Transforming Compliance Communications from Challenge to Differentiator

Transforming compliance communications from challenge to differentiator

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TRANSFORMING COMPLIANCE COMMUNICATIONS FROM CHALLENGE TO DIFFERENTIATOR

Table of Contents

Executive Summary 3

Managing Change and Complexity in a Dynamically Evolving Industry 5

• Demographic and Market Changes Require the Flexibility to Keep Up (page 5)

• Reconciling VA Product Evolution with Emerging Customer Expectations (page 6)

• How Would the New Consumers Assess Your Current VA Delivery Process? (page 7)

Compliance Communications – Current State & Opportunities 7

• Personalization Can Deliver Cost Savings and Consumer Rewards (page 8)

• “First-Dollar” Prospectus Delivery (page 9)

• Annual Prospectus Updates and Supplements (page 9)

• Ongoing Regulatory Mailings (page 9)

• Print on Demand and the Summary Prospectus – Is the Cost Justified? (page 10)

• What Database Drives Your Fulfillment Activity (Does It Report Back to You)? (page 10)

• E-Delivery (page 11)

Take a Leap Forward 12

Options Available to VA Carriers for Regulatory Fulfillment 13

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TRANSFORMING COMPLIANCE COMMUNICATIONS FROM CHALLENGE TO DIFFERENTIATOR | EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Dynamic changes in the financial services industry have added complexity and challenges for VA carriers in meeting their compliance obligations. Traditional “tri-annual” approaches to fulfillment of compliance documents, developed in a very different era, were designed primarily to maximize carrier efficiencies, using mass offset printing of documents. However, as the industry has evolved, institutions may be well served in re-evaluating their long-standing fulfillment approach to uncover any hidden costs and savings opportunities.

Recent trends prompting a reassessment include:

• An explosion in the number of VA investment options, further increasing page count and thus print and postage expense;

• The introduction of summary prospectuses, which have received regulatory approval and wide-spread adoption by fund companies, for VA subaccounts – with proposed adoption for VA product prospectuses on the horizon;

• A changing customer demographic who prefer digital over paper communications, want their content personalized, and are averse to business practices that are not sustainable;

• Improved cost efficiencies of digital print on demand whose inherent benefits of customization and minimal waste are leveling the playing field with traditional “Big Book” offset print;

• Increased scrutiny on prospectus and other regulatory mailing deliveries in the aftermath of the financial markets fallout in 2008; and

• The customer and advisor experience, which are increasingly important in a highly competitive environment where expectations are for customized information, presented in the way the customer wants to receive it and can easily comprehend.

Three compliance fulfillment options are available, each with varying degrees of challenge and opportunity:

• The Big Book – Once an industry standard, a single book is created with all of the required information for all investment options offered in the product. The more options, the greater the page count and print/postage costs associated with delivery.

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TRANSFORMING COMPLIANCE COMMUNICATIONS FROM CHALLENGE TO DIFFERENTIATOR | EXECUTIVE SUMMARY

• The Mini Catalog – A more cost-effective alternative to the Big Book, whereby multiple smaller books are created grouping subsets of options based on usage statistics. Customers with two or three of the most popular options may be sent one small book. Others may receive multiple books.

• State of the Art – A “nextgen” approach where investor disclosure communications include only those personal holdings held by the recipient. Leveraging data technology and process efficiencies, the state-of-the-art approach aims to reduce costs, deliver a better customer experience, and maintain VA firm control.

If you haven’t already, it’s time to review your approach to compliance communications to ensure you’re providing the best possible customer and advisor experience, ensuring regulatory compliance and using the most cost-effective approach. Solutions are available to help achieve dramatic improvements in all of these areas and to leapfrog the competition for those firms willing to make the move. This document reviews current delivery obligations from post-sale to ongoing regulatory mailings to help you begin to assess the most appropriate method for your institution.

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Managing Change and Complexity in a Dynamically Evolving IndustryThe variable annuity (VA) industry has always been one of the most dynamic in financial services, responding to changes in tax laws, an explosion of investment choices, innovative new features and an ever-changing risk environment. While many financial products only have to comply with one set of rules and regulators, VA products are regulated by securities regulators, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), as well as individual state insurance departments.

Demographic and Market Changes Require the Flexibility to Keep UpThe market for variable annuities has changed and expanded with baby boomers increasingly dependent upon their own savings and investments to provide retirement income in light of the decline in traditional pensions and uncertainty surrounding Social Security. With dramatic growth in Internet usage and mobile

technology, communicating with customers and their advisors is also undergoing significant change – even in the area of investor disclosure where there has been a clamor for “less is more.”

For example, summary prospectus adoption has grown dramatically with over 80% of funds used in VA products having adopted summary prospectuses. Effective as of February 28, 2009, the SEC’s Summary Prospectus rule allows mutual funds (including funds used as subaccounts in VAs), to substitute a concise “plain English” summary prospectus for the traditional statutory prospectus provided that they meet certain technical obligations for delivery and web hosting.

Leveraging the summary prospectus creates significant opportunities for cost savings for VA carriers and a better experience for VA customers. Additionally, advisors increasingly use summary prospectuses as a tool to educate and sell to their customers because the documents are concise, standardized and written in “plain English.” That’s a great start, but more needs to be done to rein in costs and improve investor service in an area plagued by waste and over communication.

Bars = Adoption in %

Adoption of Summary Prospectus by VA Fund Issuers

Source: Broadridge Quarterly Summary Prospectus Index, as of January 7, 2014

Q2 2013Q3 2013Q4 2013

Q3 2012

Q4 2011

Q1 2011

Q3 2010

Q1 2013

Q2 2012

Q3 2011

Q4 2010

Q2 2010

Q4 2012

Q1 2012

Q2 2011

Q1 2010

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

83%

84%

84%

79%

78%

78%

78%

75%

75%

75%

74%

61%

59%

53%

50%

11%

Percentage of Variable Product Fund CUSIPs that have filed standalone summary prospectuses

as available for delivery from Q1 2010 to Q4 2013.

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Note: As of the release of this document, the SEC has identified the VA Summary Prospectus Initiative (i.e., to provide summary prospectus versions of the VA product prospectus) as one of its top priorities.

Reconciling VA Product Evolution with Emerging Customer Expectations

More Variety Variable annuities were initially used in the US in 1952 as vehicles to fund pension agreements by the Teachers Insurance and Annuities Association-College Retirement Equity Fund (TIAA-CREF). Retail variable annuities today have been around for a few decades, but it was fairly recent that they experienced explosive growth in the variety of insurance riders and fund choices offered. Whereas the earliest VAs offered only proprietary subaccounts and maybe a few non-proprietary mutual fund subaccounts, today the average VA contract has in excess of 50 subaccounts from multiple fund issuers.

But this range of choice comes at a price. The industry standard approach of sending out a “Big Book” containing disclosures for all 50+ fund subaccounts in a single mass mailing to recipients who, on average, own only 4 of these investments results in massive over delivery of disclosure information that is costly to send out.

More Complexity VA compliance communications are also complex, requiring multiple types of information including the annuity contract, any associated riders, and prospectuses for the various investment options. The typical VA customer receives a large, complex stack of material likely delivered in multiple parts at different times. Generally, the product and proprietary subaccount information is created by the annuity provider while any non-proprietary subaccount investment information is created by various fund companies. This bundle of information can be confusing and inconvenient for the client.

Changing Expectations Whereas in the past consumers were identified by age brackets (i.e., Baby Boomers, GenX); today more than 70 million “New Consumers” are defined more by shared values and less by demographics, according to brand innovation firm BBMG. A 2011 study found that these New Consumers are more educated, outspoken, increasingly concerned with a product’s impact on the planet and twice as likely to reward or punish brands based on corporate practices. Even during a recession, 25% are willing to pay for more sustainable alternatives. Hence, new and future customers that receive multiple, impersonal big books with voluminous page counts might disengage with the carrier as an “eco-unfriendly” company with which to do business.

In a climate of complexity and change, VA carriers need to move ahead or risk falling behind. What are the consequences for your current state, and what are your opportunities for change?

Average # Customer Holdings

Average # VA Subaccounts

Investor Disclosure: More is Less

According to industry statistics, the average variable annuity

contract contains 51 fund subaccounts whereas the typical

policyholder only owns four of these. As a result, as much as

92% of the information a customer receives is irrelevant to

their personal portfolio – thereby wasting significant money

on print and postage and creating an unsatisfactory customer

experience.

4

51

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How Would the New Consumers Assess Your Current VA Delivery Process?Managing this industry change and communications complexity poses a variety of challenges and seemingly incongruent goals of reducing costs, staying compliant while improving the customer experience. VA carriers need to assess whether or not their current approach to compliance fulfillment is cost-effective and customer friendly. What are the “hidden costs” in the current approach when compared against emerging non-traditional approaches?

Compliance Communications − Current State & OpportunitiesIn addition to initial delivery of product-specific documents, such as the annuity contract and prospectus, the annuity carrier must deliver several items annually for a customer’s subaccount holdings including annual prospectus updates, annual and semi-annual reports, and any applicable supplements. Historically, carriers have had two main approaches available to meet these delivery requirements:

1. Sending a “Big Book” of all the available investments; or

2. Using a “Mini Catalog” approach, that sends one or more smaller books of investments that may still include subaccounts that the investor does not hold. Perhaps worse yet, a customer may have one or two investments that are included in different mini catalogs, requiring mailing of multiple mini catalogs.

These approaches can create both a poor customer experience due to substantial over delivery and exceptional challenges for the advisors on whom the annuity industry depends to distribute its products. Key customer benefits of the overall VA product can be obscured by all of the complex compliance communications, a significant portion of which pertains to investment options not even selected by the client. In addition to high cost and poor customer experience, these bulk print approaches also make it extremely difficult to manage communications and ensure compliance with all applicable rules.

Note: Product changes include new contracts, new benefits, and changes to contracts, benefits, fees and products (excluding changes to underlying funds).

Source: Morningstar 2013

Total Number of VA Product Changes Filed, Q1 2011 to Q3 2013

97

182

84

101

106

168

59

130

162

40

49

Q3 2012

Q4 2011

Q1 2011

Q1 2013

Q2 2013

Q3 2013

Q2 2012

Q3 2011

Q4 2012

Q1 2012

Q2 2011

0 50 100 150 200

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In addition, the Big Book or Mini Catalog approaches—which are generally one-time mailings—may not address obligations to deliver prospectus updates and supplement mailings. This can create a business risk as FINRA fines for failure to deliver prospectuses have risen in recent years and brought negative press to those firms penalized. Even when these events are recognized by the VA carrier, the mailing is cost prohibitive because the books contain all fund options rather than being targeted to an individual’s holdings. Since the VA carrier doesn’t control the changes that require the updates and supplemental mailings, it is very hard to predict and budget for the costs. This can cause a budget issue in a time of economic hardship when most firms are focused on reducing costs.

Personalization Can Deliver Cost Savings and Consumer RewardsThe current compliance communications process for investor disclosure requirements is built around the objective of providing efficiency for the sender (the VA carrier) and not the recipient

(the customer). These prevailing print/mail approaches have been built to maximize pick-and-pack efficiencies with bulk pre-printed materials. They offer little to no opportunity to personalize and deliver only the relevant prospectuses, creating both unnecessary cost for the carrier and unnecessary over delivery and waste for the customer.

Key Consideration: Using print-on-demand capabilities to create customer portfolio-specific packages for the initial prospectus delivery and annual updates and supplements is a more customer- and advisor-friendly approach, and creates a far better critical first impression. Further, as the VA offerings and market have evolved, it’s questionable in many cases as to whether or not the original objective of operational efficiency is still being met. Print-on-demand, portfolio-specific packages can also be much less costly with the reduction in printed pages, postage and “zero inventory” required.

Big Books and Mini Catalogs may frustrate consumers looking for more personalized information, and less waste.

Big Book Approach Mini Catalog Approach

Investor Experience

???? !!!!

The Big Book and Mini Catalog approaches can both create a poor customer experience and result in over delivery. They are also one-time mailings and may not adequately address fiduciary obligations to deliver prospectus updates and supplements.

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Annual Prospectus Updates and SupplementsPortfolio-specific printing may also be the preferred approach to fulfill annual prospectus updates and supplements. However, fulfillment is just half of the equation. Also necessary is not just the ability to deliver the most recently filed document on the SEC’s EDGAR system, but to implement a method of tracking individual document deliveries and applying the “intelligence” to know which type of document to deliver (i.e., a summary prospectus in lieu of a supplement) based on client business rules and delivery preferences. Most printers are not equipped to perform tracking of the latest EDGAR filings and individual document deliveries – once the print job is done, they “forget” and move on to the next print run. That leaves the onus of compliance tracking back on the shoulders of the carrier, which can be both a time and resource drain, if not impossible to accomplish due to a lack of technology and “best-practice” processes in place.

Ongoing Regulatory MailingsProspectus delivery is just one component of the tri-annual regulated mailings process. VA carriers are also obligated to deliver the annual report (typically mailed in February/March) and semi-annual report (typically mailed in July/August). These books can be just as large and expensive to fulfill as the prospectus, so it is critical to find the optimal approach that mirrors your business goals for cost efficiency as well as customer service.

Two options might be worth considering in lieu of your current approach:

1. Leverage the Mutual Fund Industry Utility Model. Carriers have traditionally wanted to brand their ongoing regulatory communications and have assumed the responsibility for distributing these shareholder report mailings, even though the actual compliance responsibility lies with the funds. Given the costs, carriers are starting to re-think this approach and are taking a closer look at leveraging the fund companies’ practices for distribution of these communications on behalf of the carrier.

“First-Dollar” Prospectus DeliveryThe typical prospectus package for VA customers has historically been in the form of a Big Book which is difficult for an investor to read, either in print or on the web, because the majority of information is not relevant to his/her personal holdings. Based on industry averages of over 50 fund subaccounts and four personal investor holdings, we can conservatively assume that 80-90% of the information an investor receives is not required, amounting to massive over delivery and cost waste.

Summary prospectuses can certainly help. Although adoption of summary prospectuses has soared over the past three years – both for funds offered as mutual funds and as VA investment options – the actual use of these summary prospectuses by the annuity carriers has not. So while over 80% of variable product CUSIPs have made summary prospectuses available for delivery in the VA channel, VA carriers may not be delivering these documents to investors. One reason is the summary prospectus requirements for an overall table of contents and dual pagination (i.e., pagination for each individual fund subaccount and a second sequential pagination for the overall book contents) when grouping summary prospectuses into a combined book. For a VA product that must work with a mix of summary and statutory prospectuses, the resulting document assembly task can become a barrier to adoption.

A more recent innovation is to create an algorithm to compose and print mini catalogs which include smaller groupings of the more popular funds, and to mail these out according to each investor’s holdings. Although this helps somewhat with over delivery, the investor still receives one or more fairly big books, each of which may still contain a lot of information not relevant to their holdings. Furthermore, these approaches don’t allow for mixing full statutory and summary prospectuses in the same mini catalog because the books tend to be submitted to the SEC as a single filing.

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Key Consideration: Of course, taking advantage of these potential cost savings requires a reliable data and document management capability which continually keeps the carriers connected to the nearly 600 fund complexes. Unless this capability is already built into your current business model, you will likely have to outsource this function to a qualified service provider who specializes in this area or who can broker this service for you.

2. Portfolio-Specific Prospectus Updates and Shareholder Report Documents. As with the initial prospectus delivery, digital portfolio-specific printing is not only more customer-friendly, but can be more cost-effective in many instances due to the significant reduction in page count and postage. Key Consideration: If the key goal is customer experience, you might want to personalize these documents with the same portfolio-specific technology used to digitally print initial prospectuses that contain only the investor’s specific holdings, and nothing more. With a portfolio-specific approach, you eliminate over delivery and may be able to actually reduce production costs despite the higher per-impression cost of digital print.

Print on Demand and the Summary Prospectus – Is the Cost Justified?Historically, offset print has been the most efficient way to handle first-dollar prospectus packages and ongoing compliance disclosures, due to the high page count and large print volumes when using the Big Book or Mini Catalog approaches. But with ever-expanding fund offerings, the cost, investor dissatisfaction and inventory waste from all this over delivery is pushing the pendulum away from offset print – particularly for prospectus delivery.

Print-on-Demand (POD) capabilities, and the personalization it enables, are becoming more feasible due to the reduced page count, lower digital print costs, and corresponding postage and inventory efficiencies. By using summary prospectuses, personalized POD documents can

be even more cost effective because they reduce page count – resulting in increased savings of printing, postage and inventory expenses. Implementing the summary prospectus may also provide a potential bridge to e-delivery as SEC Rule 498 requires making additional information available online.

What Database Drives Your Fulfillment Activity (Does It Report Back to You)?Not to be overlooked is the value of integrating a document database within your optimized fulfillment approach. Financial printers are accustomed to receiving files and printing jobs; however, they are ill-equipped to monitor, archive and report on the millions of individual document deliveries you fulfill each year. Chances are they are also unable to monitor the latest SEC filings on EDGAR and marry this intelligence with a history of investor document deliveries tied to your business rules and delivery preferences. For example, if an investor receives a statutory prospectus and then a summary prospectus becomes available – which will you deliver for the annual prospectus update? Or if a fund name change occurs, will you mail a summary prospectus, supplement, or neither? And is the database – if one exists – intelligent enough to know when/how to apply suppression and householding rules?

Key Consideration: Like any database, a fair amount of upfront work is required to ensure the data that drives your compliance fulfillment adheres to your business rules and delivery preferences and captures information for reporting and auditing purposes. Most likely your company or a financial printer do not readily have these capabilities nor the time to build it. Make sure you do your homework to find a partner who is up to the challenge and whose process is flexible to adapt to your evolving business requirements.

Monitoring investor deliveries and filing changes on the SEC’s EDGAR system can be a monumental task. However, you need to manage both well to ensure the most compliant investor disclosure approach.

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E-DeliveryThe lowest cost alternative, and most investor-friendly approach, is electronic delivery. Unfortunately VA channel e-consent rates have historically been low (5% - 10%) whereas the norm in the brokerage channel are consent rates reaching as high as 30% or more for some firms.

Why the odd dichotomy between VAs and mutual funds? The reason is that while the VA carriers “own the product,” it is the advisors who have the actual email addresses. As such, advisors might not be encouraging their customers to opt in for e-delivery as is a fairly common practice with retail customers of mutual funds. As the face of the VA customer continues to evolve, so too is the adoption of e-delivery among New Consumers likely to increase because:

1. 84% of mutual fund investors use the Internet for financial purposes; and

2. Advisors are changing their sales practices from selling on paper to selling on an iPad or other tablet.

However, taking advantage of the customer experience and cost savings benefits of e-delivery requires sophisticated and reliable solutions

for obtaining and tracking client consent, and the ability to track and report delivery at the individual customer level. Do you have a good process in place or have you been frustrated by failed attempts to get your customers to opt for e-delivery? Additionally, the infrastructure to control approved versions of materials and to archive and retrieve the specific materials delivered must also be in place.

While a few companies have taken small steps, primarily aimed at reducing the cost of traditional compliance communications, many companies remain saddled with the legacy of pick-and-pack investor disclosure mailings, as well as the impersonal Big Book or Mini Catalog approaches. When considering these new leading-edge solutions, many VA carriers discovered that they could not justify the cost of building the necessary solutions to support these new approaches on their own. However, third-party solutions which have already been proven in the mutual fund industry are introducing similar capabilities to the VA industry. Early adopters of these new outsourced services can significantly reduce costs, more confidently control risk, and create a new competitive standard for enhanced customer and advisor experiences.

On average, nearly 4% of all mutual fund, ETF and variable product CUSIPs are affected by new filings on EDGAR each day. On the busiest day, 20% of the fund CUSIPs are affected by filing changes on EDGAR – representing more than 8,100 fund CUSIPs.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

25%

10%

20%

5%

15%

0%

Percentage of Mutual Fund, ETF and Variable Product CUSIPs that change on a daily basis

Daily SEC Fund CUSIP Filing Activity on EDGAR (2012 and 2013 calendar years)

Year

2012

2013

# CUSIPs

39,879

40,127

Avg. Daily Change

3.58%

3.65%

Max. Daily Change

16.27%

20.21%

Min. Daily Change

0.02%

0.32%

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Take a Leap ForwardLeading carriers have already begun to re-think their approach to compliance fulfillment, moving from a traditional Big Book approach or an incrementally better Mini Catalog approach to a state-of-the-art, technology-based approach that can have substantial cost benefits. While implementation of these solutions takes an investment of both money and human resources, the savings can be so substantial that the conversion can pay for itself in as little as a year or less depending on the approach or partner you choose. Additionally, sustainable ongoing savings of 20%, or even more, are certainly attainable. And this is before you assign a value to the improved customer and advisor experience.

It simply starts with the commitment and focus to move to a better solution; one that’s better for you, your customers and the advisors who distribute your products. Plus, it’s not an all-or-nothing decision. You may choose to move to a print-on-demand approach for prospectus delivery while transferring responsibility for semi-annual and annual reports to the fund company. You may choose to move toward the ultimate solution, including e-delivery, in phases.

What’s most important is to re-examine your approach, recognizing that the game has changed and there are significant potential benefits, both in terms of customer and advisor experience and operational costs.

Key Consideration: If you’re not building the solution yourself (and chances are you have neither the time nor the in-house technology resources to take on a project of this scale), make sure you choose your compliance fulfillment partner wisely. You’ll want to connect with a partner with a good understanding of your compliance needs, who can provide a consultative rather than a “shoe-horn” sales approach, and that has the financial stability and infrastructure to support your needs both near-term and long-term.

When you consider enhancing your traditional compliance fulfillment approach with a more state-of-the-art platform, you will want to incorporate several factors into your analysis:

� Strengths and limitations of your current approach to compliance communications

� Available options

� Potential phasing strategies

� Adoption of the summary prospectus approach, including website maintenance

� Expanding electronic distribution options and usage

� Cost savings targets, now and in the future

� Customer and advisor experience enhancements

� Ability to migrate legacy systems and accommodate print, electronic and web outputs

� Implementation timeframe and resource commitment

� Leveraging a mature solution that incorporates client business rules

� End-to-end reliability in regulatory compliance

� Review of third-party data security, business continuity and disaster recovery plan

� Confirm financial stability of third-party provider to ensure their longevity

� The ability to track fulfillment expenses for chargeback opportunities

� Maintaining an archival of individual delivery histories for reporting and auditing purposes

On the following two pages, you will see three options available to carriers in meeting their regulatory compliance fulfillment needs. State-of-the-art solutions exist that can help improve all of the factors outlined above.

All of these challenges create a major opportunity for innovative carriers to leapfrog the competition, create a better customer and advisor experience, while achieving substantial cost savings.

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Options Available to VA Carriers for Regulatory FulfillmentThe table below depicts three options available to carriers in meeting their compliance communication fulfillment needs: the traditional

FULFILLMENT APPROACH GENERAL DESCRIPTION SUMMARY PROSPECTUS REGULATORY MAILINGS COMPLIANCE KEY BENEFITS LIMITATIONS E-DELIVERY

The Big Book A single book is created with all of the required information for all investment options offered in the product. The more options, the greater the page count and print/postage costs associated with delivery.

Only available if the Big Book is comprised of individually filed prospectuses (i.e., not submitted as a single multi-fund filing on EDGAR).

Big Book approach used for shareholder report mailings (semi-annual and annual reports).

One-time “blanket mailing” doesn’t account for prospectus updates and supplements (i.e., only captures one point in time).

”It’s the Devil that we know.”Traditional approach requiresthe least change.

Every customer experiencesmassive over delivery – bulkyimpersonal communications,most of which are not representative of their individual investment holdings (i.e., more information than required). Costs can be unwieldy,particularly for products withmany investment options.

Available; however, historically low (single-digit) adoption by VA policyholders has made this fulfillment approach largely irrelevant to date.

The Mini Catalog Multiple smaller books arecreated grouping subsetsof options based on usagestatistics. Customers withtwo or three of the mostpopular options may be sentone small book. Others mayreceive multiple books.

Not generally available due to limitations on mixing summary and statutory prospectuses.

Mini Catalog approach used for shareholder report mailings (semi-annual and annual reports).


Less costly than the Big Book. Leverages offset print which historically has been perceived as the “most cost-efficient” process.

Mini Catalogs also are “one-time” events and can create a compliance risk and result in over delivery. Many customers still receive multiple Mini Catalogs, creating a customer experience that can be worsethan a single Big Book. Costsavings are limited as well.


State of the Art Investor disclosure communications include only those personal holdings held by the recipient. Subsequent regulatory communications are only sent to those customers who need to receive the particular document (i.e., no irrelevant or redundant mailings).

Can achieve substantial cost savings, as well as improved customer experience, by delivering these streamlined “plain English” documents in a portfolio-specific manner.

Two options available:

• Industry utility (as leveraged in mutual fund channel) wherein print costs of shareholder reports are transferred to fund partners who are typically obligated to deliver these documents.

• Portfolio-specific printing leveraging policyholder data to digitally print-on-demand books that contain only individual investor holdings.

Ability to deliver portfolio specific documents and the summary prospectus reduces costs of prospectus updates and/or supplements. Also, the ability to track delivery history and monitor the latest SEC filings on a centralized database helps to assure the appropriate documents are delivered for each new transaction.

Re-engineered approach could significantly reduce costs and offer fast ROI: A minimum of 20% sustainable long-term savings and payback in Year One. Also improves the customer experience and advisor productivity as summary prospectus becomes a sales/marketing tool that presents streamlined information in “plain English.” Potentially improves compliance and retains client control.

Achieving full benefits requires organizational commitment by the carrier and their fund partners to migrate to the new approach. This can impact many areas including Marketing, Procurement, Operations and Legal/Compliance.

Available and more easily implemented when combined with an industry-compliant and ESIGN-compliant consent management approach, along with an awareness program.

Industry utilities or “nextgen” solutions to help accelerate e-delivery rates leveraging brokerage consent databases are currently in development.

Big Book approach, the Mini Catalog approach, and newer state-of-the-art solutions designed to reduce costs, improve the customer experience and help mitigate business risk associated with investor disclosure obligations.

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FULFILLMENT APPROACH GENERAL DESCRIPTION SUMMARY PROSPECTUS REGULATORY MAILINGS COMPLIANCE KEY BENEFITS LIMITATIONS E-DELIVERY

The Big Book A single book is created with all of the required information for all investment options offered in the product. The more options, the greater the page count and print/postage costs associated with delivery.

Only available if the Big Book is comprised of individually filed prospectuses (i.e., not submitted as a single multi-fund filing on EDGAR).

Big Book approach used for shareholder report mailings (semi-annual and annual reports).


”It’s the Devil that we know.”Traditional approach requiresthe least change.

Every customer experiencesmassive over delivery – bulkyimpersonal communications,most of which are not representative of their individual investment holdings (i.e., more information than required). Costs can be unwieldy,particularly for products withmany investment options.


The Mini Catalog Multiple smaller books arecreated grouping subsetsof options based on usagestatistics. Customers withtwo or three of the mostpopular options may be sentone small book. Others mayreceive multiple books.

Not generally available due to limitations on mixing summary and statutory prospectuses.

Mini Catalog approach used for shareholder report mailings (semi-annual and annual reports).


Less costly than the Big Book. Leverages offset print which historically has been perceived as the “most cost-efficient” process.

Mini Catalogs also are “one-time” events and can create a compliance risk and result in over delivery. Many customers still receive multiple Mini Catalogs, creating a customer experience that can be worsethan a single Big Book. Costsavings are limited as well.


State of the Art Investor disclosure communications include only those personal holdings held by the recipient. Subsequent regulatory communications are only sent to those customers who need to receive the particular document (i.e., no irrelevant or redundant mailings).

Can achieve substantial cost savings, as well as improved customer experience, by delivering these streamlined “plain English” documents in a portfolio-specific manner.

Two options available:

• Industry utility (as leveraged in mutual fund channel) wherein print costs of shareholder reports are transferred to fund partners who are typically obligated to deliver these documents.

• Portfolio-specific printing leveraging policyholder data to digitally print-on-demand books that contain only individual investor holdings.

Ability to deliver portfolio specific documents and the summary prospectus reduces costs of prospectus updates and/or supplements. Also, the ability to track delivery history and monitor the latest SEC filings on a centralized database helps to assure the appropriate documents are delivered for each new transaction.

Re-engineered approach could significantly reduce costs and offer fast ROI: A minimum of 20% sustainable long-term savings and payback in Year One. Also improves the customer experience and advisor productivity as summary prospectus becomes a sales/marketing tool that presents streamlined information in “plain English.” Potentially improves compliance and retains client control.

Achieving full benefits requires organizational commitment by the carrier and their fund partners to migrate to the new approach. This can impact many areas including Marketing, Procurement, Operations and Legal/Compliance.

Available and more easily implemented when combined with an industry-compliant and ESIGN-compliant consent management approach, along with an awareness program.

Industry utilities or “nextgen” solutions to help accelerate e-delivery rates leveraging brokerage consent databases are currently in development.

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permission of Broadridge Financial Solutions Inc. © 2014 Broadridge Financial Solutions, Inc.

Broadridge and the Broadridge logo are registered trademarks of Broadridge Financial Solutions, Inc.

EDGAR® is a registered trademark of the U.S. Securities and Exchange Commission.

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Contact UsTo further discuss the information in this document, please call us toll-free at +1 800 481 2331 or email [email protected].

About BroadridgeBroadridge Financial Solutions, Inc. (NYSE:BR) is the leading provider of investor communications and technology-driven solutions for broker- dealers, banks, mutual funds and corporate issuers globally. Broadridge’s investor communications, securities processing and business process outsourcing solutions help clients reduce their capital investments in operations infrastructure, allowing them to increase their focus on core business activities. With 50 years of experience, Broadridge’s infrastructure underpins proxy voting services for over 90% of public companies and mutual funds in North America, and processes more than $5 trillion in fixed income and equity trades per day. Broadridge employs approximately 6,400 full-time associates in 13 countries. For more information about Broadridge, please visit broadridge.com.

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Transforming Compliance Communications from Challenge to Differentiator

Investor Relations