FREQUENTLY ASKED QUESTIONS

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1 FORESTERS EQUITY SERVICES, INC. FREQUENTLY ASKED QUESTIONS Finding a new broker-dealer that fits your needs can be a daunting task. The questions in this document were designed to assist you in making sure that your new firm has what matters most to you. Feel free to use it to take further notes on Foresters Equity, to come up with new questions, or to compare us to a competitor. Insurance 2 Commissions & Costs 3 The Transition 4 Operations 5 Compliance & Registration 7 Registered Investment Advisor 8 General 9 Please note that this FAQ is not meant to provide comprehensive details on the topics covered. Please consult your Foresters Equity contract or our firm s WSPPs for additional information. FOR AGENT USE ONLY Revised May 2011 Securities offered through Foresters Equity Services, Inc. Member FINRA, SIPC 6640 Lusk Blvd, Ste A202 San Diego CA

2 INSURANCE What is your policy on fixed annuities? Will your firm take a cut from my insurance business? Foresters Equity is above all an insurance-friendly broker-dealer. Our policy is to support insurance producers and offer them an accommodating broker-dealer partner. As such, fixed insurance sales are reported as outside business activities; individual transactions are not reviewed by our firm and the commissions are not run through our grid. Can I place fixed business outside the broker/dealer? Do you have preferred insurance vendors who provide extra marketing support? Are there any proprietary pressures, either direct or indirect, to sell certain insurance products? (i.e., Do parent companies' products get the best spots at conferences, key advertising spots on your website, and is there heavy wholesaler contact?) Yes. We currently offer five fixed annuities that the insurer requires to be reviewed by a brokerdealer. However, all other fixed business must be placed outside the broker-dealer. We do not. We do offer unlimited access to our own Marketing Department who will be happy to gather point-of-sale materials for you as needed. No. We are a true independent broker-dealer and we do not have any proprietary or preferred products. 2

3 COMMISSIONS & COSTS How does the broker-dealer s compensation plan work? Please list all transaction costs, fees and other charges. We offer two different compensation contracts. Our Standard Contract offers starting payout at 75%, and automatically increases with production (The starting rate is negotiable with proof of prior production). Our Reduced Production Contract offers a lower payout, 55%, and is for the occasional securities producer. Our reps are responsible for paying for their own FINRA and state registration and renewal fees, as well as FINRA s Regulatory Element. Foresters Equity currently has a monthly fee of $80 per month on the Standard Contract, which is waived at just $20,000 in GDC production. The monthly fee on the Reduced Production contract varies based on production, and the five annual online Compliance modules are administered at total cost of approximately $135. There is also a nominal fee for website review, depending on the size and nature of your site and your contract. Our E&O has a pro-rated annual premium of $435 per year for $1 mil in coverage. Ticket charges are only applied to brokerage accounts held through our clearing firm, Southwest, and are just $6, regardless of the size of the trade. There are no ticket charges for PIPs or SWIPs. Most reps at Foresters Equity will find that using our broker-dealer has an annual cost well below $2,000, including most FINRA and state fees. 3

4 THE TRANSITION What is the process of transferring over accounts? How many forms will my existing clients need to fill out, and what kind of support can you offer me in this endeavor? If I am currently registered with a broker-dealer now, when should I terminate with them? How much of an interim can I expect where I will not be able to conduct business? What does it cost to transition for an already-licensed rep? Because of FINRA s rules, Foresters Equity no longer allows for block transfers. As such, each of your clients must positively opt-in to the brokerdealer change. We require the Change of Broker- Dealer form and New Account Application to be completed. Foresters Equity does offer personalized support with this, depending on the amount of clients you work with and your specific needs. We can t tell you exactly when to terminate, but you should keep in mind that broker-dealers technically have 30 days to process your U5 although most firms process them within a few days. We will need a copy of your U5, signed by a principal of the firm. Most firms accept resignations via or fax. This depends on how complete your paperwork is, whether or not you have reportable disclosures, and how you get your fingerprints done. Assuming that you complete your fingerprints at a LiveScan facility, that you have no reportable disclosures, and that your paperwork is received in good order, we can usually register you within 3 business days. Any variations add time. You will need to pay FINRA registration fees (which total $260) and your state(s) registration fee(s) (which vary between $25 and $285). If you have a reportable disclosure, FINRA charges an additional $95 disclosure reporting charge per event. 4

5 OPERATIONS What are your firm's protocols, from start to finish, for opening new accounts? To establish a new mutual fund account, we require the clients to sign a New Account Application (one page, double-sided), the investment company s application, and a Risk Tolerance Questionnaire. Please note that other documents may be required depending on the type of transaction. The hard copies of the paperwork, along with any investment checks, are submitted to our head office for principal review. Our Operations Department enters the client(s) s information into our system and promptly overnights the documents to the investment company for processing. Once the account is established, you will be able to view your client(s) s accounts on DST Vision and on Foresters Equity s back office website. Similar processes are completed for brokerage accounts, VA and VUL accounts, as well as managed money accounts. Are forms available online? Do you have a trading desk, and what outside sources do you make available for bonds? All of our proprietary forms are available at the back office site of after you log in as a registered representative. Guest log-ins are available for interested reps. Most forms are available as editable PDFs. No, we do not. We are a limited broker-dealer and we do not offer exchange traded securities, including ETFs, closed-end mutual funds, stocks, bonds, REITs, or UITs. However, we have been able to offer solutions for reps looking to service clients with those types of investments. 5

6 What is your process for depositing checks to accounts? For depositing checks into existing accounts, you may send the check directly to the investment company. We do ask that you send our Operations Department a notification or a copy of the check. Please send additional deposits for brokerage accounts directly to our Operations Department. All client checks are overnighted to the investment company 24 hours after they are received here at Foresters Equity. Our Operations Department is happy to assist you if you have any special requirements for a particular investment. What is the process to obtain a signature guarantee? What are ticket charges to advisors, and can ticket charges be charged to the client? We offer the Medallion Stamp signature guarantee for accounts up to $500,000. The stamp is housed at our head office. You may send the document that requires the stamp to our Operations Department, along with the Signature Guarantee Verification Form. A qualified principal will then stamp the document, and our Operations Department will forward it on to its final destination. Ticket charges are only applied to brokerage accounts held through our clearing firm, Southwest. They are not applied to accounts held directly at the investment company. Ticket charges are only $6, regardless of the size of the trade. There are no ticket charges for PIPs or SWIPs. These charges may be charged to the client with additional documentation. 6

7 COMPLIANCE & REGISTRATION In which states is the brokerdealer registered to do business? What is the compliance history of the broker-dealer? How does the broker-dealer administer and enforce its compliance procedures? What is the broker-dealer s commitment to supporting advisors with independent offices? What does your firm s advertising review process entail? Foresters Equity is registered as a broker-dealer in all fifty states. We are registered as an RIA in 15 states, with the ability to add more. We encourage you to read our FINRA CRD report here. Our firm administers its annual Compliance procedures through a Firm Element Continuing Education program, Compliance Meeting, Compliance Questionnaire, OBA update, and AML training, which are all completed online annually. Audits of business locations are conducted through announced and unannounced visits from the Compliance Department annually or every three years depending on your branch structure. You are required to use a Compliance-approved address and will be provided with one, free of charge. Foresters Equity understands the needs of an entrepreneur and is fully committed to supporting your independence. We do allow for independent branch offices, with qualified branch manager candidates first undergoing an interview with our Compliance personnel. All advertising materials should be submitted to an Advertising Review principal along with an Advertising Review Form (1 page). The principals usually return with comments or approval within 48 hours. 7

8 REGISTERED INVESTMENT ADVISOR May I have my own RIA? Yes, subject to Compliance review. If I use the broker/dealer's RIA, can I charge fees for advice? Yes; such fees are paid out at 80%. May I have outside managers added to your list of approved managers? What outside managers do you solicit for? What restrictions do you have on the choice of financial planning software? Yes, subject to certain requirements. Please contact Heather Broderick (hbroderick@forestersequity.com) for the procedures and criteria. We currently offer portfolios through ITS, Flexible Plan, PTS, Dunn Warren, Interactive Financial Advisors, Southwest s Investment Management Group, and Genworth. For the most part, our IARs can choose their own financial planning software. A printout of a sample plan must be submitted through our Advertising Review process before use. 8

9 GENERAL What is the average production of the brokerdealer s representatives? What is their mix of business? How long has the brokerdealer been in the brokerdealer business? What is the financial strength of the company? Our average production for our representatives is approximately $10,000 in annual GDC. We estimate that our average rep s mix of business is approximately 60% outside fixed sales business and 40% securities business through our brokerdealer. We were incorporated in We are financially sound and in a position to withstand volatile economic conditions. What type of Errors and Omissions program does the broker-dealer have? Can I have personal brokerage accounts at other firms? What mutual funds, variable insurance products, and feebased programs are on the broker-dealer s approved list? What is the process for adding products not on this list? We offer E&O insurance through CalSurance. Our policy covers outside life, health, long-term care, and disability insurance business in addition to business conducted through Foresters Equity s broker-dealer and RIA. The annual premium is just $435 per year for $1 million in coverage and is prorated every year until February 1 st. Yes, you may. Such accounts must be disclosed on the Brokerage Account Disclosure Form. Foresters Equity holds selling agreements with over 100 of the nation s most recognized investment companies. Products may be added to the list at the discretion of Foresters Equity management. 9

10 Who owns the client relationship? What happens to my accounts if I choose to leave the broker-dealer at some time in the future? Is my client information proprietary to me and never sold or used for marketing? Please describe technology support and offerings. Foresters Equity s contract does not place any restrictions on taking your client accounts with you. However, any leads or client accounts and/or information provided to you by Foresters Equity are under a one-year non-solicitation agreement. We offer a complimentary address (first initial, last forestersequity.com) to ensure that your digital correspondence with your securities clients is properly reviewed by Compliance. We also offer you access to our back office website where you can download all of our proprietary forms, review your commission statements, and get the latest news. Southwest Securities offers, free of charge, their web-based database to reps with brokerage accounts. All other software and computer programs are offered a-la-carte, often at a discounted rate from the vendor s standard price. How many employees are in the home office supporting the field? What is the ratio of support personnel to registered representatives? What is the level of expertise of these employees? How long have the employees been at the firm? We currently house ten employees at our head office, with a ratio of support personnel to registered representatives of 1:27. Eight of those employees are registered principals. All management staff has been with the company for at least eight years. 10