From: Hamby, Mark [mailto:hamby@kms.com] 

Sent: Friday, July 10, 2015 4:03 PM

To: EBSA, E-ORI - EBSA

Subject: RIN 1210-AB32

KMS FINANCIAL SERVICES, INC. *

Mark Hamby, Chairman & CEO

TO: Office of Regulations and Interpretations 

 Employee Benefits Security Administration 

 Attn: Conflict of Interest Rule 

 U.S. Department of Labor 

 Washington, DC

RE: Dept. of Labor’s Proposed Retirement Investment Advice Conflict of Interest Rule

Our firm has followed with interest the Department’s efforts to bring additional regulatory guidance to 

the business of advising Americans on the investment of their retirement savings. We support the 

broad objective of enhancing the delivery and effectiveness of such services at all levels and for all 

retirement savers, which has been central to our business for decades. However, we believe that the 

sweep and complexity of the Department’s proposal would actually tend to work against those larger 

interests and objectives.

This perspective draws from a time when Individual Retirement Accounts and participant-directed 

401(k) plans were newly legislated novelties. Carrying the story of these vehicles and new opportunities 

to working Americans involved a lot of education and service for the possibility of modest compensation 

on inherently small investments. There were no large rollovers to contemplate and no sophisticated, 

highly automated 401(k) platforms to efficiently leverage professional expertise and guidance across 

hundreds or even thousands of employees. 

But there was a growing opportunity in effectively encouraging Americans at all levels to save and 

invest, and in expanding and enhancing the facilities and choices by which they might do that. Financial 

services providers were incentivized to pursue that opportunity, which always carries the potential for 

conflict of interest. But it also represented, and continues to represent, a confluence of interests.

In recent years we have seen a considerable expansion of compliance and regulatory requirements, 

complexity, and cost. Meanwhile, competitive market forces have significantly reshaped service 

delivery and compensation models in favor of greater incentives to provide high levels of ongoing

service and advice rather than transaction-driven salesmanship. The digital revolution and constructive 

regulatory engagement have accelerated these trends, enhancing cost transparency and service quality.

Still, we serve a very wide range of investors who display a wide range of preferences and relative 

sophistication in how they engage with financial service providers – brokers, asset managers, financial 

planners, insurance agents, etc. There is a legitimate need and demonstrated consumer desire for 

flexibility and choice within their primary retirement savings vehicles – especially IRAs. We believe the 

Department’s proposals would ultimately constrict the range of those competing choices as well as the 

investment opportunities they can deliver. The primary effects seem quite predictable:
- Complicated and largely redundant disclosure and documentation requirements piled on top of 

that which is already provided (required), with investors becoming increasingly unlikely to read 

and absorb any of that information; 

- A substantial increase in costs to serve investors with IRA rollovers, which would likely translate 

into higher costs and/or fewer choices for those who seek personalized, professional assistance 

with the critical rollover decision and process. 

- Given the size of the IRA segment, a more generalized curtailing of choice in investment services 

and advice in favor of a few prescribed approaches designed primarily to insulate service 

providers against technical missteps or misinterpretations that could bring enforcement actions 

or litigation.

As others have noted, the Department’s proposal is overly prescriptive in effect. From the current 

broad landscape of service models, it will drive services toward a levelized, ongoing wrap-fee 

format. Much of our business has migrated in that general direction over the past 30 years, but financial 

professionals still encounter many investors whose interests or preferences are not especially wellserved – and certainly not cost-effectively served – by that approach. Another likely winner may be the 

do-it-yourself or robo-advised platforms that are designed to minimize or even preclude the 

interposition of personalized, professional advice and assistance.

If the Department’s proposal is implemented, financial service providers will ultimately adjust to the 

higher compliance and regulatory costs, restrictions on compensation flexibility, and increased 

vulnerability to technical enforcement actions and class-action litigation. But it is hard to see how that 

adjustment will enhance access to personalized, professional advice and service, especially for middleincome retirement savers. 

Respectfully,

Mark Hamby, Chairman & CEO

KMS Financial Services, Inc.*

ext. 202 at 206.441.2885 / 800.578.5253

hamby@kms.com

*KMS is an independently operated, wholly owned subsidiary of Ladenburg Thalmann Financial Services Inc. (LTS).

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