M Financial Holdings Incorporated (dba M Financial Group) (“M Financial Group”) and its subsidiaries provide a variety of sales and support services to a select network of Member Firms, insurance carriers, and customers. Member Firms are independently owned and managed financial service firms (other than M Benefit Solutions, a Member Firm wholly owned by M Financial Group), and are not agents of M Financial Group.
Member Firms provide a broad range of financial products and services, primarily to highly affluent clients, including:
Some of the services above, such as investment advisory and securities brokerage services, are provided by Member Firms through third parties, such as broker-dealers or investment advisers, which may be subsidiaries of M Financial Group.
M Financial Group and its subsidiaries provide to Member Firms a variety of support services, including product design and marketing assistance and training for Member Firm employees and independent contractors, as well as access to securities-related products and services. M Financial Group (on behalf of unaffiliated financial service providers) has direct dealings with Member Firm clients at the request of a Member Firm, typically in conjunction with a Member Firm client presentation or proposal.
Member Firms are free to offer products and services provided by any financial service provider and are not required to offer products or services designed or promoted by M Financial Group.
M Financial Group may also engage in direct sales and service activities with clients referred to M Financial Group pursuant to strategic partnerships with financial institutions that utilize M Financial Group’s expertise to serve the life insurance needs of their clients. When such sales or services involve variable life insurance or other securities products, they are offered through M Holdings Securities, Inc. (“M Securities”), a registered broker-dealer subsidiary of M Financial Group.
M Financial Group provides marketing services to a select group of insurance carriers, including the Partner Carriers, Associate Carriers, and Specialty Carriers listed on the Carriers page of the M Financial Group website.
M Financial Group provides administrative and operational services through M Insurance Solutions, Inc. (“MIS”), a registered third-party administrator subsidiary of M Financial Group.
M Life Insurance Company (dba M Financial Re) (“M Financial Re”), a subsidiary of M Financial Group, reinsures a portion of the mortality risk on some policies issued by unaffiliated insurance carriers and sold by Member Firms.
M Financial Group develops life insurance products in conjunction with unaffiliated insurance companies, which products can be offered only by M Financial Group, its Member Firms and their affiliated producers. These products are designed using M Financial Group’s proprietary experience data (such as mortality, persistency, and policy size) derived from policies reinsured by M Financial Re. These proprietary products may include pricing advantages and other features that benefit the highly affluent clientele primarily served by Member Firms.
When M Financial Re reinsures proprietary products, M Financial Group has direct access to policy experience data. This direct access facilitates active management of inforce business.
With this data, M Financial Group can continuously monitor the service, experience, and performance of inforce business on behalf of Member Firms and their clients. From time to time, policy experience data may result in pricing enhancements that apply to new sales. M Financial Group uses its influence to encourage insurance carriers to apply these improvements to inforce business as well. Since the first M Financial Group proprietary product was introduced in 1996, there have been fifty-four pricing enhancements for new sales, all of which were also applied to inforce policies. Although M Financial Group has had success encouraging insurance carriers to improve inforce policy performance in the past, carriers are not required to do so and accordingly this success may not continue in the future.
Member Firms and many of their affiliated producers are stockholders of M Financial Group. As stockholders, they share in the profits of M Financial Group via periodic stock or cash dividends.
M Financial Group also maintains a Member Firm Compensation Plan (“Plan”) pursuant to which it annually distributes to Plan participants (e.g., Member Firms or their producers) most of M Financial Group’s consolidated net cash profits. Although distributions under the Plan are, to some extent, averaged among the various Member Firms, lines of business, and cost centers of M Financial Group, a significant portion of Plan distributions are made in proportion to the revenue that a Member Firm generates. Member Firms and producers do not receive credit under the Plan for business deriving from retirement accounts which are subject to ERISA.
Distributions of dividends and other compensation paid by M Financial Group to Member Firms or their producers are in addition to compensation paid to producers by unaffiliated insurance carriers and other financial service providers. Many Member Firms remit these distributions to their owners or individual producers (in some cases in proportion to business generated). Additionally, M Financial Group may provide benefits and non-cash compensation to Member Firms and their affiliated producers. These include, but are not limited to, subsidized expenses, meetings, and trips.
M Financial Group derives its consolidated revenues from a variety of sources, including its Member Firms and unaffiliated insurance carriers and other financial service providers. The majority of these revenues come from two sources:
The primary source of compensation for Member Firms and their producers is the traditional system of commissions and fees applicable to insurance agents, securities representatives and investment advisory representatives. In addition to the indirect compensation arrangements (described above) which Member Firms and their producers derive from membership in M Financial Group, Member Firms and producers typically receive from unaffiliated financial service providers some or all of the following compensation, as applicable:
Compensation to Member Firms and their producers varies, depending upon, among other factors, the product type, the issuer, and the features and/or riders which are attached to the particular product.
M Financial Group and its subsidiaries receive additional compensation from and/or enter into reinsurance arrangements with numerous insurance carriers and financial service providers including, but not limited to: Advisors Asset Management, Allianz, American Funds, American General, Bank of New York (and its subsidiaries), Brinker Capital, Crown Global, Delaware Life, Equus Financial Consulting, Exceptional Risk Advisors, Global Benefits Group, Guardian Life, JP Morgan Asset Management, ING, John Hancock, Legg Mason, Lincoln National, Lombard International, MasterCare (and its subsidiaries), the M Funds (i.e., M International Equity Fund, M Large Cap Growth Fund, M Capital Appreciation Fund, and M Large Cap Value Fund), Manulife (and its subsidiaries), MetLife, Nationwide Financial, New York Life, Principal Financial Group, Protective Life, PNC Financial Services, Pacific Life, Pershing, LLC (and its subsidiaries), Pan American, Penn-Mutual, Prudential, Resolution Life Holdings, Inc., the SALI Funds, The Standard, Sun Life Financial, Symetra, TIAA-CREF Financial Services, Unum Group, VOYA, Welcome Funds, West Corporations,and Worldwide Benefits LLC.
The subsidiaries of M Financial Group are as follows: M Financial Re, M Administrative Services, LLC, Management Compensation Group, Northwest, LLC (dba M Benefit Solutions), M Securities, M Financial Securities Marketing, Inc., M Financial Investment Advisers, Inc. (“MFIA”), M Financial Asset Management, Inc., MIS, M Financial Bermuda, Ltd., and M Financial Global Services, Ltd. Additionally, M Fund, Inc., which is managed by MFIA, is considered an affiliated person of M Financial Group under certain laws or regulations.
The above list of insurance carriers and financial service providers, as well as the list of M Financial Group subsidiaries will change from time to time. Please review the lists periodically.M Securities and some Member Firms have entered into arrangements under which they receive compensation directly or indirectly from managers of funds available as investment options under certain private placement variable insurance contracts. Please contact M Securities or your Member Firm representative to determine whether such an arrangement is in place with respect to a specific product or service.
The culture of M Financial Group and its Member Firms is to serve the client. However, clients of Member Firms should be aware that the direct and indirect compensation arrangements involving M Financial Group and its subsidiaries and Member Firms, including without limitation those described in this summary, create economic incentives which could influence recommendations for particular financial products or services (including proprietary products referenced above). These incentives include, but are not limited to, the following:
M Financial Group, its Member Firms, and its Member Firms’ clients benefit from open discussions concerning all aspects of products, services, and the compensation of producers. If you wish, your Member Firm will discuss with you the types of direct and indirect compensation applicable to particular products or services.
4359838.1 (2/26)
