JKR & Company
Brokerage Compensation Information and Related Conflicts of Interest
At JKR & Company ("JKR"), we do our best to provide you with objective investment advice to assist you in achieving your goals. However, like all broker-dealers and investment advisers, JKR has conflicts of interest that are inherent in the financial services industry. Conflicts of interest – real or apparent – are instances where a person or firm has an incentive to serve one interest at the expense of another. JKR avoids certain conflicts and seeks to manage unavoidable conflicts through disclosure and with policies and procedures that are designed to protect customer interests.
Unavoidable conflicts of interest generally relate to the compensation we receive. In other words, there may be an economic incentive for us to recommend a solution that generates greater compensation than another solution available to you and that may not be in your best interest.
This document provides information about how JKR and JKR financial representatives are compensated and some of the related conflicts of interest. In particular, the information below describes conflicts of interest associated with compensation received by JKR and its financial representatives on brokerage services.
JKR and its financial representatives are either compensated directly by customers, or indirectly from the investments made by customers. We can get paid an upfront commission at the time of the transaction, and/or ongoing compensation, typically called a trail payment, depending on how long a customer holds an investment. If we are paid an upfront commission, it means that the more transactions a customer makes, the more we are paid. The amount we receive varies depending on the particular investment a customer makes.
Please note that not all the conflicts described in this document apply to a particular JKR financial representative or his services and the products we sell, and the types and amounts of compensation we receive, change over time. Customers should ask their JKR financial representative if they have any questions about compensation or conflicts of interest. Moreover, JKR provides both advisory and brokerage services and discloses conflicts of interest related to its advisory programs and services in its Form ADV disclosure brochure available on https://adviserinfo.sec.gov/firm/summary/8040.
UPFRONT COMPENSATION
When you purchase an investment through our broker-dealer, you pay a fee that is based on the specific transaction and not the value of your account. You will generally pay a separate commission on stocks, ETFs (Exchange Traded Funds), or options. This fee might be part of the price you pay for the investment (called a “mark-up” or “mark-down” for fixed income investments or “load” for mutual funds). JKR receives a portion of the sales charge or commission and shares it with the JKR financial representative at an agreed-upon rate. In some cases, a portion of the sales charge or commission is retained by the investment sponsor. Commissions vary from product to product. This creates an incentive to sell higher commission securities rather than lower commission securities. For more information about the commissions that apply to a particular transaction, please refer to your transaction confirmation, the applicable prospectus, or other product-specific documents.
TRAIL COMPENSATION
JKR and JKR financial representatives sometimes receive ongoing compensation from investment products, such as mutual funds and annuities. This compensation (commonly known as trails, 12b-1 fees, residual, or service fees) is designed to compensate JKR for the marketing and services we provide for our financial representatives and customers. We retain a portion of these fees and pay the remainder to your financial representative, or, in some instances, may pass all the fees on to your financial representative. You do not pay these fees directly. They are deducted from the total assets in the investment and therefore reduce investment returns. The amount of trail payment is set by the product sponsor and is typically described in the prospectus, contract, or offering documents. The more assets you invest in the product, the more we will be paid in these fees. Therefore, we have an incentive to urge you to increase the size of your investment. The amount of trail payment received can also vary from product to product creating an incentive to recommend a product that pays a higher trail rather than a lower trail.
SHARE CLASS SELECTION
JKR offers various share classes of mutual funds. Each class invests in the same portfolio of securities and has the same investment objectives and policies. But each class has different shareholder services and/or distribution arrangements with different fees and expenses. Because of the different fees and expenses, each class will likely have different performance results. For instance, Class A shares pay an upfront sales charge and an ongoing trail payment. Class C shares do not have an upfront sale charge paid, however, there is an ongoing trail payment and a contingent deferred sales charge to the investor if redeemed within a certain time after purchase. Depending on the length of the holding period for the mutual fund and other factors, one share class may be less expensive to the investor than another, and JKR and the JKR financial representative may earn more or less in compensation for one share class than another.
FINANCIAL REPRESENTATIVE COMPENSATION
JKR generally compensates its financial representatives according to an independent contractor agreement, and not as employees. This compensation is based on a percentage of the revenue he generates from sales of products and services and can be more or less than what he or she would receive at another brokerage firm. This creates an incentive to increase the number of transactions, increase the dollar amount of transaction, and/or recommend higher compensation securities.
FINANCIAL REPRESENTATIVE‘S OUTSIDE BUSINESS ACTIVITIES
We allow our financial representatives to engage in certain JKR-approved business activities other than providing brokerage and advisory services through JKR. In some instances, JKR financial representatives could receive greater compensation through the outside business than through JKR and impact his ability to recommend a product or service that is in your best interest. For example, JKR financial representatives could provide advisory services through an unaffiliated investment advisory firm or sell insurance through a separate business. If you engage with a JKR financial representative for services separate from JKR, you should ask him about the compensation he receives from the engagement.
RETIREMENT ACCOUNT 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”) at JKR, we have a financial incentive to recommend that a customer invests those assets with JKR, because we will be paid on those assets through commissions, fees and/or third-party payments. Your financial representative has an economic incentive to recommend that you roll plan assets into an IRA even though your fees and commissions likely will be higher than those you pay through the plan and you will probably pay liquidation commissions and sales charges before the transfer.
LIMITATIONS ON OUR INVESTMENT RECOMMENDATIONS
JKR and its financial representatives offer and recommend publicly-traded securities and a limited number of other investment products – only those products with which JKR has executed selling and distribution agreements. Other firms may offer products and services not available through JKR, or the same or similar investment products and services at a lower cost. Also, JKR may only offer certain products in a brokerage account, even though there is a version of the product that may be lower cost and could be available in an advisory account, and vice versa. The choice of products and services offered by individual JKR financial representatives may be more limited than generally available through JKR based on their licensing or training restrictions. You should ask your financial representative about the securities or services he is licensed or qualified to sell, and his ability to service investments transferring to JKR from another firm.
| If you have any questions about the amount of compensation JKR or your financial representative will earn from your investment alternatives, you should discuss them with your financial representative or contact us at 818-781-7721. |