1

July 20, 2015

Phyllis C. Borzi 

US Department of Labor

Assistant Secretary of Labor 

Employee Benefits Security Administration

200 Constitution Ave, NW

Washington, DC 20210

RE: Department of Labor, Employee Benefits Security Administration

RIN 1210-AB32

Dear Assistant Secretary Borzi:

Thank for you for the opportunity to submit comments regarding the proposed rules about 

conflicts of interest in retirement advice and establishing a fiduciary standard for those who 

provide this advice. The Savings Coalition of America (Savings Coalition) believes that 

Americans should have access to financial education and advice and that any changes to the 

current regulations overseeing the advice on IRA investments must be done carefully and with 

that objective in mind. Any final rule should provide investor protection without reducing 

investor access to affordable retirement advice, products and services.

The proposed rule applies a "best interest standard" more widely than what is currently being 

used. If adopted, the proposal would treat persons who provide investment advice or 

recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, 

IRA, or IRA owner as fiduciaries under ERISA. This would significantly increase the number of 

fiduciary relationships than what exists today. 

The Savings Coalition supports the principle that financial advisors act in best interest of their 

clients and feels that the implementation of a proposed rule should be practical and easily 

understood by all involved; especially the saver. The Savings Coalition believes that an 

expanded fiduciary standard should not adversely affect American retirement savers by being 

more confusing and costly. The Savings Coalition is commenting on the fiduciary standard as it 

applies to Individual Retirement Accounts (IRAs). IRAs have a key role in retirement savings 

and rollovers from employer plans. 
2

Best Interest Contract Exemption (BICE)

The proposed rules include a Best Interest Contract Exemption that “would apply when 

prohibited compensation is received as a result of advice to retail ``retirement investors'' 

including plan participants and beneficiaries, IRA owners, and plan sponsors (or their employees, 

officers or directors) of plans with fewer than 100 participants making investment decisions on 

behalf of the plans and IRAs.”

Pre-Advice Contract: 

The BICE would require a financial advisor to have a potential client sign a contract prior to any 

significant conversation about their finances take place in order to ensure they do not 

inadvertently offer retirement advice. The proposed rule, if implemented, would have this 

presented to a potential client before making any recommendations. 

Usually, when a prospective client first meets with an advisor, it is an introductory conversation 

between the client and advisor where the advisor provides information, generally describes 

available options and basically the advisor and client get to know one another. The 

requirement of having a pre-advice contract makes this initial meeting confusing for the saver 

as he/she may feel like they have already signed up to an advisor/firm instead of just an initial 

informational meeting. 

Approved Investments: 

A requirement of the BICE is that in order to qualify for its protections, an advisor may only 

provide retirement advice regarding investments that are contained within BICE’s list of 

approved investment options available to plans and IRAs. 

There are a number of other assets in which a client could invest that are not included in the 

list. Financial advisors are in the unique position to know their clients’ interests, risk tolerance 

and goals. At the very least, the requirement should allow investments in all options that can 

be used today.

Disclosure of Information: 

The BICE requires that firms maintain a publically-accessible website that is updated on at least 

a quarterly basis. In addition, that website must have detailed information “about all direct and 

indirect compensation payable to the adviser, his company, and all company affiliates with 

respect to every single asset purchased, sold, or held by a retirement customer during the last 

365 days (excluding only certain assets not commonly purchased). In addition, the webpage 

must include the same information about all assets that a retirement customer could possibly

purchase (subject to the same exclusion).”1 In addition, “Before a recommended purchase of 

an asset is made, the advisor must provide a chart to the customer with the “Total Cost” of the 

 1 Statement of Kent Mason, Davis & Harman, LLP, before the Subcommittee on Health, Employment, Labor and 

Pensions, Committee on Education and Workforce, US House or Representatives, June 17, 2015, page 10
3

asset over 1, 5 and 10 year periods, as a dollar amount, which requires the advisor to make 

assumption about future investment performance.”2

Meeting this requirement is complex and burdensome. Financial Advisors can recommend a 

broad range of investment products with each having its own compensation model. This is a 

massive undertaking and costly to all firms that provide financial advice – both large and small. 

In turn, these costs will probably be passed on to the client. In addition, the information 

provided can be complicated resulting in the ironic situation that a client may have to ask the 

advisor for assistance just to understand this provision. 

Exposure to Lawsuits: 

There is concern that, inadvertently, requirements under BICE will make financial advisors 

vulnerable to class action lawsuits. This liability is not included under ERISA or other related 

statute today. This is a result of the contract that a financial advisor and firm will have to enter 

into with a client and other requirements of BICE. 

Based on other provisions of BICE, there is a concern that advisors and firms, inadvertently may 

make an error (in the transposing information for the disclosure requirements, for example) 

that would result in an increase in lawsuits against the advisors and firms. This would also 

reflect in an increase in the costs of insurance premiums to protect against this liability. All of 

this resulting in more cost to provide advice therefore more cost to the clients.

401(k) Rollovers are Complicated:

When finalizing the proposed rules for a fiduciary standard, the Savings Coalition would like to 

ensure that all American retirement savers have access to important financial advice. There is 

concern that the proposed rules will negatively impact Americans as they make major decisions 

about when and how to take distributions from their retirement accounts. While one of the 

401(k) distribution options is a rollover into an IRA, some plans do not allow the retiree to 

remain in the plan thereby requiring that the funds be rolled over to an IRA or annuity. This is a 

critical time for Americans who are about to retire and retirees to seek financial advice as it is 

complicated. When American workers leave their jobs, either voluntary (including retirement) 

or involuntary, there are 4 options that individual can take:

• Cash Out the 401(k)

When someone cashes out of his/her 401(k), he/she is taxed on the withdrawal and 

potentially penalized. Any amount withdrawn is subject to federal, and possibly state 

and local, taxes and could be subject to a 10% early withdrawal penalty if younger than 

age 59 1⁄2.

• Keep Money in Current Plan

The worker would have to check with the administrator to see if this is an available 

option. Then that person would need to ask if there are extra fees for keeping his/her

 2 Ibid
4

money in the plan, and if he/she can roll the plan over down the road if he/she changes 

his/her mind. 

• Rollover to New 401(k) Plan

If the worker has access to the new employer’s plan right away and it offers good lowcost investments.

• Rollover to an IRA 

A rollover to an IRA is another option. The worker/retiree would have to check to see if 

he/she can lower his/her investment expenses as well as gain access to a wider variety 

of investment options. 

This illustrates how complicated the decision making process can be for the individual 

worker/retiree in America and the importance of having a trusted advisor who can navigate the 

maze of options available and assist the client in making the decision that is right for him/her.

“Under the DOL proposal, financial institutions would be prohibited from providing any specific 

assistance to individuals seeking help with the rollover and distribution process. This is the case 

in large part because any financial institution providing IRA services would have a conflict of 

interest with respect to the advice regarding the rollover decision, thus creating a prohibited 

transaction. Most read the BIC exemption in the re-proposal as not covering this type of 

assistance thus rendering the assistance categorically prohibited. Others read the BIC 

exemption as technically applicable to this assistance, but effectively unavailable because of the 

exemption’s unworkable conditions. Either interpretation denies assistance to many in need of 

help in navigating the retirement savings options that exist after termination of employment. 

Among many unfortunate consequences, this would cause a drastic curtailment of call center, 

brokerage and other assistance to those terminating employment, leading to greatly increased 

leakage of assets from the retirement system.”3

Will Financial Advisors Continue to Provide Advice Under the Proposed Rule?:

The proposed rule assumes that advisors will continue to offer advice under the BICE. According 

to testimony given by Brian Reid, Chief Economist of the Investment Company Institute at a 

hearing before the House Subcommittee on Health, Education and Employment, “the DOL 

argues that IRA investors currently pay between 26 and 28 basis points per year in front-end 

loads, in addition to fund expenses. A recent study by Cerulli Associates finds that fee-based 

accounts – the most likely alternative to brokerage accounts – cost investors 111 basis points 

per year on average, in addition to fund expenses.”4

 Reid goes on further to state, “ . . the Best 

Interest Contract Exemption is prohibitively costly, in addition to being convoluted and 

unworkable. Brokers subject to the Exemption’s many new limitations, burdens, and costs, as 

 3 Ibid, page 7

4 Statement of the Investment Company Institute, Brian Reid, Chief Economist, Hearing on “Restricting Access to 

Financial Advice: Evaluating the Costs and Consequences for Working Families and Retirees,” Subcommittee on 

Health, Education, Labor and Pensions, Committee on Education and the Workforce, US House of Representatives, 

June 17, 2015, page 4
5

well as increased exposure to liability, are not likely to work for less compensation, as the DOL 

presumes.”

5

What is Education and What is Advice?:

What is currently considered to be education, under the proposed rule, will be advice. 

Currently, allowable investments for IRAs are considered to be financial education. There must 

be a clear designation about the difference between advice and education. For example, an 

advisor should be able to tell clients within a certain asset classes about the funds that are 

there. Currently, this is considered education and under the proposed rule, it would be 

considered advice. 

“ . . . Fidelity offers best in class operational support, including contribution calculations, 

participant notifications, plan testing and reporting, as well as assistance with plan 

amendments. Employees receive employee education and financial planning advice through a 

variety of channels including Net Benefits, employee meetings, digital and mobile access, and 

one-on-one assistance with guidance representatives skilled in the client’s specific design plan. 

Unfortunately the Department of Labor’s proposal would put a stop to these offering. The 

Labor proposal would classify the assistance we provide to small businesses (which today is 

education) as fiduciary investment advice.”6

Unintended Consequences:

BICE creates a new set of requirements that are currently not covered by ERISA today. There is 

a concern that there will be an increase in class action lawsuits based on this, thereby 

increasing the costs of providing the advice. The Savings Coalition believes that all financial 

advisors should be held to a “best interest of the client” standard. However, it should not be so 

cumbersome and costly that advisors decide not to serve lower and moderate income savers or 

leave the already highly regulated business entirely. This is particularly important for financial 

advisors who work in small firms throughout the country.

Conclusion:

The Savings Coalition believes that the current law requiring the SEC to act on a fiduciary 

standard should be implemented and there needs to be coordination among federal agencies 

on a uniform standard. Retirement savings are an important part of every American’s financial 

future and it is critical that Americans have access to financial advice to ensure they have 

financially secure retirements. It is critical that Americans retirements not be adversely affected 

by the proposed rules. 

There are key components to providing advice and the relationship between the advisor and 

client that need to be clearly understood by all involved in the process and the final rule needs 

to address that. If the Best Interest Contract Exemption is to be useful, it should allow savers to 

 5

 ibid 6 Statement of John F. Haley Jr., Fidelity Investments, before the Subcommittee on Health, Employment, Labor and 

Pensions, Committee on Education and the Workforce, US House of Representatives, June 17, 2015, pp 5-6
6

talk with financial advisors prior to signing a contract before they talk; allow for all investments 

currently allowed in IRAs; have workable internet disclosures and data production 

requirements that are not so cumbersome that they could lead to inadvertent mistakes (when 

transcribing data for example) which could cause advisors to be sued; and have reasonable, 

easily understood data requirements that are not prohibitively costly. It is especially important 

that it not be so cumbersome for financial advisors that compliance greatly increases the cost 

of providing advice, thereby significantly increasing costs to American savers.

The Savings Coalition has long been a supporter of improving financial literacy in America. 

Twenty-two states require students to take an economics course as a high school graduation 

requirement. The lack of financial education is often cited as a problem among Americans 

from not understanding student loans, to understanding how saving early helps to lead to a 

more secure retirement. Understandably, all of us want advisors to work in the best interests 

of their clients. We should also make sure that savers understand all of the financial products 

and opportunities available to them by making sure they have access to financial education.

Sincerely,

Kathy Hamor

Executive Director

The Savings Coalition of America

2111 Wilson Blvd.

Suite 700

Arlington, VA 22201

703-351-5096