of bonds, such as corporate bonds, government bonds, and municipal bonds. Bonds are debt securities issued by corporations, governments, or other entities that pay fixed or variable interest rates to investors for a specific period of time. When the bond reaches maturity, the bond issuer generally returns the principal amount of the bond to investors. There are many types of bonds and the features, characteristics, and risks associated with bonds can vary significantly.

For most bonds, a bond’s coupon rate is the rate of interest it pays annually and is expressed as a percentage of its face value. Usually, the coupon rate is calculated by dividing the sum of coupon payments by the face value of a bond.

Bonds generally are priced at an initial face value (sometimes called “par” value) of $1,000 per bond. However, once the bond is traded on secondary markets, the bond’s price may be lower than the face value, which is referred to as a “discount,” or higher than the face value, which is referred to as a “premium.” If the bond is priced at a discount, the investor will receive a higher interest yield (return) as a result of paying less than the face value. On the other hand, if the bond is priced at a premium, the investor will receive a lower interest yield (return) as a result of paying more than the face value. Bond prices typically have an inverse relationship with bond interest yields (e.g., as bond prices decrease, interest yields increase; as bond prices increase, interest yields decrease).

Unlike equities, where prices are usually evaluated based on their daily closing prices, many bonds do not have a uniform closing price because they are traded in over-the-counter (OTC) markets or another negotiated market. Bond prices are affected by many different factors, including but not limited to, supply and demand for the bond, the issuer’s credit rating, bond size, interest rates, and age-to-maturity. With regard to the age-to-maturity pricing factor, bonds are paid in full (at face value) when they mature, though there are options to call, or redeem, some bonds before they mature (and some bonds permit the issuer to call the bond prior to maturity). Since a bondholder is closer to receiving the full face value as the maturity date approaches, the bond's price moves toward par as it ages. Many bonds are priced by discounting the expected cash flow to the present using a discount rate.

Fees and Costs

You will typically pay a “markup” as a transaction cost to the clearing firm when you buy a bond, as most bonds are traded on a principal (dealer) basis in the OTC market (although some bonds may be bought on an agency (commission) basis). With most bonds, instead of charging you a commission to perform the transaction for you, the broker-dealer marks up the price of the bond to above its face value. When you buy bonds through a broker-dealer on the secondary market, the bonds will have price markups. The markup thus represents the difference between the price a broker-dealer pays for a bond and the price at which it is sold to you by the broker-dealer.

With new issues of bonds, the broker-dealer's markup generally is included in the par value, so you do not pay separate transaction costs. Everyone who buys a new issue pays the same price, known as the offering price. If you are interested in a new issue of a bond, you can get an offering document describing the bond’s features and risks.

If you sell a bond before it matures, you may receive more or less than the par value of the bond. Either way, the clearing firm will mark down the price of your bond, paying you slightly less than its current value (and will then mark up the price slightly upon resale to another investor). This is how broker-dealers are compensated for maintaining an active secondary market.

Part of the profit earned by the clearing firm in marking up and marking down bond prices is shared with us for acting as the introducing broker-dealer on the transactions. Securian also charges a mark-up / commission, which is negotiable, with minimums and upper limits. See Securian’s Client Commission and Fee Schedule for more information.

The amount of a markup/markdown charged on a bond transaction will depend on a number of factors and particular circumstances for each transaction, including the type of bond (corporate, government, or municipal), transaction size, credit quality, unit price, maturity, liquidity, and market scarcity.

For example

If you purchase 10 corporate bonds with a $1000 par value, and the markup is $20 per $1000 par value, you would pay $10,000 for the market price of the bond and then an additional $200 markup, which means you would pay $10,200 in total to purchase the corporate bonds.*

*Based on Securian’s Client Commission and Fee Schedule in effect as of February 2020.

More Information

More information describing a specific bond’s features and risks is available in the bond’s offering document. More information about bonds, including pricing and issuer credit ratings, is also available on FINRA’s Bond Section of the Market Data Center section of their website. In addition, more information about government bonds is available on the Municipal Securities Rulemaking Board’s (MSRB) EMMA (Electronic Municipal Market Access) section of their website.

Closed-End Funds

Characteristics

Securian Financial Service, Inc. (Securian) offers a wide range of closed-end funds from many different fund companies. An important aspect of closed-end fund investing is to read the fund’s prospectus carefully before investing. Each closed-end fund prospectus contains important information that will help you make an informed decision about an investment in a closed-end fund. In deciding whether to invest in a closed-end fund, you should consider several different factors, including the fund’s investment objective, investment strategies and risks, the investment adviser responsible for the management of the fund’s assets, and the fees and expenses associated with an investment in a particular closed-end fund.

Similar to mutual funds, closed-end funds are pooled investment vehicles. However, there are some important differences between these types of funds.

Unlike mutual funds, most traditional closed-end funds do not continuously offer their shares for sale. Instead, such funds typically sell a fixed number of shares through an initial public offering, after which their shares typically trade on a secondary trading market. The price of shares in a closed-end fund that trades on a secondary market after their initial public offering is determined by the market and may be higher or lower than the shares’ NAV. In addition, there are certain non-traded closed-end funds that do sell their shares on an ongoing basis, and do not trade on a secondary trading market.

Many closed-end funds have no “maturity” or termination date, and shareholders may exit their investments only by selling shares on the secondary trading market. Nonetheless, these closed-end funds without termination dates may still be terminated based on the investment manager’s decision. Certain other closed-end funds, however, have a specified or targeted termination date, at which time the shareholders receive an amount equivalent to the shares’ NAV at the termination date. Non-traded closed-end funds typically contemplate having a “liquidity” event at some point once the fund’s offering has ceased. Liquidity events include listing the fund’s shares on a secondary trading market and liquidation.

Unlike mutual funds, closed-end fund shares are not redeemable, which means that the fund is not required to buy shares back from investors upon request. Non-traded closed-end funds typically offer to repurchase their shares from investors in periodic tender offers. In addition, some closed-end funds, commonly referred to as “interval funds,” offer to repurchase their shares from investors at specified intervals. Securian does not recommend interval funds as a matter of policy.

Fees and Costs

You will typically pay a sales charge when you buy shares in a closed-end fund’s public offering, or a commission if you buy and sell shares in a closed-end fund in a secondary trading market. You will pay this sales charge or commission in addition to the amount of the fund you choose to buy or sell. For a public offering purchase, the fund’s sales charge is a one-time fixed fee, which is typically a percentage of the investment amount for closed-end funds. For a closed-end fund transaction in the secondary trading market, the commission is also a one-time fixed fee, which is typically a flat dollar amount plus a percentage of the principal (both of which will vary based on the dollar amount of the transaction).

For example

If you purchase $5,000 of shares in the initial offering of a closed-end fund that assesses a 5% sales charge on your investment, then a $250 sales charge will be deducted and the remaining $4,750 of your investment will be used to purchase shares in the closed-end fund’s initial offering. If you purchase $5,000 of shares in a closed-end fund on a trading market, you will pay a $89 commission.*

*Based on Securian’s Client Commission and Fee Schedule in effect as of April 2020.

Some interval funds also charge you a redemption charge when you accept an interval fund’s offer to repurchase your shares. This redemption charge is a one-time fixed fee, charged as a percentage of the redemption proceeds. Unlike the sales charges and commissions, the redemption charge is not paid to us, but is paid to the fund to compensate it for expenses associated with the repurchase.

For example

If you own $5,000 of shares in an interval fund that assesses a 2% redemption charge, and you accept an interval fund’s offer to repurchase all of your shares, a $100 redemption charge will be deducted and you will receive the remaining $4,900 as your redemption proceeds.

Closed-end funds also deduct other ongoing fees and expenses, such as management fees, from fund assets. In addition, the ongoing fees and expenses of funds generally include 12b-1 fees, and these 12b-1 fees are intended to finance distribution activities intended primarily to result in the sale of additional shares of the fund, and include marketing and advertising expenses. These ongoing fees and expenses, which are reflected in the fund’s overall expense ratio, are typically used to pay for the fund’s continued operations, such as paying the fund’s investment manager, accounting and auditing expenses, legal expenses, and recordkeeping expenses.

These ongoing fees and expenses are typically charged daily as a percentage of your assets. You pay these fees and expenses indirectly because they are deducted from your assets on an ongoing basis. These payments, as well as the conflicts of interest associated with them, are described more fully below in this Reg BI Disclosure.

More Information

More information on the sales charges, ongoing fees and expenses, and overall expense ratio for closed-end funds is available in the fund’s prospectus. You can request a copy of a fund’s prospectus from your financial professional.

See Securian’s Client Commission and Fee Schedule for more information.

College Savings Plans

Characteristics

Securian Financial Service, Inc. (Securian) offers various college savings plans, which are a type of “529 plan.” 529 plans are tax-advantaged and state-sponsored investment programs designed specifically for education savings and named after the section of the Internal Revenue Code that authorized them.

There are two general types of 529 plans: college savings plans and prepaid tuition plans. College savings plans are securities that allow investment earnings to grow tax-deferred, and withdrawals are exempt from federal taxation when used for qualified educational expenses. College savings plans generally operate through state-sponsored trusts and permit investors to allocate contributions to one or more trust portfolios or “investment options” offered in the plan. Prepaid tuition plans allow investors to “lock-in” tuition rates at certain specified educational institutions. Every state offers at least one type of these 529 plans, and some states offer both types of 529 plans. The remainder of this disclosure discusses college savings plans.

College savings plan contributions are generally invested in certain underlying investment options, such as mutual funds, that support the plan. The contributions will fluctuate in value as the underlying investment options increase or decrease, and there is no guarantee that the amount contributed to the college savings plan will equal the amount necessary for future education expenses. Although similar to mutual funds in certain ways, generally college savings plans are issued by state governments, and are not directly regulated or registered under the federal securities laws.

An important aspect of investing in college savings plans is to read the offering document (often called a program description or “official statement”) carefully before investing. Each program description contains important information that will help you make an informed decision about an investment in a college savings plans. In deciding whether to invest in a college savings plan, you should consider several different factors, including each investment option’s past performance, investment objective, investment strategy and risks, the investment adviser responsible for advising the state issuer, and the fees and expenses associated with an investment in a particular investment option. While past performance of an investment option is not indicative of future results, an investment option’s long-term performance record may be important factors in deciding to invest.

Fees and Costs

You often will typically pay a sales charge when you purchase a college savings plan. We receive a portion of this sales charge for the sales and related services we provide to the primary distributor of the college savings plan.

Most college savings plans offer multiple units (often called share classes), similar to the share class structure offered by many mutual funds. Though there are several types of college savings plan share classes, the most common share classes available to you are Class A and Class C. Each class typically has different fees and expenses, and therefore investment option performance results will differ as those fees and expenses reduce performance across share classes. You should also note that the amount of time you expect to hold your investment in a college savings plan may play an important role in determining which share class is most appropriate for you, and you should discuss this consideration with your financial professional.

While there are no standard definitions for these share classes, and each college savings plan defines its share classes in its offering document, set forth below are some basic descriptions of the most common share classes available to you:

  • Class A — This share class usually carries a front-end sales charge, which is typically assessed as a percentage of each contribution. The net amount of your contribution after the deduction of the sales charge is invested in shares of the college savings plan investment option(s) that you select. Class A shares typically have lower operating expenses compared to the other share classes of the same investment option. This means that ongoing costs will typically be lower than ongoing costs associated with other share classes of the same investment option. Many college savings plans also offer “breakpoint” discounts for large investments in Class A shares of investment options, which means that the front-end sales charge decreases as the investment increases. These breakpoints are described in the college savings plan’s offering document. This share class is typically more appropriate if the beneficiary is young or has a long time horizon before needing to access the funds.

For example

If you purchase $5,000 worth of Class A shares of an investment option for a college savings plan that assesses a 4% front-end sales charge on your investment, then you will pay a $200 front-end sales charge and the remaining $4800 of your contribution will be used to purchase Class A shares of the investment option.

  • Class C — This share class is characterized by a level asset-based sales charge that you pay annually as a percentage of your assets in an investment option. It does not have a front-end sales charge like Class A shares, but does have a CDSC like Class B shares. However, unlike Class B shares, the CDSC for Class C shares is generally eliminated after a short period of time (usually one year). This share class is recommended to be used if the beneficiary is near 18 or otherwise has a short time horizon before needing to access the funds.

For example

If you purchase $5000 of Class C shares of an investment option of a college savings plan with a 1% asset-based sales charge, you will not pay a front-end sales charge or a CDSC, so the entire $5000 contribution will be used to purchase Class C shares of the investment option at the time of purchase. However, all 529 Plan investment options charge shareholders internal operating expenses, and C shares generally have higher operating expenses than A shares. If we assume a hypothetical difference in operating expenses of 0.75%, your investment in a C share will incur $37.50 more in operating expenses than an A share based on your initial $5000 investment assuming no appreciation or depreciation of the shares in that one year period. Over a long time period, the difference in operating expenses can make C shares significantly more expensive than other share class options.

In addition to these sales charges, college savings plans typically deduct certain ongoing fees and expenses from each investment option, such as program management fees, from assets in the investment options. Although these ongoing fees and expenses may vary based on your college savings plan, some of the more common ones are set forth below:

  • Program Management Fee — College savings plans generally deduct a program management fee to pay the program manager for providing investment advisory, accounting, and other services to the plan. This fee is typically charged annually as a percentage of your assets, and is reflected in the NAV of the plan’s investment options.
  • Maintenance Fee — Most college savings plans charge an annual maintenance fee. This fee, which compensates the plan sponsor for costs of maintaining the plan, may be waived in certain circumstances, such as when your plan assets exceed certain thresholds.
  • Underlying Mutual Fund Expenses — Most college savings plan investment options invest in one or more mutual funds and bear a portion of the fees and expenses of these underlying funds. The underlying mutual fund expenses are deducted from fund assets and reflected in the NAVs of the underlying mutual funds, which means they are also reflected in the NAV of the college savings plan’s investment options. More information on the mutual funds that underlie the plan’s investment options is available in the college savings plan’s offering document. In addition, more information on the underlying mutual funds, including their ongoing fees and expenses and overall expense ratio, is available in the funds’ prospectuses.

You pay these fees and expenses indirectly as they are deducted from your investment option assets, or the assets of underlying mutual funds, on an ongoing basis.

More Information

More information on the sales charges and ongoing fees and expenses is available in the college savings plan’s offering document, which you can request from your financial professional.

Equities

Characteristics

Securian Financial Services, Inc. (Securian) offers a wide range of equity securities, which give stockholders a share of ownership in a company. Stocks may be one part of an investor’s holdings. Before deciding to buy or sell an equity security, such as a publicly traded company, it is important for you to evaluate the risks associated with the company. As part of this evaluation, you will want to carefully review the company’s relevant disclosure documents, such as its initial registration statement and prospectus in the case of an initial public offering, or its most recent audited financial statement in the case of a secondary market transaction. Stocks in public companies are registered with the SEC and in most cases, these companies are required to file reports with the SEC quarterly and annually. You may access these disclosure documents through the SEC’s EDGAR tool to search company filings

Fees and Costs

Buying and selling stocks entails fees. You will typically pay a commission every time you buy or sell an equity security. You will pay this commission in addition to the price you pay for the equity security you choose to buy or sell. This commission is a one-time fee, which is typically a flat dollar amount plus a percentage of the principal (both of which will vary based on the dollar amount of the transaction). Our firm is not a “discount” broker-dealer; discount broker-dealers generally offer lower commission rates. See Securian’s Client Commission and Fee Schedule for more information.

For example

If you purchase $10,000 worth of shares in a public company, you will typically pay a $110 commission*.

*Based on Securian’s Client Commission and Fee Schedule in effect as of April 2020.

Exchange-Traded Funds

Characteristics

Securian Financial Service, Inc. (Securian) offers a wide range of exchange-traded funds (ETFs). ETFs are investment funds that are listed for trading on a national securities exchange and can be bought and sold in the equity trading markets. Shares in the ETF represent an interest in a portfolio of securities.

ETFs possess characteristics of both mutual funds and closed-end funds. Similar to mutual funds, an ETF pools assets of multiple investors and invests those pooled assets according to its investment objective and investment strategy. ETFs also continuously offer their shares for sale like mutual funds. In addition, ETFs share certain characteristics with closed-end funds, namely that the fund’s shares trade on a secondary market and may trade at prices higher or lower than the fund’s NAV.

However, ETFs do not sell or redeem individual shares. Instead, certain “authorized participants” have contractual arrangements with the ETF to purchase and redeem ETF shares directly from the ETF in blocks called “creation units” and “redemption units,” respectively, where each creation or redemption unit typically represents 50,000 shares of the ETF. After purchasing a “creation unit,” the authorized participants generally sell the ETF shares in the secondary trading market.

This creation and redemption process for ETF shares provides arbitrage opportunities designed to help keep the market price of ETF shares at or close to the NAV per share of the ETF. For example, if ETF shares are trading at a price below the NAV (generally referred to as a “discount”), an authorized participant can purchase ETF shares in secondary market transactions, and — after accumulating enough shares to compose a “redemption unit” — redeem them from the ETF for the more valuable underlying securities. The authorized participant’s purchase of ETF shares in the secondary market would create upward pressure on ETF share prices, which would bring them closer to the NAV per share of the ETF.

Fees and Costs

You will typically pay a commission every time you buy or sell shares in an ETF. You will pay this commission in addition to the amount of the ETF you choose to buy or sell. This commission is a one-time fixed fee, typically a flat dollar amount plus a percentage of the principal (both of which will vary based on the dollar amount of the transaction). See Securian’s Client Commission and Fee Schedule for more information.

For example

If you purchase $10,000 worth of shares in an ETF, you will typically pay a $110 commission.*

*Based on Securian’s Client Commission and Fee Schedule in effect as of April 2020.

ETFs also deduct ongoing fees and expenses, such as management fees, from ETF assets. These ongoing fees and expenses are typically used to pay for the ETF’s continuing operations, such as paying the ETF’s investment manager, accounting and auditing expenses, legal expenses, and recordkeeping expenses. However, ETFs generally have lower expense ratios than mutual funds because most ETFs are not actively managed and, therefore, do not incur the internal costs of buying and selling the underlying portfolio securities.

These ongoing fees and expenses are typically charged annually as a percentage of your assets. You pay these fees and expenses indirectly because they are deducted from your assets on an ongoing basis. We may receive payments from the legitimate profits of the ETFs investment adviser, where such payments are generally referred to as “third-party payments” or “revenue sharing.” These payments, as well as the conflicts of interest associated with them, are described more fully below in Securian’s Regulation Best Interest Disclosure.

More Information

More information about ETFs, including their ongoing fees and expenses and overall expense ratio is available in the ETF’s prospectus. You can request a copy of a mutual fund’s prospectus from your financial professional.

Mutual Funds

Characteristics

Securian Financial Service, Inc. (Securian) offers a wide range of mutual funds from many different mutual fund companies. Mutual funds are registered investment companies that issue redeemable securities. Mutual funds issue shares on a continual basis, and there is no secondary trading market for mutual fund shares. Mutual funds are required to sell their shares at the fund’s net asset value (NAV) per share plus any applicable sales charge or load, which is described below. The fund’s NAV is calculated by dividing the total value of all the fund’s assets, minus any liabilities such as ongoing fees and expenses (described below), by the number of shares outstanding.

An important aspect of mutual fund investing is to read the mutual fund’s prospectus carefully before investing. Each mutual fund prospectus contains important information that will help you make an informed decision about an investment in a mutual fund. In deciding whether to invest in a mutual fund, you should consider several different factors, including the mutual fund’s past performance, investment objective, investment strategies and risks, the investment adviser responsible for the management of the mutual fund’s assets, and the fees and expenses associated with an investment in a particular mutual fund. While past performance of a mutual fund is not indicative of future results, a mutual fund’s long-term performance record and portfolio manager’s experience and qualifications may be important factors in deciding to invest in a mutual fund.

Fees and Costs — Generally

You will typically pay a sales charge or load when you buy shares in a mutual fund. We receive a portion of this sales charge for our efforts, and the efforts of our financial professionals, in selling shares of the mutual fund.

Most mutual funds utilize multiple share classes, with differing fees and expenses for distribution and shareholder services. Though there are many different types of share classes, the most common share classes available to you are Class A, and Class C. Each class typically has different fees and costs, and therefore fund performance results will differ as those fees and expenses reduce performance across share classes. You should also note that the amount of time you expect to hold your investment in a mutual fund may play an important role in determining which share class is most appropriate for you, and you should discuss this consideration with your financial professional.

Fees and Costs — Share Class Distinctions

While there are no standard definitions for these share classes, and each mutual fund defines its share classes in its prospectus, set forth below are some basic descriptions of the most common share classes available to you:

  • Class A — This share class usually carries a front-end sales charge, that is typically assessed as a percentage of your investment. This means that a sales charge is deducted from your investment each time you purchase shares in the mutual fund. Class A shares also typically have ongoing fees and expenses, which sometimes include fees commonly referred to as 12b-1 fees, and these 12b-1 fees are intended to finance distribution activities intended primarily to result in the sale of additional shares of the mutual fund. Despite these ongoing fees and expenses, Class A shares typically have lower operating expenses compared to the other share classes that may be available to you of the same mutual fund. This means that ongoing costs will typically be lower than ongoing costs associated with other share classes that may be available to you of the same mutual fund. Many mutual funds offer “breakpoint” discounts for large investments in Class A shares, which means that the front-end sales charge decreases as the investment increases. These share classes and breakpoints are described in the mutual fund’s prospectus.

For example

If you purchase $5,000 of Class A shares of a mutual fund that assesses a 5.75% front-end sales charge on your investment, you will pay a $287.50 front-end sales charge and the remaining $4712.50 of your investment will be used to purchase Class A shares of the mutual fund.

  • Class C — This share class is characterized by a level asset-based sales charge that you pay annually as a percentage of your assets. It does not have a front-end sales charge like Class A shares in this example, but does have a contingent deferred sales charge (also known as a CDSC). This CDSC means that you pay a sales charge when you sell your mutual fund shares. The amount of the CDSC is typically assessed as a percentage of your investment, and eventually is eliminated the longer you hold your shares. Most Class C shares generally eliminate the CDSC after one year. C shares generally have higher on-going operating expenses than A shares, and these higher on-going fees can make C shares more expensive to hold over the long term (e.g. a break-even point between A and C shares will vary based on specific funds, but generally can be around 6 to 7 years).

For example

If you purchase $5,000 of Class C shares of a mutual fund with a 1% asset-based sales charge, you will not pay a front-end sales charge or a CDSC, so the entire $5,000 investment will be used to purchase Class C shares of the mutual fund at the time of purchase. However, all mutual funds charge shareholders internal operating expenses, and C shares generally have higher operating expenses than A shares. If we assume a hypothetical difference in operating expenses of 0.75%, your investment in a C share will incur $37.50 more in operating expenses than an A share after the first year based on your initial $5,000 investment, assuming no appreciation or decline in value of the shares in that one year period. Over a long time period, the difference in operating expenses can make C shares significantly more expensive than other share options.

Fees and Costs — Breakpoints

While it may make sense to own mutual funds from different mutual fund companies, it also may increase the total sales charges that you pay to purchase those mutual funds. Mutual fund companies often offer discounts or reduced sales charges based on the total amount you choose to invest with the mutual fund company. The investment levels needed to receive these discounts are known as “breakpoints.” Mutual fund companies typically allow you to combine holdings with those of immediate family members to reach these breakpoints.

Set forth below are some common ways you can receive the benefits of breakpoints.

  • Rights of Accumulation: “Rights of accumulation” allow you to combine your mutual fund purchase with your existing investment in the mutual fund company to reach a breakpoint.
  • Letter of Intent: You can take advantage of breakpoints by agreeing to purchase a certain dollar amount in a mutual fund over a specified period of time. In most instances, this requires signing a “Letter of Intent” (LOI).

The prospectus of every mutual fund describes its breakpoint policies, including how you can reach breakpoints. You can request a copy of a mutual fund’s prospectus from your financial professional.

Fees and Costs — Ongoing Fees and Expenses

In addition to the 12b-1 fees mentioned above, mutual funds typically also deduct other ongoing fees and expenses, such as management fees or servicing fees, from fund assets. These ongoing fees and expenses are typically used to pay for the mutual fund’s continued annual operating expenses (these ongoing fees are sometimes referred to as the mutual fund’s “expense ratio”), such as paying the mutual fund’s investment manager, accounting and auditing expenses, legal expenses, and recordkeeping expenses. In addition, as noted above, the ongoing fees and expenses include fees commonly referred to as 12b-1 fees, and these 12b-1 fees are intended to finance distribution activities intended primarily to result in the sale of additional shares of the mutual fund, and include marketing and advertising expenses.

These ongoing fees and expenses are typically charged daily as a percentage of your assets. You pay these fees and expenses indirectly because they are deducted from your assets on an ongoing basis. These payments, as well as the conflicts of interest associated with them, are described more fully in Securian’s Regulation Best Interest Disclosure.

More Information

More information on a mutual fund’s sales charges, ongoing fees and expenses, and overall expense ratio is available in the mutual fund’s prospectus. You can request a copy of a mutual fund’s prospectus from your financial professional.

Options

Characteristics

Securian Financial Services, Inc. (Securian) offers option contracts for you to buy or sell. Options are contracts that, when purchased give you the right, but not the obligation, to buy or sell an underlying asset at a fixed price within a certain period of time. Various exchanges operating in the United States and regulated by the SEC offer public trading markets where different types of options are bought and sold, such as equity, index, and interest rate options. Option contracts may also be traded on certain European markets.

An option contract that gives you the right to buy the underlying asset is referred to as a “call” option, and an option contract that gives you the right to sell the underlying asset is referred to as a “put” option. Most options have certain standardized terms that indicate the nature and amount of the underlying asset, the expiration date, the exercise price, and whether the option is a call or put. Many securities that are publicly traded in the United States have put or call options contracts, which are available for trading on an exchange in the United States. Equity options, for example, are designated by reference to the issuer of the underlying security, the expiration month or expiration date of the option, and the option’s exercise price and type (put or call).

When you sell an option, you take on an obligation to sell (a call) or buy (a put) an underlying asset at a fixed price within a certain period of time. The buyer of the option has the rights associated with the option.

Prior to buying or selling options, you will receive a copy of the “Characteristics & Risks of Standardized Options,” also known as the options disclosure document (ODD). Investors should read a copy of the ODD prior to buying or selling an option. The ODD contains required disclosure of the characteristics and risks of standardized option contracts. The options disclosure document is available on the Option Clearing Corporation’s website.

No certificates are issued to show your ownership of an option. You must review the confirmations and statements that you receive from us in order to confirm your positions in options as of the date of the confirmation or statement. It is very important to understand the process for exercising your rights as the holder of an option contract. You must give us instructions in order to exercise your rights. However, some options contract may be automatically exercised at expiration if they are in the money. See the options disclosure document for more information.

Fees and Costs

You will typically pay a commission every time you buy or sell an option contract. You will pay this commission in addition to the premium associated with the option contract, which you will pay regardless of whether you choose to exercise the option to buy or sell the underlying asset. The commission is a one-time fixed fee, typically with a flat dollar base fee plus a per contract fee. See Securian’s Client Commission and Fee Schedule for more information. The premium is not a standardized term of the option contract. The premium does not constitute a “down payment.” The premium is a non-refundable payment and is in addition to the commission.

For example

If you purchase the option to buy 200 shares of a public company (two options contracts), you will typically pay a $56 commission, regardless of whether you choose to exercise the option.*

*Based on Securian’s Client Commission and Fee Schedule in effect as of April 2020.

Unit Investment Trusts

Characteristics

Securian Financial Service, Inc. (Securian) offers a wide range of unit investment trusts (UITs). UITs are pooled investment vehicles in which a portfolio of securities is selected by the trust’s sponsor and deposited into the trust for a specified period of time. The UITs portfolio of securities is not actively traded, as the trust generally follows a “buy and hold” investment strategy. The portfolio will generally remain fixed until the termination of the trust. UIT term lengths vary, but generally speaking they have a maturity date that is between 15 to 24 months from the initial offering date.

At the UIT’s maturity, an investor typically has three options. One is to receive the proceeds based on the value of the investment. An investor could also rollover into a newly-issued UIT. Another option that may be available to investors in limited circumstances is to receive proportionate shares of the securities held in the portfolio.

The UIT’s portfolio is generally designed to follow an investment objective over a specified period of time. UITs are formed by the trust sponsor, who enters into an agreement with the trustee. When the trust is formed, several investment terms and conditions are set forth in the trust agreement, such as the trust objective, what securities will be placed in the trust, when the trust will terminate, and what fees and expenses will be charged to the trust’s assets. These terms and conditions of the trust will be listed in the prospectus.

Fees and Costs

You will typically pay a sales charge when you buy units in a UIT’s initial offering, or a commission when you buy or sell units in a UIT in a secondary trading market. You will pay this sales charges or commission in addition to the amount of the UIT you choose to buy or sell.

For example

If you invest $10,000 in a UIT’s initial offering that assesses a 3.5% sales charge, then a $350 sales charge will be deducted and the remaining $9,650 of your investment will be used to purchase units in the UIT’s initial offering. If you purchase $10,000 of units in a UIT on a trading market, you will pay a $110 commission.*

*Based on Securian’s Client Commission and Fee Schedule in effect as of April 2020.

In some instances, collection of all or part of a sales charge is deferred over a period subsequent to the settlement date for the purchase of units. Typically, the deferred sales charge is deducted from the unitholder’s distributions on the units during the collection period until the total amount of the sales charge is paid.

Repeatedly selling UITs before their maturity date followed by the purchase of a newly-issued UIT will cause you to incur sales charges with greater frequency.

UITs also deduct other fees and expenses from trust assets, such as organizational and operating expenses. These fees and expenses include portfolio supervision, recordkeeping, administrative fees, and trustee fees. UITs also charge a creation and development fee, which compensates the sponsor for creating and developing the trusts. However, UITs generally do not deduct a separate management fee because the portfolio is not actively managed. We may receive a portion of these fees and expenses, generally referred to as “third-party payments” or “revenue sharing.” These payments, as well as the conflicts of interest associated with them, are described more fully below in this Reg BI Disclosure.

More Information

More information about UITs, including their sales charge and ongoing fees and expenses, is available in the UIT’s prospectus.

Real Estate Investment Trusts

Characteristics

Securian Financial Service, Inc. (Securian) offers publicly traded real estate investment trusts (REITs), which own and typically operate income-producing real estate assets, such as office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and real estate mortgages or loans. Unlike other real estate companies, REITs do not develop real estate properties to resell them, but rather buy and develop properties primarily to operate them as part of their own investment portfolio.

As an investment for a retail customer, REITs provide exposure to the investment performance of commercial real estate. REITs are required to pay out most of the taxable income to their shareholders. Some REITs can offer higher dividend yields than some other investments.

Securian offers publicly traded REITs (traded REITs), which are typically listed for trading on a national securities exchange. As a matter of policy, Securian does not offer non-traded REITS, which are not listed for trading on public exchange and cannot be bought or sold readily in a secondary market. Non-traded REITS are illiquid investments. Traded REITs can be bought and sold on a secondary trading market. The market price for shares of traded REITs is readily available since they are traded on security exchanges.

Fees and Costs

You will typically pay a commission when you buy or sell shares in a REIT in a secondary trading market. For an initial offering purchase, the REIT commission is a one-time fixed fee, typically as a percentage of the investment amount. The commission is deducted from the amount you invest. For a purchase or sale transaction in the secondary trading market, the REIT commission is also a one-time fixed fee, typically a flat dollar amount plus a percentage of the principal (both of which will vary based on the dollar amount of the transaction). The commission is a separate charge from the purchase or sale amount.

For example

If you purchase $10,000 worth of shares in a REIT in the secondary trading markets, you will pay a $110 commission.*

*Based on Securian’s Client Commission and Fee Schedule in effect as of April 2020.

REITs bear the fees and expenses associated with acquiring, operating, and disposing of their assets. You pay these fees and expenses indirectly because they impact the profitability of the REIT and the value of your shares.

More Information

More information about REITs, including their initial commissions and ongoing fees and expenses, is available in the REIT’s prospectus.

Variable Products

Characteristics

Securian Financial Service, Inc. (Securian) offers variable annuities and variable life insurance policies (variable products). These variable products are issued by different insurance companies and will be in the form of a contract or policy between you and the insurance company. There are differences from one variable product to the next in the features, benefits, fees and costs of the product and in minimum and maximum premium amounts. Below is general information about most variable products. Information about the particular features, benefits, fees and costs for a specific variable product can be found in the prospectus for that product. You will receive a copy of the prospectus for the variable product that your financial professional recommends to you.

Variable annuities can help with saving for retirement. Funds invested in these annuities can grow tax-deferred. This means you will pay no federal taxes on the income and investment gains on the funds you invest in your annuity until you make a withdrawal, receive income payments, or a death benefit is paid. When you withdraw your funds, however, you will pay tax on the gains at ordinary federal income tax rates rather than lower capital gains rates. When you start taking income payments, you can select payment options that will guarantee you payments for so long as you live. Some annuities offer additional features and guarantees, available as options or riders.

Variable life insurance provides life insurance protection (i.e. a death benefit) and also allows you to build up a cash value that can grow tax-deferred. Most variable life insurance policies allow you to take out loans against your cash value and to make withdrawals (so long as the remaining cash value is sufficient to keep the policy in force). You can also terminate your policy by surrendering it and receiving the remaining cash value. Terminating your policy will terminate your death benefit protection. Most insurance companies offer riders and other options with their variable life insurance policies, such as disability insurance, income benefits or accelerated death benefits.  

When you purchase a variable annuity or variable life variable product, your insurance premium contributions (net of any fees and charges deducted from premiums) are invested in the investment options — typically underlying mutual funds — that you select. The value of your investment — usually referred to as your cash value — will fluctuate as the values of the underlying mutual funds increase or decrease.

Most insurance companies impose a minimum requirement on the initial premium. In the case of variable life insurance, you will likely be required to make premium payments periodically to keep the policy in force. While you may have some flexibility in the amount or timing of these periodic premium payments, you should consider whether you can afford to continue making premium payments when deciding to purchase a variable life insurance policy. If you fail to make sufficient payments to keep the policy in force, the policy will lapse (that is, terminate without value) and you will no longer have any death benefit protection.

Variable products are not short-term savings vehicles. Withdrawing funds or surrendering a variable product in the short-term after purchase will likely trigger surrender fees and charges, and may also trigger tax penalties. You can lose the money you invest in variable products, including potential loss of your initial investment, due to poor performance of the investment options you select and/or the cumulative impact of fees and charges on your cash value.  

Fees and Costs — Premium Payment Deductions

In the case of some variable products, the insurance company deducts a fee from your premium payment, with the effect that only the net premium amount is invested or allocated. In the case of variable annuities, the fee deduction is usually to cover a state insurance premium tax. In the case of variable life products, the fee deduction can also cover the insurer’s sales expenses.

Fees and Costs — Surrender and Withdrawal Charges

Most variable products impose a surrender charge if you surrender your variable product or make a withdrawal of your cash value during the surrender charge period. This surrender charge and the surrender period are described in the product prospectus. Surrender charge periods vary by variable product, but are generally around 6 to 8 years for variable annuities, even though they sometimes may range up to 15 years on some variable life insurance policies.

The surrender charges also vary by variable product, and generally begin around 7 to 8% of the purchase payment in year one and end around 2 to 3% of the cash value in the final year of the surrender charge period. Typically, the surrender charges decrease over the duration of the surrender charge period, with the higher surrender charges applying to surrenders and withdrawals made at the beginning of the surrender charge period, and the lower surrender charges applying to surrenders and withdrawals made towards the end of the surrender charge period. Tax penalties can also apply to surrenders or withdrawals under annuities made before age 59-1/2.

Fees and Costs — Ongoing Fees and Expenses

Insurance companies deduct fees and expenses from your cash value to cover fees and expenses. These ongoing fees and expenses commonly include mortality and expense (M&E) risk fees, cost of insurance fees (assessed under variable life insurance policies), administration fees, transaction fees, and fees associated with certain optional riders. The M&E risk fees are calculated as a percentage of your insurance coverage or account value and is described as an annualized rate charged against assets. However, some fees, such as administration or transaction fees, are fixed amount fees charged annually or when specific transactions occur and are deducted from your cash value. The cost of insurance fees charged on variable life insurance are typically calculated by applying a rate based on your underwriting classification to the “net amount at risk” (the difference between your product’s death benefit and cash value). These fees typically are deducted from your cash value on an ongoing basis. If you add riders to your variable annuity or variable life insurance policy, the fees for those riders will be deducted from your cash value.

In addition, you will indirectly pay the ongoing fees and expenses for the mutual funds that are the underlying investment options for your variable product in which you invest. These fees and expenses are separate from the fees charged by the insurance company and will be reflected in the performance of the underlying investment options. These ongoing fees and expenses include the mutual fund’s management fees, servicing fees, and 12b-1 fees, and are typically as an annualized rate charged against fund assets.

The commissions, surrender charges, and ongoing fees and expenses associated with variable products vary by insurance company and the type of variable product. More information regarding the commissions, surrender charges, and ongoing fees and expenses for variable products is available in the variable product’s prospectus.

Fees and Costs — Our Commissions

When you purchase a variable product, the issuing insurance company will pay a commission to us. While you do not pay this commission directly, the insurer factors this commission into the product’s fees and costs in the case of variable products. In this way, you indirectly pay the commission. We receive this commission for our sales efforts and for assisting you with the insurance application, and the underwriting and delivery processes related to the purchase of a variable product. We share a portion of this commission with your financial professional.

Insurance commissions we receive vary based on the variable product and insurance company, and we receive higher commissions for some types of variable products than for others, which creates a conflict of interest for us. In addition, in the case of life insurance, the commissions may vary between initial premium payments and subsequent premium payments. Although insurance commissions vary, we typically receive between 1 and 7% commission for a variable annuity sale based on the amount of the deposit. Typically, with variable annuity commission arrangements that provide a higher percentage payout, compensation is received upfront, without any trailing compensation. With lower up-front commission percentages, trailing commissions are often also applicable, such as a 1% commission up front based on deposit value, and a 1% annual trailing commission based on contract value. Variable life insurance sales typically result in a commission between 50 and 115% based on first year premium payments. These examples are provided for illustrative purposes only, as commission arrangements will vary by insurance company, product and state of sale.

For example

If you purchase a $50,000 variable annuity from an insurer that pays us a 5% commission, we will receive, and you will indirectly pay, an initial commission of $2,500. If you contribute another $10,000 to your variable annuity contract as an additional payment, we will receive, and you will indirectly pay, a subsequent commission of $500.

Fees and Costs — Marketing Expenses and Allowances

Some insurance companies also pay us a marketing allowance for our marketing activities on their behalf. The marketing allowances are usually calculated as a percentage of new sales (premiums paid by our retail customers), a percentage of the cash value in variable products held by our retail customers, or both. While both of these arrangements exist in the industry, our arrangements are generally based on new sales. The percentage paid varies from insurer to insurer, and can range from 0 to 15% of new sales (generally first year premiums). Some insurers additionally or alternatively make contributions to cover the costs of the business meetings and events that we hold for our financial professionals. Not all of the insurers on our Retail Platform make these payments to us.

Marketing representatives of insurance companies or their affiliated distributors, often referred to as “wholesalers,” work with our financial professionals to promote their variable products. These insurance companies and their wholesalers may pay for or provide training and education programs for our financial professionals. Insurance companies and their wholesalers may provide small gifts to or business entertainment with our financial professionals, may cover expenses with our financial professionals attending business meetings they sponsor, and may provide financial assistance to financial professionals for their marketing events and activities.

You do not pay these marketing expenses directly. However, the marketing expenses are built into the pricing of the variable product, so you indirectly pay for the cost of the marketing expenses, such as training and education programs for our financial professionals sponsored by the insurance company and their wholesalers.

More Information

More information about variable products, including the insurance commissions and other fees and expenses built into the cost of the insurance, is available in the variable product’s prospectus. You can request a copy of a variable product’s prospectus from your financial professional.

In addition, more information on the mutual funds underlying the variable product’s investment options, including the mutual fund’s ongoing fees and expenses and overall expense ratio, is available in the mutual funds’ prospectuses. You can request a copy of underlying mutual fund prospectuses from your financial professional.

Investments will fluctuate and when redeemed may be worth more or less than when originally invested.​

ETFs entail the same risks as direct stock ownership and ETFs structured as "fund of funds" will entail the same risks associated with the underlying funds.

Investments in fixed income securities are subject to the creditworthiness of their issuers and interest rate risk. As such, the net asset value of bond and real estate funds will fall as interest rates rise.

High yield, lower-rated (junk) bonds generally have greater price swings and higher default risks.​ Debt obligations are affected by changes in interest rates and the creditworthiness of their issuers.

The principal value of bonds will fluctuate with market conditions. Bonds redeemed prior to maturity may be worth more or less than their original cost. Bond interest paid by a municipality outside the state in which you reside could be subject to state and local income taxes. If you sell a municipal bond at a profit, you could incur capital gains taxes. In some cases, municipal bond interest could be subject to the federal alternative minimum tax.​

Investments in derivatives may provide investment exposure, enhance return or protect a Portfolio’s assets from unfavorable shifts in the value or rate of underlying investments. Because of their complex nature, some derivatives may not perform as intended, can significantly increase the Portfolio’s exposure to the existing risks of the underlying investments and may be illiquid and difficult to value. As a result, the Portfolio may not realize the anticipated benefits from a derivative it holds or it may realize losses. Derivative transactions may create investment leverage, which may increase the volatility and may require liquidation of securities when it may not be advantageous to do so.

Investment risks associated with real estate investing, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes, and differences in real estate market values.​

A 529 plan is a tax-advantaged investment program designed to help pay for qualified education expenses. Participation in a 529 plan does not guarantee that the contributions and investment returns will be adequate to cover education expenses. Contributors to the plan assume all investment risk, including the potential for loss of principal, and any penalties for non-educational withdrawals.

Your state of residence may offer state tax advantages to residents who participate in the in-state plan, subject to meeting certain conditions or requirements. You may miss out on certain state tax advantages should you choose another state’s 529 plan. Any state based benefits should be one of many appropriately weighted factors to be considered in making an investment decision. You should consult with your financial, tax or other advisor to learn more about how state based benefits (including any limitations) would apply to your specific circumstances. You may also wish to contact your home state’s 529 plan Program Administrator to learn more about the benefits that might be available to you by investing in the in-state plan.

An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59 ½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax-qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but tax and penalties may apply to non-qualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals.

Variable annuities have additional expenses such as mortality and expense risk, administrative charges, investment management fees and rider fees. Variable annuities are subject to market fluctuation, investment risk and loss of principal.

Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods. Variable life insurance products contain fees, such as management fees, fund expenses, distribution fees and mortality and expense charges (which may increase over time). The variable investment options are subject to market risk, including loss of principal.

Securities and investment advisory services offered through Securian Financial Services, Inc. Member FINRA/SIPC. 400 Robert St N. St Paul, MN 55101.

DOFU 5-2020
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