Important Information About Investing

Important Things To Know About Investing

As a firm, we offer a wide variety of investments, some of which are quite complex. You should always educate yourself about a particular investment before purchasing it. You should always read prospectuses and other documents you receive concerning your investment. We have included the following general information to assist you and not as a substitute for your reading the more complete documents relating to your specific investment.

Keys for Investing

Every investor should know the basic "keys" for better investing. One of the most important steps in attaining your financial objectives is to establish a long-term relationship with your financial professional. A financial professional must be educated in investments and techniques of investing and care about his or her clients. Our financial professionals receive regular training and are dedicated to helping you reach your financial goals.

Once you have established a relationship with your financial professional, we suggest the following rules of investing that should be followed throughout your relationship:

Stay in frequent touch with your financial professional. Be honest about your concerns and ask questions about risks or transaction charges.
Approach investing like you would any important goal: Get involved in the process. First, gain an understanding of your starting point. What are your resources, your risk tolerance, your time horizon, and your goals. Second, design an investment plan suited to your individual circumstances. Third, monitor your results and make adjustments if necessary to keep you on track. Your financial professional has the tools and skills to help guide you through the process.
If an investment seems too good to be true, it probably is. Be wary of stock tips and other promises of high returns. The first rule of investing: Higher investment returns are usually accompanied by higher risks. Don't reach for unrealistically high returns.
Diversify over a broad spectrum of investments. Your financial professional can help you select asset classes that are appropriate for you.
Be patient. Stick to your plan. Consider employing a dollar cost averaging strategy and approach the market with a long-term point of view.
Don't succumb to fear when the market is dropping and don't become greedy when prices are rising. Emotions can be the greatest enemy to your long-term investment plan. Don't try to "time" the market as no one can do it successfully all the time.
Educate yourself about the investment under consideration and do your best to understand the risks, costs and liquidity of any investment you make. If you don't understand any information in a prospectus, ask your financial professional to help explain the information.
If you are investing in mutual funds, ask about breakpoint availability in the funds.
Consider asset allocation-a tactical, sophisticated long-term approach to investing. Asset allocation provides the blueprint, which helps you diversify your assets into the appropriate asset classes with proper balance. Again, your financial professional has the tools and skills to help you.
It is better to err on the side of being conservative than too aggressive.

These keys for investing are common-sense rules that should give you a higher probability of success. Remember though, that there are no "guarantees" in investing, and a disciplined approach to investing, working with your financial professional, will help you achieve your financial objectives.

Securities Products and Costs of Investing

Commissions are not the only costs involved in certain securities transactions. Certain securities products have internal expenses that may affect the return on your investment. The costs associated with a particular security are described in the prospectus and you should carefully read that information. Listed below are some general cost considerations in more common securities products.

Stocks and Bonds

Our firm usually transacts purchases and sales of stocks on an agency basis. This means that as the broker-dealer, we act as your agent for these transactions and receives a commission. Stock commissions generally range from 1% to 5%, depending on the size of the trade and the number of shares. The commission is added to the purchase price or subtracted from the sales price of the transaction. The amount of the commission is set by our firm according to a schedule that your financial professional has and can explain to you. There may also be other charges for the transactions, which are detailed on your confirmation.

Mutual Funds

Mutual funds have a more complex cost structure than stocks and bonds. These costs can include, among other things, commissions (generally referred to as "loads" or "sales charges") and distribution and marketing costs as well as internal expenses. The costs are set by the mutual fund company and are described in the fund's prospectus and Statement of Additional Information.

The various costs for a particular mutual fund generally vary depending on the class of fund you decide to purchase and, in some circumstances, how much you invest. Different mutual funds have different classes and more classes are evolving all the time. The most common types of mutual fund classes are described below.

Class A Shares
In purchasing Class A mutual fund shares, you can expect to pay a front-end sales charge usually referred to as a "load," unless you are purchasing the shares in an advisory account or are purchasing a large amount (usually $1 million or more) in the same mutual fund family. The load is included in the price you pay and is paid to our firm who, in turn, shares a portion of it with your financial professional. The amount less the "load" is what gets invested in the mutual fund. Class A shares, as with other mutual fund classes, also have internal expenses that are paid from the assets in the fund and affect your return on investment. These are described in the mutual fund prospectus.

The amount of the sales load on Class A shares varies by fund family and also varies within a fund family depending on the amount you purchase. As you purchase more Class A shares within a fund family, the amount of the load gets lower. The point at which a purchase of Class A shares includes a reduced sales charge or load is called a "breakpoint." The breakpoints are described in the fund prospectus and are important for you to consider in making a mutual fund Class A share purchase. In determining when you reach a breakpoint, mutual funds will often consider your prior purchases in all of your accounts, including your retirement accounts, such as your pension plan, 401(k), IRA, etc., as well as purchases you intend to make in the near future, and purchases made by your immediate family members. When you purchase Class A mutual fund shares, you should ask your financial professional about the availability of breakpoints and fully disclose all purchases made by you and your family, even if made through another broker-dealer, bank, trust company or directly with the mutual fund company. Without knowledge of all of your mutual fund holdings, your financial professional cannot determine whether you are entitled to a breakpoint, or which alternative investments are best for you.

Class B Shares
Class B mutual funds shares generally do not have a front-end sales charge. Instead, all of your money is invested in the mutual fund and our firm is compensated from the internal expenses of the mutual fund. However, Class B mutual fund shares generally have a back-end sales charge, which means that if you sell your Class B shares within a specified number of years, you will pay a sales load at that time. Also, Class B shares generally have higher internal expenses than Class A shares have so your return over time may be lower than it would be had you purchased Class A shares, even with the front-end sales load that Class A shares carry. Therefore, depending on how much you have invested or intend to invest and how long you intend to hold the funds, Class A shares may be better suited for your investment needs. Class B shares will usually convert to Class A shares if you hold them for a long period of time.

Because of the internal costs associated with Class B shares, and the availability of breakpoints on Class A shares, we may restrict the amount of Class B shares that you may purchase through your financial professional. Upon request, your financial professional can provide a calculation that compares the cost of a Class B share to a Class A share.

Class C Shares
Class C shares generally have no front-end sales load or a sales load that is smaller than the front-end sales load charged on Class A shares. Class C shares often have back-end sales load if you sell the shares within a short period of time, generally one year. Class C shares usually have higher internal expenses than both Class A and Class B shares, which will affect your investment performance if you hold the funds for a long period of time. Unlike Class B shares, Class C shares will not convert to Class A shares over time.

Like B shares, because of the internal costs and the availability of breakpoints, we may restrict the amount of Class C shares you may purchase through your financial professional. Again, upon request, your financial professional can provide a calculation that compares the cost of a Class C share to a Class A share.

Deciding Which Mutual Fund Share Class is Right for You

Deciding which mutual fund share class is right for you takes careful thought. In general, you should consider and discuss with your financial professional:

How much you are investing today
How much you intend to invest in the near future
How much of a particular mutual fund you or your immediate family members already own
How long you intend to hold the funds
What is the sales charge or load that you will pay and how much are the internal expenses of the mutual fund that will affect the value of your investment over time
What are your goals and objectives for purchasing the mutual fund
How much time you are willing to invest in following the performance of the mutual fund managers

Both the SEC and the FINRA maintain Web sites at www.sec.gov and www.finra.org that have mutual fund expense calculators. Our firm also has a calculator on our Web site at www.ingfinancialpartners.com. These calculators can help you compare and evaluate the costs and expenses of purchasing different fund share classes. There are also other materials that more fully explain mutual funds on the FINRA Web site at www.finra.org, which we invite your to read. Your financial professional can help you calculate which fund and which fund share class is best for you.

Variable Annuities

A variable annuity is a contract between you and an insurance company. It is both a security and an insurance product. The insurance company agrees to make periodic payments to the owner (or beneficiary) beginning either immediately or at some future date. You can purchase variable annuities either by making a single payment or a series of payments. Variable annuities can help you accumulate tax-deferred earnings as part of your overall retirement plan. They are designed to be long-term investments and are not suitable for meeting short-term goals because substantial taxes, penalties and charges can apply if you withdraw your money early.

Variable annuities involve market risk. Variable annuities offer a range of investment options and the market value of your variable annuity will vary depending on the performance of the investment options you choose. The investment options within a variable annuity usually include stocks, bonds, money market instruments or some combination of these investments. The available investment options you choose are usually referred to as "sub-accounts."

Variable annuities are complex investment products and it is important that you understand how they work. Although the investments in the sub-accounts are similar in many respects to mutual funds, the fees and expenses may differ. Variable annuities, like other securities, are sold through a prospectus that you should read carefully before purchasing. Below are the general features of a variable annuity.

Annuity Pay-out Option
Variable annuities allow you to receive periodic payments for the rest of your life or the life of your spouse or any other person you designate, and offer protection against the possibility that, after you retire, you will outlive your annuity income.

Death Benefit
If you die before you begin to receive periodic payments on your annuity, your beneficiary is guaranteed to receive a specific amount-typically at least the amount of your purchase payments less any withdrawals, even if the current value has declined below the guaranteed amount.

Tax-deferred Compounding
Earnings on a variable annuity grow on a tax-deferred basis. This means that income taxes that would have been paid on interest, dividends or capital gains are deferred until you make a withdrawal from the account. It is important to note, however, that when you withdraw your money from a variable annuity you will be taxed at ordinary income rates rather than the lower capital gains rate you would pay on other investments. In general, the benefit of tax deferral may outweigh the costs of a variable annuity only if you hold it as a long-term investment.

It is important to note that if you purchase a variable annuity through a tax-advantaged retirement plan such as a IRA, 401(k), 403(b) or Keogh plan, you will not get any additional tax advantage from the variable annuity. You should consider whether your annuity investment would be more appropriate in a non-tax-advantaged account. You should consider buying a variable annuity in your tax-advantaged plan only if it makes sense because of its other features, such as lifetime income and death benefit protection. The tax rules applicable to variable annuities are complicated and you should consult with your tax professional before investing in a variable annuity.

Step-up Basis
The growth of an annuity is fully taxable as income, both to you and your heirs. Upon inheritance, the proceeds of most variable annuities do not receive a "step-up" in cost basis when the owner dies. This means that the IRS treats the annuity as though your heirs just earned it; and they must pay income tax on it now.

Tax-free Transfers
You can transfer your money from one investment option to another within a variable annuity without paying taxes at the time of the transfer, subject to any limitations imposed by the insurance company as described in the prospectus.

Variable Annuity Fees

Variable annuities may impose a variety of fees when you invest in them. You should read the prospectus carefully to determine which fees are applicable. Below are some of the more common variable annuity fees.

Surrender Charges
Most variable annuities do not charge an initial sales charge. Our firm and your financial professional are compensated from the internal expenses of the product. That means that 100% of your funds are available for investment in the sub-accounts. However, insurance companies usually do charge a deferred sales charge if you withdraw money from the variable annuity during a certain period of time described in the prospectus. Generally, the surrender charge is a percentage of the amount withdrawn and declines gradually over a period of years. Some contracts will allow you to withdraw a specific percentage of your account value without paying a surrender charge. However, withdrawals are subject to applicable income taxes and, if taken before age 59 ½, an IRS penalty.

Mortality and Expense Risk Charge
This charge compensates the insurance company for insurance risks it assumes under the annuity contract. These charges are deducted as a percentage of the value of the sub-accounts, usually in the range of 1.25%, and vary from one company to another.

Administrative Fees
These fees cover the administrative costs associated with servicing the variable annuity, including the cost of transferring funds between sub-accounts, tracking purchase payments, issuing confirmations and statements, recordkeeping and other customer service activities. Administrative fees are also deducted from the value of the sub-accounts.

Underlying Fund Expenses
This annual fee covers the fees and expenses imposed by the investment fund management and administration that manage and administer the underlying investments in your variable annuity. Fund expenses include the cost of buying and selling securities and administering trades. These expenses are assessed on the value of the sub-accounts.

Determining Whether to Purchase a Variable Annuity

Before you invest in a variable annuity, it is important that you read the prospectus and fully understand the features of the annuity and its fees and expenses. You should consider and discuss with your financial professional whether:

You will use the variable annuity primarily to save for retirement or similar long-term goal.
You are willing to take the risk that your account value may decrease if the underlying investment options perform poorly.
You intend to remain in the variable annuity long enough to avoid paying any surrender charges.
Your age makes a variable annuity less attractive.
You could purchase some of the features of the annuity, such as long-term care insurance, more inexpensively.
You have other investment vehicles available, such as IRAs and employer-sponsored 401(k) plans that also provide tax-deferred growth and other tax advantages. As a general rule, it may be more advantageous for you to make the maximum allowable contribution to your IRA or 401(k) plan before investing in a variable annuity.
You are purchasing a variable annuity in your tax-advantaged plan (such as an IRA). In this case, you will receive no additional tax advantage from a variable annuity. Under these circumstances, a variable annuity may be suitable only if its other features, such as lifetime income payments or death benefit protection are important
You have a need for liquidity. Variable annuities cannot be sold quickly or inexpensively converted to cash.

Variable Life Insurance

Variable life insurance is an insurance policy that, like traditional life insurance, offers a death benefit that represents the amount the life insurance company is obligated to pay upon the death of the insured. Unlike traditional life insurance, however, variable life insurance also has an investment element. Premium payments on a variable life insurance policy, after deducting sales expense charges, are placed into sub-accounts. The sub-account value is subject to market risk and can fluctuate in value, based on the performance of the investments made. Generally, the insurance company guarantees the original face amount of the policy as a death benefit as long as premiums are timely made or the cash value in the account is sufficient to pay the premiums.

Typically, the main charges associated with a variable life insurance policy include front-end sales loads, back-end sales loads, administrative charges, cost of insurance, mortality and expense risk charges, all of which can vary significantly depending on the insured's personal circumstances, such as age, health, and the amount of the policy.

As with any investment, it is important to read the prospectus carefully before purchasing a variable life insurance policy and to understand the costs involved in the product.

Other Investments

As your broker-dealer, our firm offers other investments in addition to those described above, each with it's own cost structure. Your financial professional can explain these products to you and the costs involved in purchasing them.