Registered both as an investment advisor and brokerage firm, Commonwealth Financial Network has more than $130 billion in assets under management (AUM). The firm views its financial advisors as small business owners rather than sales staff, so it acts as their “back office.” Most of these advisors are also brokers and insurance agents, which means they can receive commissions from vendors, on top of client fees. As a result, Commonwealth is a fee-based advisory firm.
With advisors across the country, the firm has headquarters in Waltham, Massachusetts, and San Diego. In 2019, it reported that its advisors had the highest gross revenue among independent broker-dealers, according to Financial Advisor.
Commonwealth Financial Network Background
Joseph Deitch founded Commonwealth in 1979, originally calling it The Cambridge Group. His vision was to start an independent broker-dealer that didn’t have the conflicts of interest that his former firm had. This is likely why Commonwealth does not have its own proprietary investment products. Instead, it provides advisors with technology, compliance support and tools, research support, marketing support, continuing education and more.
In 1991, Investment Advisor magazine named Commonwealth “Broker-Dealer of the Year” in the inaugural year of the award. The firm won the honor two more times that decade. Since then, Deitch has stepped away from day-to-day operations and serves as chairman. He still owns a large part of the company through a trust. Almost a dozen other current employees are also stakeholders.
Commonwealth advisors have various financial accreditations, including the certified financial planner (CFP), chartered financial analyst and chartered alternative investment analyst (CAIA) designations, among others.
Commonwealth Financial Network Client Types and Minimum Account Sizes
The minimum investment needed to open an account here varies depending on the program. At the low end, the minimum is $1,000 for a passive model portfolio in the Preferred Portfolio Services (PPS) Select program. At the high end, the minimum is $500,000 for an account in the PPS Select Fixed Income SMA program. That said, Commonwealth may waive its minimum requirements at its own discretion.
Given that these minimums are relatively low, the great majority of Commonwealth's individual clients do not have high net worths. The firm’s advisors do work with high-net-worth individuals, of course, plus businesses, pension and profit-sharing plans, state and municipal government entities and charitable organizations.
Services Offered by Commonwealth Financial Network
Commonwealth’s advisors offer an array of investment products, asset allocation services, financial planning and consulting services. The investment programs, which can be delivered through a wrap fee program, are:
- PPS Custom - This program features personalized investment portfolios, usually on a discretionary basis, using one or more investment types. These can include stocks, bonds, mutual funds, exchange-traded funds (ETFs), UITs, variable and fixed-indexed annuities and alternative investments.
- PPS Select - This program offers a selection of model portfolios that are managed on a discretionary basis by Commonwealth’s investment management and research team. Portfolio types include mutual fund and ETF portfolios, equity portfolios, fixed-income portfolios and variable annuity subaccount portfolios.
- PPS Direct - This program is centered around a variety of model portfolios managed by one or more third-party portfolio managers on a discretionary basis. They may be constructed with mutual funds or ETFS, individual stocks and bonds (in a separately managed account), by third-party investment advisors using mutual funds and ETFs or as a unified managed account (multiple separately managed accounts).
Additionally, within its third-party asset management program, Commonwealth advisors can recommend unaffiliated money managers and act as a subadvisor. Account minimums generally run from $25,000 to $50,000.
Commonwealth Financial Network Investment Philosophy
Commonwealth offers a full array of investing strategies for every kind of client profile. If its advisors don’t have the niche expertise needed, they will recommend an independent money manager. That said, the firm generally applies the concepts of dollar-cost averaging (buying fixed amounts on a regular schedule) and asset allocation. Advisros may also utilize technical, fundamental, quantitative and qualitative methods of securities analysis.
Fees Under Commonwealth Financial Network
Commonwealth’s fees for portfolio management services are based on a percentage of AUM, and they are generally paid quarterly. These fees vary by program, and they may be negotiable.
Below are the fee schedules for the PPS Custom, PPS Select and PPS Direct programs. Fees for third-party advisor-managed programs are available through the third-party manager themselves. For context, a 2018 study by RIA in a Box showed the average annual advisory fee was 0.95% of AUM.
|*There may be an additional fee for platform accounts that ranges from 0.01% to 0.12%, based on asset levels.|
|PPS Custom Program Annual Management Fees*|
|$0 to $749,999||2.25%|
|$750,000 to $999,999||2.00%|
|$1MM to $1,999,999||1.75%|
|$2MM and up||1.50%|
|*There is an additional program fee that follows a tiered schedule that ranges from 0.30% to 0.60%, based on asset levels.|
|PPS Select Program Annual Advisor Fees*|
|$0 to $499,999||2.00%|
|$500,000 to $999,999||1.75%|
|$1,000,000 to $4,999,999||1.50%|
|$5,000,000 or more||Negotiable|
|*There is an additional program fee that ranges from 0.835% to 1.14%, based on asset levels. The combined advisor and program fee will not to exceed 3.00%.|
|PPS Direct Program Annual Advisor Fees*|
|AUM||Max Advisor Fee|
|Up to $250,000||2.21%|
|Next $250,000 – $500,000||2.25%|
|Next $500,000 – $1MM||2.27%|
|Next $1MM – $2MM||2.29%|
|Next $2MM – $5MM||2.31%|
|$5MM and up||2.33%|
Clients in wrap fee programs may also have to pay program fees or platform fees. Clients not in wrap fee programs also pay transaction fees, custodial fees and other charges.
For financial planning or wealth management consulting services, fees may be annual for ongoing services, a flat fee or an hourly rate of up to $500 per hour.
What to Watch Out For
Commonwealth had 15 disclosures in its most recent SEC filings. Five had to do with affiliate advisors. The other 10 involved the company itself, resulting in fines or penalties ranging from $15,000 to $300,000. In one of the most recently completed actions, which was brought by the U.S. Securities and Exchange Commission (SEC), the firm agreed to pay $1,426,700 in disgorgement and $210,603 in prejudgment interest for allegedly purchasing, recommending or holding mutual fund share classes that charged 12b-1 fees instead of shares classes that had lower costs, during the first three months of 2014.
As noted earlier, your Commonwealth advisor may also be a broker or insurance agent who receives commissions on sales. This can result in a potential conflict of interest. That said, Commonwealth’s advisors are legally bound to work in clients’ best interests due to their fiduciary duty.
Opening an Account With Commonwealth Financial Network
If you're interested in working with Commonwealth, go to the firm's website to find one of its advisors near you. You can also reach the firm's headquarters over the phone at (781) 736-0700.
All information is accurate as of the writing of this article.
Tips for Finding the Right Financial Advisor
- Use SmartAsset’s free financial advisor matching tool to connect with advisors in your area. You'll receive up to three matches, with the final choice of who to work with being up to you.
- Also ask about the advisor’s client base. If his or her clients mostly have a high net worth, and you are not that wealthy, you may want to work with someone who won’t think of you as small change. Conversely, if you do have sizable assets and the advisor mostly works with less affluent investors, you probably want someone with the experience and know-how to help people at your asset level.