Office of Regulations and Interpretations

Employee Benefits Security Administration

Attention: Conflicts of Interest Rule

Room N-5655

Office of Exemption Determinations

Employee Benefits Security Administration

Attention: D-11712 and D-11713

United States Department of Labor

200 Constitution Avenue, N.W.

Washington, D.C. 20210

RE: Proposed Conflict of Interest Rule and Related Proposals, RIN-1210-AB32

Ladies and Gentlemen: 

The Financial Planning Coalition (Coalition),

1 which is comprised of the Certified Financial Planner 

Board of Standards (CFP Board), Financial Planning Association® (FPA®) and National 

Association of Personal Financial Advisors (NAPFA), appreciates the opportunity to comment on 

the re-proposal by the Department of Labor, Employee Benefits Security Administration (the 

Department) to expand the definition of the term “fiduciary” under the Employee Retirement 

Income Security Act (ERISA) (hereinafter “Re-Proposed Rule”).

2 CFP Board is a non-profit 

certification and standard-setting organization, which sets competency and ethical standards for 

over 72,000 CERTIFIED FINANCIAL PLANNERTM professionals throughout the country.3 FPA® is the 

largest membership organization for CFP® professionals and those who support the financial 

planning process in the U.S. with over 24,000 members nationwide.4 NAPFA is the nation’s 

1 The Coalition is a collaboration of the leading national organizations representing the development and 

advancement of the financial planning profession. Together, the Coalition seeks to educate policymakers about the 

financial planning profession, to advocate for policy measures that ensure financial planning services are delivered 

with fiduciary accountability, and to enable the public to identify trustworthy financial planners.

2 Definition of the Term “Fiduciary,” 80 Fed. Reg. 21,928 (Apr. 20, 2015) (to be codified at 29 C.F.R. pt. 2510). 

3 CFP Board’s mission is to benefit the public by granting the CFP® certification and upholding it as the recognized 

standard of excellence for the delivery of competent and ethical personal financial planning services. CFP®

professionals voluntarily agree to comply with CFP Board’s rigorous standards including education, examination, 

experience and ethics and subject themselves to disciplinary oversight of CFP Board.

4 With a national network of over 90 chapters, FPA® represents tens of thousands of financial planners, educators 

and allied professionals involved in all facets of providing financial planning services. FPA® works in alliance with 

academic leaders, legislative and regulatory bodies, financial services firms and consumer interest organizations to 

represent its members. 

 
leading organization of fee-only comprehensive financial planning professionals with more than 

2,500 members.5

 

The Coalition brings a unique perspective to the table. Coalition stakeholders and members have 

committed to provide financial services under a fiduciary standard of conduct pursuant to each 

organization’s code of professional conduct.

6 CFP® professionals and FPA members hold 

registrations and/or licenses across business models as investment adviser representatives, 

registered representatives of broker-dealers and/or insurance agents and in many instances hold 

dual or multiple registrations or licenses. Regardless of business model, or compensation model, 

they are obligated to provide financial planning services under a fiduciary standard of conduct. 

We seek to bring our experience, guiding our stakeholders and members in the application of the 

fiduciary standard across business and compensation models, to the Department in this comment 

letter.

The Coalition commends the Department for taking further steps to enhance protections for 

Retirement Investors. We believe that a strengthened fiduciary rule is necessary and appropriate 

for Advisers7 under ERISA, and strongly support adoption of the Department’s Re-Proposed Rule.

The current regulatory framework allows Advisers’ interests to be misaligned with Retirement 

Investors’ interests. Under this framework, the current fiduciary definition under ERISA includes 

significant loopholes that allow for the sale of products that may not be in the best interest of the 

Retirement Investor. Importantly, while many Advisers seek to do what is best for their clients, 

others take advantage of regulatory gaps to steer their clients into high-cost, substandard 

investments that pay the Adviser well but eat away at Retirement Investors’ nest eggs over time. 

Many in the financial services industry who claim that they support a best interest standard argue 

that the Re-Proposed Rule is unworkable. The Coalition believes, based on our experience 

applying the fiduciary standard to CFP® professionals across business models, that the ReProposed Rule is both workable and essential to protect America’s Retirement Investors. 

Importantly, the Department has demonstrated its willingness to work with industry and the public 

to develop a final rule that will increase fiduciary protection for tax-preferred retirement assets and 

at the same time works across the varied financial services business models.

5 NAPFA members adhere to some of the highest standards in the profession and annually each advisor must sign 

and renew a Fiduciary Oath and subscribe to the Association’s Code of Ethics. NAPFA-affiliated advisors are 

committed to the organization’s core values of competency, commitment to holistic financial planning, compensation 

under a model that facilitates objective advice, client-centered standard of care, complete disclosure of potential 

conflicts of interest and explanation of fees. 

6 See CFP Board Standards of Professional Conduct, Rule of Conduct 1.4 available at http://www.cfp.net/for-cfpprofessionals/professional-standards-enforcement/standards-of-professional-conduct/rules-of-conduct; FPA®, 

“Standard of Care,” available at http://www.onefpa.org/about/Documents/Standard%20of%20Care.pdf; NAPFA, 

“Mission and Fiduciary Oath,” available at https://www.napfa.org/about/FiduciaryOath.asp. 

7 Consistent with the Department’s naming convention, by using the term “Adviser” the Coalition does not intend to 

limit its use to investment advisers registered under the Investment Advisers Act of 1940 or under state law. As used 

herein, an Adviser can be an individual or entity who can be, among other things, a representative of a registered 

investment adviser, a bank or similar financial institution, an insurance representative and company, or a registered 

representative of a broker-dealer and broker-dealer. 

2

 
The Department’s Re-Proposed Rule addresses concerns raised by firms, industry organizations 

and consumer and public interest organizations8 related to the original fiduciary rule proposed by 

the Department in 2010.9 Specifically, the Department listened to and addressed these concerns 

with a comprehensive rulemaking that includes a revised definition of who is a “fiduciary” under 

ERISA that expands the reach of the fiduciary duty to all retirement assets; principles-based 

Prohibited Transaction Exemptions (PTEs) to provide flexibility across business models for 

Advisers to adhere to a fiduciary standard; and a Regulatory Impact Analysis that establishes the 

need for the rule consistent with regulatory requirements.

Far from being unworkable, we believe the Re-Proposed Rule is both workable and essential. To 

make it more workable, the Coalition has focused its comment letter on areas where we believe 

the rule can be improved. The Coalition seeks clarification of certain issues and proposes 

modifications to others to allow for a more practical application of the fiduciary standard to various 

business models. 

I. The Department’s Re-Proposed Rule is Needed to Protect Consumers

During the 40 years since the Department promulgated the current fiduciary rule under ERISA, 

the retirement landscape has changed drastically, with a dramatic shift from defined benefit plans 

to savings vehicles such as 401(k) plans, which did not exist when the rule went into effect in 

1974, and Individual Retirement Accounts (IRAs), which contained only $3 billion in aggregate 

assets at that time.

10 Retirement assets have grown significantly since 1974 when ERISA took 

effect. As of the end of the first quarter of 2015, assets in IRAs totaled $7.6 trillion and 401(k) plan 

assets totaled $6.8 trillion.11

Facing growing responsibility for their own retirement savings and an increasingly complex 

universe of financial products and services, Americans today must depend upon competent and 

ethical Advisers to help make decisions critical to their financial security. Fiduciary-level advice is 

particularly critical when Americans roll over their 401(k) plan assets into IRAs. For many 

Americans, whether to roll over and how to invest their retirement nest egg is one of the most 

important financial decisions they will make in their lifetime. Unfortunately, under the current 

regulatory framework, not all Advisers are required to make rollover or IRA recommendations in 

their clients’ best interest, leaving Americans subject to conflicted advice related to their retirement 

savings.

8 Letter from Kevin R. Keller, Chief Executive Officer, Certified Financial Planner Board of Standards, Inc., to Office of 

Regulations and Interpretations, Employee Benefit Security Administration, U.S. Department of Labor (Feb. 3, 2011), 

http://www.dol.gov/ebsa/pdf/1210-AB32-155.pdf; Letter from Ellen Turf, Chief Executive Officer, National Association 

of Personal Financial Advisors, to Office of Regulations and Interpretations, Employee Benefit Security 

Administration, U.S. Department of Labor (Apr. 12, 2011), http://www.dol.gov/ebsa/pdf/1210-AB32-PH057.pdf. 

9 Definition of the Term “Fiduciary,” 75 Fed. Reg. 65,263 (Oct. 22, 2010) (to be codified at 29 C.F.R. pt. 2510) 

[hereinafter “Original Rule”].

10 ICI, Research Perspective, “The Evolving Role of IRAs in U.S. Retirement Planning,” Nov. 2009, Vol. 15, No. 3, 

available at https://www.ici.org/pdf/per15-03.pdf. 

11 ICI, “Retirement Assets Total $24.9 Trillion in First Quarter 2015,” Jun. 24, 2015, available at 

https://www.ici.org/research/stats/retirement/ret_15_q1. 

3

 
a. The Current Regulatory Framework Allows Advisers’ Interests to be 

Misaligned with Consumers’ Interests

While some segments and practices within the financial services industry are highly regulated, 

the current patchwork of regulatory frameworks, which has evolved over decades, does not 

adequately protect consumers of retail financial advice. 

Importantly, the current fiduciary definition under ERISA includes significant loopholes that allow 

Advisers to provide advice about and sell financial products that may be suitable for Retirement 

Investors, but are not necessarily in their best interest.12 For example, under the less rigorous 

suitability standard, Advisers are permitted by law to recommend products that are not in the best 

interest of the consumer, including recommending products that are more expensive to 

consumers and that pay more to the Advisers. In addition, compensation practices, which are 

completely legal under current regulations, provide substantial incentives to Advisers to place the 

interests of the Financial Institution and the Adviser ahead of the Retirement Investor’s interests. 

Very simply, the current regulatory framework allows the interests of Financial Institutions and 

Advisers to be misaligned with the interests of our nation’s Retirement Investors. 

Contrary to many in the financial services industry who claim that the Re-Proposed Rule is 

unnecessary and that there are only a few “rogue” Advisers harming Retirement Investors, the 

misalignment of interests is widespread throughout the financial services industry. For example, 

the Financial Industry Regulatory Authority (FINRA) noted in an October 2013 Report that 

conflicts of interest are pervasive and “widespread across the financial services industry.”13 In 

addition, FINRA’s recent 2015 Examination Priorities letter states that “[a] central failing FINRA 

has observed is firms not putting customers’ interests first.”14 

Retirement Investors are harmed – primarily in the form of higher costs and lower retirement 

savings – when they receive conflicted advice that puts the Adviser’s interest ahead their own. To 

illustrate the magnitude of harm to Retirement Investors, the Department has published a 

comprehensive Regulatory Impact Analysis that accompanies the Re-Proposed Rule and 

illustrates the harmful impact of conflicts of interest, including increased costs to investors under 

the current regulatory framework.

15

Based upon a wide range of independent studies, the Department estimates that, as a result of 

conflicted advice, Retirement Investors will lose between $210 billion and $430 billion over 10 

years, and between $500 billion and $1 trillion over 20 years, in the mutual fund investments in 

12 These loopholes arise from the current regulatory system where broker-dealer registered representatives and 

insurance agents, unlike investment advisers, are not regulated as fiduciaries when providing investment advice, 

even though broker-dealer registered representatives and insurance agents often hold themselves out as financial 

advisors and offer virtually identical services to investors.

13 FINRA, “Conflict of Interest Report,” Oct. 2013, available at https://www.finra.org/file/conflict-interest-report. 

14 FINRA, “2015 Examination Priorities Letter,” Jan. 6, 2015, available at

http://www.finra.org/sites/default/files/p602239.pdf (“Conflicts of interest are a contributing factor to many regulatory 

actions FINRA (and other regulators) have taken against firms and associated persons”). 

15 U.S. Dep’t of Labor, Fiduciary Investment Advice: Regulatory Impact Analysis, Apr. 14, 2015, available at

http://www.dol.gov/ebsa/pdf/conflictsofinterestria.pdf. 

4

 
their IRAs. Furthermore, a Retirement Investor who moves money out of a 401(k) plan and into 

an IRA based on conflicted advice can expect to lose 12 to 24 percent of the value of his or her 

savings over 30 years. Evidence from a wide variety of studies cited by the Department supports 

the conclusion that these losses are the direct result of Advisers’ option to place their own financial 

interests ahead of the interests of Retirement Investors when offering retirement investment 

advice.16

The evidence of harm to Retirement Investors from a misalignment of interests is evident in 

examples of conflicted advice reported by CFP® professionals in CFP Board’s Senior Exploitation 

Study, conducted by APCO Insight, in August 2012.17 The study was conducted to obtain deeper 

insights and analysis into CFP® professionals’ experiences with seniors who have been financially 

exploited. The study found over half of the CFP® professional respondents (56 percent or nearly 

1,500) personally had worked with an older client who previously had been subjected to unfair, 

deceptive or abusive practices.18 Of these, 76 percent reported financial exploitation that involved 

equity indexed or variable annuities.

19

For example, a California-based CFP® professional reported on a seventy-year-old woman who 

was repeatedly sold annuity contracts by insurance company Advisers with high commissions of 

20 to 25 percent, which would likely exceed reasonable compensation under a fiduciary standard 

of conduct. Some of the contracts also had twenty-year surrender charges, restricting the client’s 

access to these assets until she was ninety years old. The CFP® professional estimated that this

client lost over $10,000 and, although he helped her remove her assets from the annuity products

and write letters of complaint to the insurance companies, he did not expect her to recover any of 

her lost funds.

16 The Investment Company Institute (ICI) and U.S. Chamber of Commerce have both questioned the Department’s 

Regulatory Impact Analysis. At a June 17, 2015 Hearing before the Subcommittee on Health, Employment, Labor, 

and Pensions, Committee on Education and the Workforce, ICI Chief Economist Brian Reid testified that none of the 

academic studies that the Department uses addresses the core question of whether an investor’s performance is 

different when his or her Adviser is a fiduciary compared to when his or her Adviser is not a fiduciary and the 

Department fails to identify and analyze the significant harm to Retirement Investors that is likely to result from the 

Re-Proposed Rule. It is important to note that the Department sent a letter to relevant industry groups, including ICI, 

asking for the data needed to perform the Regulatory Impact Analysis; the industry groups responded that the vast 

majority of the data was unavailable or too expensive to provide. The Coalition believes that because the 

Department’s estimates apply just to mutual fund investments in IRAs, the data likely significantly understate the total 

cost of conflicted advice related to the other savings vehicles and other financial products. 

17 APCO Insight, Certified Financial Planner Board of Standards: Senior Financial Exploitation Study, Aug. 2012, 

available at http://www.cfp.net/docs/news-events---supporting-documents/senior-americans-financial-exploitationsurvey.pdf?sfvrsn=0. Research included both a quantitative online survey and qualitative in-depth interviews. CFP®

professionals were invited to participate in the online survey via email from CFP Board. From July 24 – August 7, 

2012, 2,649 CFP® professionals completed the survey. The theoretical sampling error for the full sample is ±1.9 

percentage points at a 95 percent confidence interval. 

18 Id.

19 Id. Variable annuities were included in the FINRA Exam Priorities Letter for 2015 and Secretary Perez has also 

spoken about the risks to consumers arising from the recommendation of these products. Mark Schoeff Jr., “Perez 

calls out variable annuities in argument for DOL fiduciary rule,” InvestmentNews, Jun. 24, 2015, available at

http://www.investmentnews.com/article/20150624/FREE/150629958/perez-calls-out-variable-annuities-in-argumentfor-dol-fiduciary-rule. 

5

 
The harm to consumers resulting from the misalignment of interests is especially important with 

respect to retirement assets. Congress enacted ERISA in 1974 to establish special rules to protect 

Americans’ retirement assets in tax-preferred retirement savings vehicles. In doing so, Congress 

recognized that it was in the public interest to encourage all Americans to save for a secure and 

dignified retirement.

20 Given the importance of maximizing Americans’ retirement assets, 

Congress intentionally established requirements for financial advice under ERISA that are distinct 

from and more rigorous than those that apply under insurance and securities laws to nonretirement assets, including the explicit requirement that advice be in the sole interest of the plan

and plan participants. The Department’s Re-Proposed Rule would close loopholes in its current 

regulations that allow for conflicted advice by non-fiduciary Advisers related to retirement assets 

in contravention of Congress’ express intent. 

b. Retirement Investors Cannot Easily Identify Fiduciary Advisers

In addition to a regulatory framework that permits conflicted financial advice by non-fiduciary 

Advisers, Retirement Investors face additional challenges in the current financial services 

marketplace. First, consumers are unable to distinguish Advisers who provide fiduciary-level 

services from those who don’t. Second, Advisers exacerbate consumer confusion with marketing 

and communications practices that do not clearly and openly disclose the standard of conduct 

under which they are operating or their conflicts of interest. 

A landmark 2008 SEC-sponsored study conducted by the RAND Center for Corporate Ethics, 

Law, and Governance found that “[e]xisting studies suggest that investors do not have a clear 

understanding about the distinction between broker-dealers and investment advisers and their 

different levels of fiduciary responsibility.”21 Subsequent studies confirm persistent and pervasive 

consumer confusion about financial industry titles and standards of conduct.

A study conducted by InfoGroup, on behalf of the Coalition, Consumer Federation of America 

(“CFA”), American Association of Retired Persons (“AARP”), and the North American Securities 

Administrators Association (“NASAA”), found that three out of five U.S. investors mistakenly think 

that “insurance agents” have a fiduciary duty to their clients; two out of three U.S. investors are 

incorrect in thinking that stockbrokers are held to a fiduciary duty; and three out of four investors 

are wrong in believing that “financial advisors” – a ubiquitous term used by financial services and 

insurance firms to describe their salespersons – are held to a fiduciary duty.22 The study also 

20 29 U.S.C. § 1001 (2012) (“It is hereby declared to be the policy of this chapter to protect interstate commerce and 

the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and 

reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing 

standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for 

appropriate remedies, sanctions, and ready access to the Federal courts.”).

21 Angela Hung, et al., RAND Corp., Technical Report, Investor and Industry Perspectives on Investment Advisers 

and Broker-Dealers, Jan. 3, 2008, available at http://www.rand.org/pubs/technical_reports/TR556.html. 

22 InfoGroup, U.S. Investors and the Fiduciary Standard, Sept. 15, 2010, 

http://www.hastingsgroup.com/fiduciarysurvey/docs/091510%20Fiduciary%20survey%20report%20FINAL2.pdf. 

6

 
found that 75 percent of investors incorrectly believed that the fiduciary standard is already in 

place for “financial planners.”23

A study conducted by Fondulas Strategic Research, on behalf of the Coalition, found significant 

consumer confusion about the various titles associated with financial planning. A full 82 percent 

of consumers believe that a “financial planner” is essentially the same as a “financial advisor,”

and there is only slightly less confusion between the titles “financial planner,” “wealth manager”

and “investment advisor.” 24 

Misleading advertising in the financial services marketplace further exacerbates this consumer 

confusion. While many Financial Institutions claim that they support a fiduciary standard of 

conduct and represent their services as unbiased and un-conflicted, their regulatory filings reveal

a different truth. 

One large financial services firm advertises on its website that their Advisers “recommend 

unbiased solutions that are in your best interests.” The firm’s Form ADV brochure, however, states 

that “the differences in compensation create an incentive for financial advisors to recommend 

products for which they receive higher compensation” and their Advisers have a “conflict of 

interest based on an incentive to recommend investment products based on the compensation 

received, rather than based on your needs.”

One large insurance firm, presumably to avoid being subject to the fiduciary duty under the current 

five-part test of ERISA, states in its Form ADV that “[a]ny recommendations provided by your 

Planner for your IRAs or any retirement plan assets you have the right to self-direct are not 

intended to be the sole or primary basis for your investment decisions.” Additionally, the 

firm’s code of conduct states that rather than acting in the client’s best interest, Advisers must act 

in the best interest of the firm. 

The alphabet soup of financial service titles – most of which suggest to the consumer that they 

are receiving advice and not being sold a product – compounded by practices in the marketplace

– make it virtually impossible for consumers to identify and choose an Adviser who is obligated to

provide advice under a fiduciary standard of conduct. Consequently, consumers who want and 

would benefit from advice in their best interest are harmed because they cannot identify a qualified 

fiduciary Adviser.25 

23 Id.

24 Fondulas Strategic Research, Quantitative Survey: Consumers' Beliefs About Financial Planners, Jan. 2014 (on file 

with the Coalition).

25 CFP Board’s television advertisement in support of its public awareness campaign, known as the DJ ad, further 

illustrates how easily consumers can be misled. In filming the ad, CFP Board exposed real consumers, who were 

looking for financial advice, to a DJ who was made over into a “financial planner” and armed with industry jargon. 

Remarkably, the vast majority of people believed they were meeting with a real financial advisor, and many described 

him as being knowledgeable, capable and trustworthy. This experiment illustrates the vulnerability of the average 

consumer and the need for increased investor protection regulations. http://www.letsmakeaplan.org/if-theyre-not-acfp-pro-you-just-dont-know/the-experiment. 

7

 
c. Consumers Want Advice in Their Best Interest and Want the Government to 

Act to Protect Investors

It is indisputable that consumers want advice in their best interest and want the federal 

government to increase regulations to protect them. Consumers believe that all Advisers, 

regardless of how they are licensed, should be required to act in consumers’ best interests. The 

September 2010 InfoGroup study found that 91% of respondents thought that “a stockbroker and 

an investment adviser (who) provide the same kind of investment advisory services ... should 

have to follow the same investor protection rules” and 97% agreed that “when you receive 

investment advice from a financial professional, the person providing the advice should put your 

interests ahead of theirs and should have to tell you upfront about any fees or commissions they 

earn and any conflicts of interest that potentially could influence that advice.”26 Moreover, 

consumers want the government to play an active role in providing for a level playing field. A 

March 2013 survey conducted by the KRC Research Group, on behalf of the Coalition, shows 

that “by an overwhelming margin, Americans want the federal government to play an active role 

in protecting investors by increasing oversight of [financial] advisers.” 27 The survey reflected that 

80 percent of investors do not believe the federal government is doing enough to protect 

“consumers from being taken advantage of” by financial advisors and 84 percent of investors 

agree that “financial advisors should be regulated by the federal government to protect investors 

and build confidence in financial services.”28 

It is no surprise that groups that represent large numbers of consumers, including the Consumer 

Federation of American (“CFA”) and the American Association of Retired Persons (“AARP”), 

enthusiastically support the rule and have provided the Department with hundreds of thousands 

of signatures of consumers who support the rule.29 

In short, Retirement Investors face a perfect storm in the financial services marketplace. With 

ever-increasing responsibility for their own retirements and the need to choose from an 

increasingly complex set of financial products and services, Retirement Investors more than ever 

need competent financial advice that is in their best interest. Yet the current regulatory framework 

allows Advisers’ interests to be misaligned with the interests of Retirement Investors; it does not 

require Advisers to clearly and openly disclose the standard of conduct under which they operate 

or their actual or potential conflicts of interest; and it permits market practices under which 

Retirement Investors are simply unable to distinguish Advisers who provide fiduciary-level 

services from those who do not. As discussed in more detail below, the Department’s ReProposed Rule will help to correct this regulatory misalignment and marketplace confusion by 

26 InfoGroup, U.S. Investors and the Fiduciary Standard, Sept. 15, 2010, 

http://www.hastingsgroup.com/fiduciarysurvey/docs/091510%20Fiduciary%20survey%20report%20FINAL2.pdf. 

27 KRC Research, Survey: American Investors Want More Protection, Mar. 8, 2013, available at

http://financialplanningcoalition.com/survey-american-investors-want-more-protection/. 

28 Id.

29 AARP provided the Department with 31,205 signatures on April 21, 2015. CREDO, MoveOn, Public Citizen and 

Americans for Financial Reform (AFR), collectively, provided the Department over 230,000 signatures on July 16, 

2015.

8

 
requiring more Advisers to operate with fiduciary-level accountability when providing advice to 

retirement plans, plan beneficiaries and IRA owners.

II. Expansion of Fiduciary Protection under the Department’s Re-Proposed Rule will 

Help Protect Consumers

The Coalition supports the Department’s proposal to increase ERISA fiduciary-level advice to 

retirement plans, plan beneficiaries and IRA owners as a much-needed reform to address the 

misalignment of interests, to reduce confusion in the financial services marketplace and to 

increase protections for Retirement Investors. The Department’s Re-Proposed Rule specifically 

addresses the misalignment of interests in the marketplace by closing the loopholes in the current 

five-part test for defining a fiduciary Adviser under ERISA, thereby requiring all Advisers, who 

provide advice related to retirement assets, to be fiduciary Advisers under ERISA. Requiring 

fiduciary accountability for all advice related to retirement assets will build in needed protections 

for Retirement Investors. Fiduciary Advisers will help Retirement Investors navigate complex 

products and services in the financial marketplace by providing recommendations in their best 

interests. Requiring all ERISA Advisers to be fiduciaries will also help ameliorate Retirement 

Investors’ inability to identify a fiduciary Adviser and should reduce the current conflicting and 

confusing marketing and disclosure practices. 

Specifically, the Coalition supports the removal of the current requirement that advice be provided 

“on a regular basis” to trigger a fiduciary obligation under ERISA. The application of full fiduciary 

protection to one-time advice concerning retirement assets is an important investor protection 

reform. It ensures that a Retirement Investor, who may go to an Adviser for an important one-time 

investment decision (e.g., whether or not to distribute assets from an employer-sponsored 

retirement plan), will receive advice that is in his or her best interest. 

The Coalition supports the removal of the “mutual understanding” requirement from the five-part 

test in the current rule and believes that, when looking at the issue of reliance, the determination 

should be based upon the reasonable expectation of the Retirement Investor. Because the ReProposed Rule would not require a “meeting of the minds” concerning the extent to which a 

Retirement Investor will actually rely on the advice when making an investment decision, an 

Adviser will not be able to escape his or her fiduciary obligations by claiming that the advice 

provided was “solely incidental” to the recommendation or that the advice was not the “primary 

basis” for the Retirement Investor’s decision-making. 

The Coalition supports extending the fiduciary standard to advice provided to IRA owners.

30

Requiring advice related to the rollover of assets from employer-sponsored retirement plans to 

IRAs (including both the initial rollover decision, either from an employer-based plan or existing 

IRA, and the allocation of assets in the IRA) to be fiduciary-level advice is a much needed investor 

30 The new proposal fits squarely within the Department’s responsibility to regulate advice regarding IRAs, which was 

established in 1978. Reorganization Plan No. 4 of 1978, 43 Fed. Reg. 47713 (Oct. 17, 1978). This responsibility was 

confirmed by Congress in 2006 by the addition of a statutory investment advice exemption to ERISA and the Internal 

Revenue Code (IRC) through the Pension Protection Act of 2006 (“PPA”). 29 U.S.C. § 1108(g) and 26 U.S.C. § 

4975(d)(17), respectively, as added by PPA. 

9

 
protection reform.

31 For many Retirement Investors, their decision on whether and how to roll over 

employer-sponsored retirement assets will be the single most important financial decision they 

will ever make in their lives, with the potential to seriously affect their standard of living in 

retirement. There are many well-documented abuses concerning these important retirement 

decisions.

32

The Coalition also supports the Department’s requirement to provide Retirement Investors with a 

binding and enforceable contract through which they can hold Advisers accountable to provide 

advice in their best interests. We believe that this provision is an appropriate and necessary 

enforcement mechanism and that the threat of private action will provide a strong incentive for 

Advisers and Financial Institutions to meet their fiduciary obligations under the Re-Proposed Rule 

and to establish policies and procedures to mitigate conflicted advice.

Finally, the Coalition supports the Principal Transaction Exemption as proposed by the DOL. It 

strikes an appropriate balance between providing Advisers with the opportunity to sell products 

(for commission-based compensation) from their own inventory and protecting Retirement 

Investors from conflicted advice. We believe that compliance with the conditions of the exemption 

will protect consumers from abusive practices, while at the same time not unreasonably narrowing

the universe of securities for which the exemption is available.

The Coalition believes that these proposed reforms, which specifically address the misalignment 

of interests by closing the loopholes in the current five-part test for defining a fiduciary adviser 

under ERISA that allow for the sale of financial products that may not be in the Retirement 

Investor’s best interest, are a necessary step to help restore consumer trust in the industry by 

holding Advisers accountable, under a fiduciary standard of conduct, to Retirement Investors for 

the advice they provide. 

III. Industry Arguments Against the Re-Proposed Rule are Misplaced

The Department faces considerable opposition to the Re-Proposed Rule. Interestingly, 

opponents, primarily from the brokerage and insurance industries, make essentially the same 

arguments in opposition to the Re-Proposed Rule as they did in opposition to the Original Rule.

Opponents raise these nearly identical arguments notwithstanding the significant improvements 

in the Re-Proposed Rule that were made specifically in response to industry concerns. As 

discussed in more detail below, the Coalition finds that many of these arguments against the ReProposed Rule are simply unsupported, do not accurately reflect the changes in the Re-Proposed 

31 Advisers often obfuscate fees associated with rollover recommendations and IRAs. FINRA, 

Regulatory Notice 13-23, Brokerage and Individual Retirement Account Fees, Jul. 2013, available at

http://www.finra.org/sites/default/files/NoticeDocument/p304670.pdf (“Broker-dealers’ marketing campaigns often 

emphasize that fees are not charged in connection with their retail brokerage accounts and IRAs. Nevertheless, while 

certain types of fees may not be charged, others will be.”).

32 Government Accountability Office, Labor and IRS Could Improve the Rollover Process for Participants, GAO-13-30 

(Mar. 2013) (“GAO Report”) available at http://www.gao.gov/assets/660/653506.txt. The GAO Report found that 

Advisers “encouraged rolling 401(k) plan savings into an IRA even with only minimal knowledge of a caller’s financial 

situation” and that Advisers claimed that 401(k) plans had extra fees and that IRAs “had no fees,” or argued that IRAs 

were always less expensive, notwithstanding the fact that opposite is generally true.

10

 
Rule, are inconsistent with our experience in establishing a fiduciary obligation for our 

stakeholders and members, or are rebutted by reliable research. 

a. The Re-Proposed Rule will Not Drive Advisers Out of Business

Opponents’ claim that the Re-Proposed Rule will drive Advisers out of business. CFP Board heard 

these same arguments in 2007 when it established a fiduciary standard for CFP® professionals 

when providing financial planning services. At that time, major firms throughout the country as 

well as industry organizations representing the brokerage and insurance industries raised 

significant concerns with CFP Board. They asserted that CFP Board’s fiduciary requirement was 

unworkable with their business models and that CFP® professionals would be forced to rescind 

their certification if required to operate under a fiduciary standard of conduct. 

Contrary to these predictions, the number of CFP® professionals has grown by more than 

30 percent to over 72,000 since CFP Board established a fiduciary standard. CFP® professionals, 

many who work at large firms that represent a cross-section of business models, are now proudly 

promoting that they deliver fiduciary-level services when providing financial planning. 

The Coalition believes that the opponents’ argument that Advisers will walk away from providing 

services to Retirement Investors, who collectively have $14.4 trillion in 401(k) plans and IRAs, 

defies credibility.33 Rather, if our experience in putting the fiduciary standard in place is any 

indication, Financial Institutions and Advisers will adjust their policies and practices. Additionally, 

we believe that the Re-Proposed Rule will be a catalyst for innovation in the industry, as Financial 

Institutions and Advisers will devise new tools and strategies — assisted by modern software and 

new technology-based tools — to accommodate even those with only a few thousand dollars to 

invest. 

b. The Re-Proposed Rule is a Workable, Business-Model Neutral Solution that 

Preserves Consumer Choice

Opponents also claim that the Re-Proposed Rule is “unworkable” because it will eliminate the 

broker-dealer and insurance business models. Contrary to this argument, the Re-Proposed Rule 

and accompanying principles-based PTEs preserve the ability of Retirement Investors to choose 

how they prefer to pay for retirement advice without requiring them to lose their right to best 

interest recommendations. The Department crafted a principles-based, business-model 

exemption – the Best Interest Contract (BIC) Exemption – that provides the terms under which 

Financial Institutions and Advisers can receive sales-based compensation for advice and still 

comply with the ERISA fiduciary standard.

Opponents further argue that the BIC Exemption is so unworkable that it, as a practical matter, 

will force Advisers into a fee-based model. Our collective experience operating under a fiduciary 

standard of conduct belies that argument. CFP Board and FPA are business-model and 

33 ICI, “Retirement Assets Total $24.9 Trillion in First Quarter 2015,” Jun. 24, 2015, available at 

https://www.ici.org/research/stats/retirement/ret_15_q1; see also ICI Research Perspective, “401(k) Plan Asset 

Allocation, Account Balances, and Loan Activity in 2013,” Dec. 2014, Vol. 20, Num. 10 (According to the Investment 

Company Institute, the average 401(k) account balance was $72,383 at the end of 2013). 

11

 
compensation-model neutral. CFP Board’s Standards of Professional Conduct require CFP®

professionals, when providing financial planning services, to do so under a fiduciary standard of 

conduct.

34 CFP® professionals provide fiduciary-level financial planning services under a variety 

of business and compensation models, including commissioned-based compensation and 

revenue-sharing models. CFP Board established a Business Model Council for the purpose of 

working with firms to understand their business models and provide guidance to firms on how 

their CFP® professionals can comply with the fiduciary standard under different business models.

Our experience shows that Advisers can, and many currently do, successfully provide fiduciarylevel service under a variety of business models. 

While not identical to the BIC Exemption, many of the current requirements of CFP® professionals 

are similar to proposed requirements under the BIC Exemption: to act in the best interest of the 

client, to exercise reasonable and prudent judgment, to execute a written contract with the client, 

to identify and mitigate conflicts of interest between the client and the CFP® professional and the 

CFP® professional’s employer, to provide written disclosures including the full costs of products 

and services and the compensation to the CFP® professional and/or employer, and to comply 

with applicable regulatory requirements.

35 These similarities are reflected in the chart below. 

34 CFP Board Standards of Professional Conduct, Rule of Conduct 1.4, available at http://www.cfp.net/for-cfpprofessionals/professional-standards-enforcement/standards-of-professional-conduct/rules-of-conduct. 

35 CFP Board Standards of Professional Conduct, Rules of Conduct 1.3, 1.4, 2.2, 4.1, 4.3 and 4.4, available at

http://www.cfp.net/for-cfp-professionals/professional-standards-enforcement/standards-of-professional-conduct/rulesof-conduct. 

12

 
Based on our experience, we believe that Advisers and Financial Institutions are able to establish 

policies and procedures designed to implement the types of obligations required under the BIC 

Exemption. This will enable Advisers to continue to provide services under business models that 

include brokerage and insurance models with commission-based or revenue-sharing 

compensation arrangements. 

c. The Re-Proposed Rule Will Not Diminish Availability of Services to MiddleIncome Americans

Opponents claim that the Re-Proposed Rule will force Advisers to stop serving middle-income 

Americans. Opponents’ primary support for this oft-repeated assertion is an industry study that 

is not applicable to the Re-Proposed Rule. In contrast, reliable empirical data, replicated in 

numerous studies, as well as current practices in the marketplace, demonstrate that a fiduciary 

duty will not force Advisers to abandon middle-income households and will not leave them without 

investment advice.

Opponents continue to rely on the Oliver Wyman study that was conducted in April 201136 for 

their assertion that the DOL rule will force Advisers to stop serving middle-income Retirement 

Investors. This study is premised on the Department completely eliminating commission-based 

compensation. However, the Re-Proposed Rule specifically permits Advisers to receive 

commissions for the sale of security and insurance products. The principles-based PTEs broadly 

permit firms to continue compensation practices typically used by broker-dealer registered 

representatives and insurance agents with middle-income Retirement Investors, such as 

commission-based advice and revenue sharing practices, as long as they adhere to basic 

standards aimed at ensuring their advice is in their clients' best interest.37

Research studies that compare fiduciary and non-fiduciary services show just the opposite – that 

there is no statistically significant difference in the delivery of services to middle-income 

Americans. A February 2014 study, conducted by Princeton Survey Research Associates 

International (“PSRAI”) on behalf of the Coalition, examined the experience and attitudes of 

financial advisors who have switched from a suitability standard to a fiduciary standard of conduct

36 Oliver Wyman Report, Assessment of the Impact of the Department of Labor’s Proposed “Fiduciary” Definition Rule 

on IRA Consumers, (Apr. 2011) (data for Department use submitted Jan. 2012), available at

http://www.dol.gov/ebsa/pdf/WymanStudy041211.pdf. 

37 The Wyman study is further flawed in multiple respects. First, the study relies upon data that is not representative 

of the industry. For example, in the Wyman study sample, 88 percent of investors have brokerage IRAs, which the 

study fails to break down into full-service versus discount brokers. However, in the latest Investment Company 

Institute research from January 2015, only 46 percent of investors have brokerage IRAs (32 percent full-service and 

14 percent discount). ICI Research Perspective, Vol. 21, No 1A, Jan. 2015, available at http://www.ici.org/pdf/per21-

01a.pdf.The study also greatly underestimated the costs to investors by providing only a subset of investors’ costs, 

rather than investors’ all-in costs. Davis & Harman, the firm that commissioned the study, admitted that “it was hard to 

do an apples-to-apples comparison” and it “wasn't feasible to collect and analyze enough data to do an analysis of 

all-in costs. Ian Salisbury, “Study on Retirement Cost Draws Fire,” MarketWatch, Aug. 29, 2012, available at

http://www.marketwatch.com/story/study-on-retirement-costs-draws-fire-1346276514746. Additionally, as part of its 

Regulatory Impact Analysis, the Department commissioned the RAND Corporation to provide an independent review 

of the Wyman study; the independent review found the arguments made by the study to be “unpersuasive.” RAND 

Corp., Potential Economic Effects on Individual Retirement Account Markets and Investors of DOL’s Proposed Rule 

Concerning the Definition of a “Fiduciary,” Feb. 2015, available at 

http://www.rand.org/pubs/research_reports/RR1009.html. 

13

 
or who operate under both standards.38 PSRAI conducted online interviews with a sample of 

1,852 advisors drawn from Coalition stakeholders that included a broad representation of various

business and compensation models.39

Of particular focus in the study were those respondents who switched from a suitability to a 

fiduciary standard (15%) and those who operate under both a suitability and fiduciary standard in 

their practice (48%) (hereinafter referred to collectively as “fiduciary respondents”).40 These 

advisors offer a more experienced (and arguably a more credible) view of the real impact of 

transitioning from suitability to a fiduciary standard.41 Focusing just on the findings related to the 

availability of services and products and types of clients served,42 80 percent of the fiduciary 

respondents reported an increase or no change in range of services when delivering services to 

their customers under a fiduciary standard of conduct; 69 percent reported an increase or no 

change in range of products when delivering services to their customers under a fiduciary 

standard of conduct; and 72 percent reported an increase or no change in the number of clients 

served. Broken down by assets, 88 percent reported an increase or no change in clients with 

$100,000 - $999,999 assets under management when delivering services to their customers 

under a fiduciary standard of conduct, and 59 percent reported no change or an increase in clients 

with less than $100,000 assets under management when delivering services to their customers 

under a fiduciary standard of conduct.

43

A June 2013 study conducted by the Aité Group, on behalf of the Coalition, compared financial 

professionals who operated under a fiduciary standard of conduct with those who did not.44 

Among other things, the study examined differences between broker-dealer registered 

representatives who had a fiduciary practice (i.e., who managed assets as a fiduciary for over half 

38 Princeton Research Associates International, Fiduciary Standard Survey, Feb. 2014, available at

http://financialplanningcoalition.com/. 

39 Respondents included investment adviser representatives (29%), broker-dealer registered representatives (28%) 

and dually registered investment adviser/broker-dealer registered representatives (26%). Id. at 8. 45% of respondents 

reported that that clients typically pay through fees; 47% report both commissions and fees; 5% report commissions 

only. Id. at 9. The margin of error at the 95% level of confidence is plus or minus 2.5 percentage points. Id. at 8.

40 Id.at 9.

41 The SEC specifically asked for data on advisers who switched standards. See SEC Request for Data and Other 

Information, Duties of Brokers, Dealers and Investment Advisers, File No. 4-606, Exchange Act Release No. 69013 

(Mar. 1, 2013) at 49. While this study was done with reference to the SEC’s fiduciary rulemaking, respondents’ views 

on operating under both standards can be informative to the application of the DOL fiduciary rule as well. 

42 The study looked at a many other factors, including the respondents’ views on the fiduciary standard and the 

impact of extending the fiduciary standard to broker-dealers registered representatives. For example, among those 

who switched to a fiduciary standard, large majorities reported that the change has been mostly positive for their 

clients (81%), for their practice (81%) and for them personally (87%). 

43 Id. at 18. 

44 Aité Fiduciary Study Findings, in the letter from the Financial Planning Coalition, Jul. 5, 2013, to the SEC in 

response to the SEC Request for Data and Other Information, Duties of Brokers, Dealers and Investment Advisers, 

File No. 4-606, Exchange Act Release No. 69013 (Mar. 1, 2013), available at http://www.sec.gov/comments/4-

606/4606-3126.pdf. The Aité Group, a leading third party researcher and data aggregator in the financial services 

industry, surveyed 498 broker-dealer registered representatives and registered investment adviser representatives 

who worked in a cross section of firms (wirehouse, bank-affiliated, independent and insurance affiliated brokerdealers, online brokerage, independent RIA firms, and self-clearing firms). The margin of error at the 95 percent 

confidence level is generally 4 percentage points.

14

 
of their client assets and hereinafter referred to as “fiduciary registered representatives”) and other 

registered representatives. While there were significant differences on many factors,45 the study 

found that there was no statistically significant difference between fiduciary registered 

representatives and other registered representatives in terms of working with mass-market clients 

(those with less than $100,000 in investable assets). In fact, the study found that fiduciary 

registered representatives work with a comparable percentage of mass-market clients to that of 

other registered representatives.46 

A July 2012 study by Professors Michael Finke and Thomas Langdon compared the availability 

of broker-dealer services in the several states that already hold broker-dealer registered 

representatives to a full fiduciary standard when dealing with all customers, with those states that 

do not hold broker-dealer registered representatives to a fiduciary standard. The study found “no 

statistical differences between the two groups in the percentage of lower-income and high-wealth 

clients, the ability to provide a broad range of products including those that provide commission 

compensation, [or] the ability to provide tailored advice and the cost of compliance.” 47 

In short, relevant and reliable studies simply do not support opponents’ argument that a fiduciary 

standard would affect their ability to serve middle-income clients. 

Moreover, opponents’ claim is inconsistent with current practices in the marketplace.

48 There are 

individual Advisers as well as existing and emerging business models that successfully provide 

low-cost service to middle-income Americans under a fiduciary standard of conduct. Today, there 

are thousands of CFP® professionals and FPA and NAPFA members across the country who 

currently provide fiduciary-level services to everyday Americans with business models requiring 

no or very low minimum assets under management. Additionally, the Department has recognized 

a number of companies that provide fiduciary-level advice to smaller Retirement Investors.

49

While some Financial Institutions may decide that it is not profitable for them to serve middleincome Retirement Investors under the new requirements of the Re-Proposed Rule, the Coalition 

believes that, with $14.4 trillion currently in 401(k) plans and IRAs, there is a strong economic 

45 Id. The study found that the registered investment advisers and the fiduciary registered representatives, who 

deliver services to their customers under a fiduciary standard, experience stronger asset growth, stronger revenue 

growth, and obtain a greater share of client assets than the other broker-dealer registered representatives. 

46 Id.

47 Dr. Michael Finke and Thomas Langdon, The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice, 

Journal of Financial Planning, Jul. 2012, available at 

https://www.onefpa.org/journal/Pages/The%20Impact%20of%20the%20BrokerDealer%20Fiduciary%20Standard%20on%20Financial%20Advice.aspx

48 Opponents’ claim that Advisers who serve lower and middle-income Americans only provide commission-based 

advice is also not supported by industry data. For Advisers whose core market are investors with less than $100K 

AUM, only 24% were commission-only, while 35% were fee-and-commission mix (10% to 50% in fee-based revenue) 

and 32% were fee-based (greater than 50% to 90% in fee-based revenue). Cerulli Advisor Metrics 2014: Capitalizing 

on Transitions and Consolidation, Cerulli Associates (2014), at 100. 

49 Remarks by U.S. Secretary of Labor Tom Perez at the Brookings Institution, The Hamilton Project, Forum on 

Promoting Financial Well-Being in Retirement, Washington, DC, Jun. 23, 2015, available at

http://www.dol.gov/_sec/media/speeches/20150623_Perez.htm. As Secretary Perez noted during the speech, “[w]hen 

I talk to firms like these and tell them about the argument on the other side — that our rulemaking will make it 

impossible to serve the small saver — they say: Give those small savers my e-mail address.” 

15

 
incentive for the vast majority of Financial Institutions to develop new and innovative business 

models to successfully serve middle-income Retirement Investors. 

Finally, the argument that Advisers, who can still receive commissions for their services, can’t 

afford to serve middle-income Retirement Investors if they are required to provide advice that is 

in the best interests of the Retirement Investor is fundamentally at odds with opponents’ rhetoric 

that they support a best interest standard. Empirical evidence strongly suggests that it is precisely 

these less wealthy, often less sophisticated investors who are most at risk from harmful practices 

permitted under the current regulatory framework. Small Retirement Investors, who are 

disproportionately served by broker-dealers and insurance agents who are not currently required 

to serve their customers’ best interests, are at the greatest risk of receiving conflicted advice that 

drains their retirement savings.

50

d. The Re-Proposed Rule Will Not Open the “Floodgates” of Litigation 

Opponents argue that the Re-Proposed Rule will open the “floodgates” for plaintiffs’ attorneys to 

file class-action lawsuits. The significant hurdles associated with class actions will necessarily 

limit the use of this enforcement tool by Retirement Investors. To be certified, class action plaintiffs

must satisfy stringent requirements, including commonality and typicality of facts and/or law 

across the entire class. These stringent requirements ensure that only those cases where the 

harm in question is systematic will be certified as class actions. Where the harm is not systematic,

because there are differences in the facts or law for each potential claimant, then a class action 

will not be certified. 

In fact, arbitration, not class actions, will likely be the enforcement mechanism that Retirement 

Investors will most likely use to enforce the BIC Exemption. The Department has permitted 

Financial Institutions to continue to require mandatory pre-dispute arbitration clauses in 

Retirement Investors’ contracts. These arbitration proceedings will most likely be conducted by 

FINRA, a dispute resolution forum very familiar to Financial Institutions and Advisers. 

Many Advisers currently operate under the ERISA fiduciary standard and there is no evidence 

that has been put forth by opponents that those Advisers are dealing with increased litigation risk. 

In fact, adherence to a fiduciary standard of conduct could reduce litigation risk. In a January 2015 

letter to its members, FINRA stated “firms best serve their customers — and reduce their 

regulatory risk — by putting customers’ interests first. This requires the firm to align its interests 

with those of its customers.”51 The Coalition believes that when Advisers and Financial Institutions 

take seriously their obligation to mitigate conflicts and put the interests of their customers first, 

50 Dr. Michael Finke, Fiduciary Standard: Findings From Academic Literature, attached to the letter from IMCA, 

Jul. 5, 2013, to the SEC in response to the SEC Request for Data and Other Information, Duties of Brokers, Dealers 

and Investment Advisers, File No. 4-606, Exchange Act Release No. 69013 (Mar. 1, 2013), available at

http://www.sec.gov/comments/4-606/4606-3121.pdf (Dr. Finke reviewed a number of academic studies related to the 

potential benefits to consumers of a fiduciary standard, including studies showing that less sophisticated and less 

wealthy investors are most likely to suffer the harmful consequences of recommendations that are not based on the 

best interest of the investor.). 

51 FINRA, “2015 Regulatory and Examination Priorities Letter,” Jan. 6, 2015, available at

http://www.finra.org/sites/default/files/p602239.pdf. 

16

 
they should see their liability risks reduced as a result of the better outcomes they achieve for 

clients. 

e. The Benefits to Retirement Investors Far Outweigh the Costs to Financial 

Institutions to Implement Reforms Required by the Rule

Opponents of the Re-Proposed Rule contend that the costs to the industry to implement the rule 

are too onerous and that Advisers and Financial Institutions will pass these costs on to their 

clients. However, the opponents focus only on the costs to the industry, rather than focusing on 

the immense quantitative and qualitative benefits to Retirement Investors of advice that is in their 

best interest. 

The Department recognizes that there will be costs to Financial Institutions and Advisers 

associated with implementation of the Re-Proposed Rule. In its Regulatory Impact Analysis, the 

Department estimates that the compliance costs associated with the Re-Proposed Rule will total 

between $2.4 billion and $5.7 billion over 10 years.52 The Coalition is proposing rule modifications 

that are intended to reduce the anticipated costs to Financial Institutions and Advisers. Moreover, 

the Department has already indicated that it is looking at ways to modify the Re-Proposed Rule

to reduce costs. However, even assuming no cost reductions, the Coalition believes that the costs 

of conflicted advice to Retirement Investors under the current regulatory framework greatly 

outweigh the costs to the financial services industry to implement and to comply with the ReProposed Rule. 

As noted above, based upon a wide range of independent studies, the Department estimates that, 

for mutual fund investments in IRAs alone, investors will lose between $210 billion and $430 billion 

over 10 years, and between $500 billion and $1 trillion over 20 years as a result of conflicted 

advice. Furthermore, according to the Department’s analysis, a Retirement Investor who moves 

money out of a 401(k) plan and into an IRA based on conflicted advice can expect to lose 12 to 

24 percent of the value of his or her savings over 30 years.

53

The Department also estimates that the Re-Proposed Rule may result in gains of between $40 

billion and $44 billion over 10 years for these IRA Retirement Investors. The potential gains to the 

entire retirement market are likely to be significantly greater. However, if only 75 percent of 

anticipated gains to IRA investors were realized, that would amount to between $30 billion and 

$33 billion over 10 years. If only 50 percent were realized, that would total between $20 billion 

and $22 billion over 10 years. Even under the most conservative estimates, therefore, the benefits 

to Retirement Investors of best interest advice are many times greater than the costs to industry 

to implement and to comply with the Re-Proposed Rule.

54

52 U.S. Dep’t of Labor, Fiduciary Investment Advice: Regulatory Impact Analysis, Apr. 14, 2015, available at

http://www.dol.gov/ebsa/pdf/conflictsofinterestria.pdf.

53 Id.

54 Id.

17

 
IV. The Re-Proposed Rule Reflects a Balanced Approach that Preserves Various

Business Models While Ensuring that Retirement Investors Will Receive Advice 

that is in Their Best Interest

The Department clearly listened to many of the concerns articulated by firms, industry 

organizations and consumer and public interest organizations in response to the Department’s 

2010 Original Rule and the Department has repeatedly assured all parties that it will do the same 

with the Re-Proposed Rule. The Department has been clear that it plans to use the comment 

period to make further refinements to address industry concerns while maintaining critical 

protections for Retirement Investors. The Department has repeatedly assured Congress and all 

interested parties (including Financial Institutions, industry organizations, and consumer and 

public interest organizations) that it welcomes their recommendations in order to promulgate a 

final rule that is workable across business models.

To assist the Department in promulgating a rule that is workable across business models, the 

Coalition devotes the remainder of its comment letter to identifying areas where we believe the 

Re-Proposed Rule can be clarified or improved to allow for a more practical application of the 

fiduciary standard to various business models. 

a. Coalition Supports the Proposed Revisions of Definition of “Fiduciary 

Adviser” Under ERISA with Suggestions for Modifications

Under the Department’s re-proposed definition, any individual receiving compensation for 

providing advice that is individualized or specifically directed to a particular plan sponsor, plan 

participant, or IRA owner for consideration in making a retirement investment decision is a 

fiduciary. As noted above, the re-proposed definition closes loopholes in the current five-part test, 

where many Advisers have no obligation to adhere to ERISA’s fiduciary standards or to the 

prohibited transaction rules. 

i. Mutual Understanding 

The Coalition understands and agrees that under the proposed definition of “investment advice,” 

a mutual understanding between the parties that the advice will serve as the primary basis for 

plan decisions should no longer be required. In the future, fiduciary status should rest on four 

criteria: (i) an understanding by the recipient (ii) that advice may be either individualized or 

specifically directed to the recipient (iii) for consideration by the recipient in making investment 

decisions for the applicable plan or IRA and (iv) will come within one of the four listed categories 

of recommendations. 

However, the Coalition believes that the applicable language in proposed 29 CFR § 2510.3-

21(a)(2)(ii) may need to be revised, since it could be interpreted as requiring a “meeting of the 

minds” as provided under the current regulations. The Department should make clear that a 

meeting of the minds is not required. We recommend that this requirement be amended to clarify 

that it can be met by reliance or an understanding by the recipient that the advice is individualized 

or specifically directed to the recipient. We believe that when looking at the issue of reliance, the 

determination should be based upon the reasonable expectation of the Retirement Investor.

18
ii. Pre-Contract Communications with Retirement Investors

The Re-Proposed Rule states that a written contract to trigger the BIC Exemption must be entered 

into prior to a recommendation “as to the advisability of acquiring, holding, disposing or 

exchanging securities or other property, including recommendations to receive a distribution of 

benefits or roll over assets from a plan or IRA.” The Coalition understands that the intention of 

the Re-Proposed Rule is to protect Retirement Investors; however, the Rule is unclear whether 

initial discussions, during which an Adviser is marketing or promoting his or her services to 

prospective Retirement Investors, constitute Covered Advice.

It is important for the Department to explicitly recognize that certain marketing and promotion 

activities must be allowed before a fiduciary relationship arises. The Coalition requests 

clarification that initial discussions, during which an Adviser is marketing or promoting his or her 

services, do not constitute Covered Advice. While the line between initial marketing 

communications and Covered Advice may at times be difficult to determine and may require a 

“facts and circumstances” analysis, we believe that the Department can provide broad guidelines 

and examples to help clarify the types of communications that constitute marketing and not

Covered Advice.

Broadly speaking, Covered Advice should include advice that is individualized to or specifically 

directed to the recipient for consideration in making an investment or investment management 

decision. This broadly includes recommendations that are provided to address the objectives or 

needs of a client after taking into account the client’s specific circumstances. Covered Advice 

should include, for example: 

• Communications that contain recommendations to purchase or sell investment products;

• Communications about investment products that encourage clients to purchase or sell 

investment products as well as communications that encourage clients not to purchase or 

sell investment products;

• Communications that contain recommendations of a particular investment or allocation 

strategy directed to the client or intended for the client’s consideration in making 

investment or allocation decisions; and 

• Technology that makes specific recommendations to users based on the users’ financial 

information. 

On the other hand, communications that do not make recommendations that are individualized to 

or specifically directed to the recipient for consideration in making an investment or investment 

management decision or otherwise promote a product or service of the Adviser or Financial 

Institution should not be considered Covered Advice. These types of marketing communications 

could include, for example:

• Discussing general investment and allocation strategies without reference to specific 

products;

19
• General marketing materials that are not targeted to a specific customer or group of 

customers; or

• Promoting the Adviser’s range of services.

While we believe that further clarification and guidance from the Department will be helpful, it 

cannot address with specificity all the types of communications and business activities that may 

constitute either Covered Advice or marketing communications. In addition, Advisers may, as a 

practical matter, need to provide recommendations that constitute Covered Advice prior to being 

able to execute a contract. To provide additional flexibility to Advisers to engage in pre-contract 

communications with Retirement Investors while ensuring protection of the Retirement Investor, 

we propose that the Department make clear that if a client is given advice prior to the execution 

of a contract, all the protections contained in the BIC Exemption, including the obligation to provide 

advice that is in the best interest of the client, apply retroactively to the advice.55

iii. Implementation and Enforcement Dates of Re-Proposed Rule

The Department has indicated that once the Re-Proposed Rule is finalized, there will be a delayed 

implementation date of eight months. The Coalition strongly supports setting a tight

implementation date given the immediate need for protection of Retirement Investors. However, 

the Coalition is concerned that eight months will not allow Financial Institutions and Advisers 

sufficient time to adjust compensation arrangements, to adopt new required policies and 

procedures, and to prepare necessary disclosures required under applicable exemptions, 

including, but not limited to, the BIC Exemption, discussed below. This concern is based upon the 

previous experience of CFP Board in implementing its own fiduciary standard, where CFP Board 

established an enforcement date that was six months after the implementation date. 

The Coalition suggests that the Department either retain the eight-month implementation date for 

the Re-Proposed Rule or allow a limited extension to no more than 12 months after the final rule 

is published. The Department should require Financial Institutions and Advisers to establish 

policies and procedures that reflect reasonable, good faith compliance with the new regulations

upon the implementation date. To allow flexibility for full implementation of all the requirements of 

the Re-Proposed Rule, the Coalition further suggests that the Department consider establishing 

phased-in enforcement deadlines for certain specific requirements, which may take additional

time to implement. For requirements under the BIC Exemption that may need additional time to 

fully implement (e.g., disclosure and recordkeeping requirements), the Department could approve 

the use of “contractual triggers” that would phase-in certain requirements after the date of the 

contract. Should the Department allow for phased-in requirements, the Coalition recommends

that this flexibility should not extend to the fundamental obligation to serve the best interest of the 

client and that all requirements must be fully implemented and enforceable by no later than one 

year after the implementation date of the final rule. 

55 See discussion infra Part IV.c.i.4. 

20

 
b. Coalition Supports the Proposed Carve-Outs from the Definition of What 

Constitutes “Fiduciary Investment Advice” Under ERISA

While substantially broadening the scope of the fiduciary regulation through the Re-Proposed 

Rule, the Department provides certain “carve-outs” that allow persons who may otherwise be 

deemed investment advice fiduciaries to be exempt from fiduciary status. The Coalition agrees 

that a majority of these carve-outs preserve certain common business practices within the 

retirement services industry for which fiduciary protections are not needed. 

i. General Education Carve-Out

The Coalition believes it is vitally important that the Department encourage generalized education 

and information about financial concepts (e.g., asset classes, asset allocation, etc.). The ReProposed Rule carefully carves out education from the definition of retirement investment advice

so that Advisers and plan sponsors can continue to provide general education on retirement 

saving across employment-based plans and IRAs without triggering fiduciary duties. Studies 

regularly show that the “financial literacy” of many Americans is much lower than needed to make 

well-informed financial decisions.56 The Coalition appreciates that the Department makes clear 

that generalized educational and informational materials, which clearly disclose that such 

materials are not tailored to a specific customer’s financial situation, do not by themselves 

establish fiduciary status in any plan context. 

The Re-Proposed Rule includes an education carve-out that allows for the use of allocation 

models, but would not allow for models to be populated with specific investment options. This 

current industry practice has been developed to meet requests from plan participants for guidance 

related to proper investment selection. However, the Coalition recognizes that providing this 

limited educational assistance may cross a line into providing back-door advice and understands 

why the Department has proposed this provision in the Re-Proposed Rule. Nonetheless, the 

Coalition respectfully suggests that the education carve-out as proposed be expanded to allow 

models to be populated as long as all of the investment options available to plan participants and 

IRA owners in a certain asset class are included. For example, if there are three funds that would 

be categorized as bond funds, all three can be listed in the allocation model and the carve-out 

would still apply. If there is only one fund in an asset class, the carve-out would also still be 

available. The Coalition recognizes that this suggested change would have greater application in 

the employer-sponsored retirement plan context, where a selection of core investment options is 

usually limited to between six and forty funds.

56 Financial literacy is especially important with regard to fees. For example, a 2012 study of 7,500 U.S. households 

by Cerulli Associates, in conjunction with Phoenix Marketing International, found that nearly two-thirds of investors 

either believed the advice they received was free (29 percent) or did not understand how the Adviser was paid (31 

percent). Cerulli Quantitative Update: Retail Investor Advice Relationships, Cerulli Associates (2012), at 224. Even 

with the heightened focus on financial literacy, the more recent 2014 study found that over half of investors still either 

believed the advice they received was free (26 percent) or did not understand how the Adviser was paid (25 percent). 

Cerulli Quantitative Update: Retail Investor Advice Relationships, Cerulli Associates (2014), at 22. 

21

 
c. Coalition Supports the Department’s Principles-Based Approach to 

Prohibited Transaction Exemptions (PTEs) Under ERISA with Requests for 

Clarification and Proposed Language to Allow for a More Practical 

Application of the Fiduciary Standard to Various Business Models 

The Coalition supports the Department’s new broad, principles-based PTEs that can 

accommodate a range of evolving business models, while preserving a strong fiduciary standard. 

We agree with the Department that the principles-based approach to PTEs streamlines 

compliance and gives Financial Institutions and Advisers the flexibility to determine how to serve 

Retirement Investors’ best interest. 

i. Best Interest Contract (BIC) Exemption

The Coalition supports the BIC Exemption. We believe it is a flexible, adaptable, business-model 

neutral approach to the application of the fiduciary duty under ERISA that will balance a number 

of competing interests. It will preserve a strong principles-based fiduciary standard while at the 

same time allow compensation models that will facilitate the delivery of services to middle-income 

Retirement Investors by placing the burden on Financial Institutions and Advisers to commit to 

putting their clients’ best interest first and to establish appropriate policies and procedures to 

mitigate conflicted advice. 

The exemption places the burden of making a determination regarding whether the compensation 

is reasonable on the Financial Institution and Adviser, not on the Retail Investor. Additionally, as 

noted above, by allowing commissions under the BIC Exemption the Department has rendered 

the findings of the 2011 Oliver Wyman Study, which were based on the assumption that 

commissions would be eliminated, irrelevant.

1. Exclusion of Small Participant-Directed Plans

The BIC Exemption would provide relief to fiduciary Advisers who earn variable compensation 

from retail Retirement Investors, such as plan participants and IRA owners, as well as sponsors 

of non-participant-directed plans with less than 100 participants, such as small defined benefit 

plans. We note that sponsors of small 401(k) plans and other small plans with participant-directed 

investments are omitted. 

The Coalition urges the Department to extend the BIC Exemption to cover small, participantdirected plans. If this relief is not provided, Advisers may be unable to earn variable compensation 

when selling investments to sponsors of these small plans. The Coalition views this as an 

unjustified anomaly, given that the BIC Exemption is intended to cover retail retirement clients, 

including the participants in such small plans. 

The extension of the BIC Exemption would prevent contraction of this market and ensure the 

continued availability of advisory services to small plans. Moreover, the extension of the BIC 

Exemption to small participant-directed plans would address the dilemma faced by platforms 

maintained by financial advisors that would normally provide assistance in selecting a menu of 

investment options for a 401(k) plan. These platform providers cannot qualify under the platform 

provider carve-out, because their advice would be directed to the specific needs of the plan, and 

22
the BIC Exemption, as currently proposed, would be unavailable to provide relief from ERISA’s 

prohibited transaction rules. Under these circumstances, many platform providers may feel 

compelled to leave plan sponsors to their own devices in selecting a plan investment menu. The 

Coalition believes that this especially vulnerable group needs to have as many forms of 

assistance available to it as possible, as long as appropriate standards — such as those 

established under the BIC Exemption — are in place.

2. Exclusion of Certain Assets from BIC Exemption

The Department’s Re-Proposed Rule limits availability of the BIC Exemption to certain listed 

investment products. These products include bank deposits and CDs, mutual funds, exchangetraded funds, bank collective investment funds, insurance company separate accounts, 

exchange-traded REITs, corporate bonds available under registered offerings and equity 

securities that are publicly traded. Also included are Treasury and agency debt securities, 

insurance and annuity contracts, and guaranteed investment contracts (GICs). 

Noticeably, this list does not include privately placed debt securities, non-traded REITs or 

alternative investments, such as hedge funds and private equity. Although the Coalition 

recognizes that such investments are being increasingly used by small plans such as defined 

benefit plans, we strongly support the Department’s proposed limitation on investments that 

qualify for the BIC Exemption. The Department’s analysis of such investments shows that they 

comprise only four percent of the retirement marketplace and that there may be valuation and/or 

liquidity issues that could arise. It is our position that if a provider wants to offer such investments 

to retail Retirement Investors, they can do so (1) under a compensation model that does not 

involve conflicted advice; or (2) by seeking an individual PTE from the Department to cover their 

proposed investment product.

3. Application of BIC to Rollover Advice by AUM Adviser

Under the Department’s Re-Proposed Rule, covered recommendations relating to investments in 

securities or other property will include recommendations to take rollovers from a plan, as well as 

investment recommendations for rollover assets. Further, the proposed definition also includes 

recommendations relating to the investment management of the assets of a plan or IRA, including 

rollover assets. In CFP Board’s experience, which includes investigation and discipline arising 

from complaints against its CFP® professionals, some of the greatest abuses have involved 

conflicted advice to plan participants to take a lump sum distribution from an employer sponsored 

retirement plan. Therefore, the Coalition sees this expansion of fiduciary investment advice, to 

include advice given in relation to IRAs, to be an important and necessary protection for 

Retirement Investors. 

Generally speaking, Advisers who charge fees for services, including assets under management, 

a flat retainer, a project fee or an hourly fee do not receive variable compensation for their advice 

and thus do not generally need the protection of a PTE to provide advice under ERISA (hereinafter 

these fee structures are referred to as “non-variable compensation”). 

23
However, the Coalition believes that in a very limited circumstance – when an Adviser who is 

being paid a percentage of assets under management makes a rollover recommendation that 

would increase the Adviser’s assets under management – this would be considered conflicted 

advice that would trigger the need for a PTE for that limited advice. This would include rollover 

advice to a participant or IRA owner, including advice to roll over assets from an employer-based 

plan to an IRA or roll over assets from an existing IRA to a new IRA where the advice results in 

an increase in assets under management. Given that an Adviser, who is compensated by assets 

under management, is generally subject to the requirements of a fiduciary duty under securities 

law and regulation,57 the Coalition respectfully requests that the Department consider a 

streamlined sister exemption to the BIC Exemption applicable to this limited circumstance (For 

convenience, we are referring to this proposed exemption as the “AUM Adviser Rollover 

Exemption”).

The Coalition proposes that this exemption be available to an Adviser who charges asset based 

fees that meet the fee leveling test under 29 CFR § 2550.408g-1(b)(3)(D).58 Under this 

streamlined exemption, the Department could require the Adviser to meet only a certain subset 

of the requirements of the BIC Exemption. We propose that these include (1) a written contract 

(as further described below with suggested changes), (2) the Best Interest Standard requirement, 

and (3) the required disclosures. We do not believe the remaining requirements of the BIC 

Exemption would be needed to protect Retirement Investors including, but not limited to, the 

development of policies and procedures to mitigate conflicted advice, the creation of a website 

and the recordkeeping obligations. The Coalition notes that its proposal to create a sister 

exemption that shares a subset of requirements is similar to the approach taken in 

29 CFR § 2550.408g-1. 

The Coalition again notes that this proposed AUM Adviser Rollover Exemption would only apply 

to and be needed for the limited Covered Advice of providing advice to a participant or IRA owner 

to roll over assets from an employer-based plan or an existing IRA to a new IRA. The AUM Adviser 

will no longer need to rely on a PTE to provide investment advice regarding the investment or 

57 In Financial Planning Association v. SEC, 482 F.3d 481 (D.C. Cir. 2007), the DC Circuit vacated SEC’s proposed 

Advisers Act Rule 202(a)(11)-1, which provided, among other things, that fee-based brokerage accounts were not 

advisory accounts and thus were not subject to the Advisers Act. Subsequent to the court’s decision, the SEC has 

provided interpretive, but not final, guidance reflecting that broker-dealers offering fee-based brokerage accounts are 

subject to the Advisers Act with respect to those accounts. See Interpretive Rule under the Advisers Act Affecting 

Broker-Dealers, Advisers Act Rel. No. 2652 (Sept. 24, 2007) (“Release 2652”) (The SEC has “long held the view that 

when a broker-dealer charges its customers a separate fee for investment advice, it clearly is providing advisory 

services and is subject to the Advisers Act”); see also Opinion of General Counsel Relating to Section 202(a)(11)(C) 

of the Investment Advisers Act of 1940, Investment Advisers Act Release No. 2 (Oct. 28, 1940) (“a broker or dealer 

who is specially compensated for the rendition of advice should be considered an investment adviser and not be 

excluded from the purview of the [Advisers] Act merely because he is also engaged in effecting market transactions 

in securities”).

58 Advisers may meet the fee leveling test as long as no “fiduciary adviser (including any employee, agent, or 

registered representative) that provides investment advice receives from any party (including an affiliate of the 

fiduciary adviser), directly or indirectly, any fee or other compensation (including commissions, salary, bonuses, 

awards, promotions, or other things of value) that varies depending on the basis of a participant's or beneficiary's 

selection of a particular investment option.”

24

 
management of assets once inside the IRA because such ongoing advice would not result in 

variable compensation and therefore would not be considered conflicted advice.

4. Execution of BIC Exemption – Operationalize for Various 

Business Models – New and Existing Clients

One of the central requirements of the BIC Exemption is a written agreement between the Adviser, 

Financial Institution and the Retirement Investor. The agreement must contain certain mandatory 

provisions and warranties. For example, under the terms of the agreement, the Adviser must 

acknowledge that it is a fiduciary for purposes of ERISA or the IRC, as applicable, with respect to 

the advice that is provided. Further, the agreement must incorporate the “impartial conduct 

standards” as defined under the BIC Exemption. In order to meet the written contract requirement, 

the proposed regulation requires an Adviser and Financial Institution to “enter into a written 

contract” with a Retirement Investor prior to the Adviser making a recommendation. The preamble 

to the BIC Exemption states this requirement somewhat differently and notes that “[t]he contract

must be executed” by the Adviser, Financial Institution and the Retirement Investor, before the 

recommendation occurs. However, the Coalition has a number of concerns with the contract 

requirement as proposed. 

First, the Re-Proposed Rule should include a requirement that the contract incorporate language 

to bind all parties who have provided Covered Advice to the Retirement Investor, which would 

include the Financial Institution, the Adviser, the call center Adviser, any former Adviser, and an 

Adviser’s team member(s). This requirement will ensure the right of Retirement Investors to hold 

past and present fiduciary Advisers accountable for providing advice in their best interest through 

a private right of action for breach of contract. 

Second, the contract requirements under the Re-Proposed Rule should be tailored for the type of 

client. For existing clients, the Coalition recommends that the Department recognize that 

notification by a Financial Institution of the new legally binding obligations required by the BIC 

Exemption meets the execution requirement for the contract, without the need for a client 

signature. In other words, the Department should make clear that the BIC Exemption allows for 

negative consent to create legally binding protections under the contract flowing from the 

Financial Institution / Adviser to the client. 

For new clients, the Coalition recommends that the Department build in flexibility with regard to 

the timing of the execution of the BIC contract to allow for client execution of the contract at the 

same time the client is required to sign an engagement or account opening agreement. These 

touch points for client signatures will vary based on the business model. To allow for flexibility but 

still protect the Retirement Investor, we propose that the Department make clear that if a new 

client is given advice prior to the execution of the contract, all the protections contained in the BIC 

Exemption, including the obligation to provide advice that is in the best interest of the client, apply 

retroactively to the advice. 

The Coalition proposes the following examples for touch points where a new client’s signature 

may be obtained in a manner that reduces the administrative burden on Financial Institutions and 

Advisers:

25
For CFP® professionals providing financial planning services and receiving variable 

compensation, the client’s signature can be obtained when the client signs the financial planning 

services agreement.59 The financial planning services agreement specifies: the parties to the 

financial planning services agreement; the date of the financial planning services agreement and 

its duration; how and on what terms each party can terminate the financial planning services 

agreement; and the services to be provided as part of the financial planning services agreement. 

The Adviser can include the required BIC exemption provisions in this agreement. 

For broker-dealers and broker-dealer registered representatives, the client’s signature can be 

obtained when the client opens his or her brokerage account. When the client opens a brokerage 

account, he or she must sign an account opening agreement. The account opening agreement 

will generally require the client to make decisions including: who will make the final decisions 

about what the client buys and sells in the account; how the client will pay for investments; and 

how much risk is the client comfortable taking. When opening a new account, the Financial 

Institution will also likely ask the client to sign a legally binding contract to arbitrate any future 

dispute between the client and the Financial Institution or Adviser. The Financial Institution can 

include the required BIC exemption provisions in this account opening agreement.

For insurance agents, the client’s signature can be obtained when the client submits his or her 

annuity or life insurance (collectively “insurance”) contract application. When the client applies for 

insurance, he or she must sign an insurance contract. The insurance contract generally includes:

the specific details of the contract, such as the structure of the insurance product being sold;

payment provisions (how the investment will operate and when the periodic payments will be 

made); and any penalties for early withdrawal (in the case of an annuity). The Financial Institution 

can include the required BIC exemption provisions in the insurance contract. 

Third, the Coalition recommends that the Department consider tailoring its contract execution 

requirements to accommodate certain types of business models. For example, the Coalition 

believes that it may be impractical to require call center Advisers to put in place an executed 

contract prior to providing assistance to plan participants or prospective clients, which can include 

potential advice (e.g. regarding rollovers). Contract execution requirements customized for call 

center business models could include (1) a requirement that only the Financial Institution needs 

to execute a contract with a new client; (2) that any call center Adviser who provides Covered 

Advice to the Retirement Investor is covered by that contract; and (3) that the contract retroactively 

includes any Covered Advice that may have been provided by the call center Adviser prior to the 

execution of the contract. 

5. Fee Structures that Meet the BIC Exemption Warranty

Under the BIC Exemption, the Adviser wanting to meet the BIC Exemption must, among other 

things, warrant that it has adopted written policies and procedures that are reasonably designed 

to mitigate the impact of material conflicts of interest. The Coalition strongly supports the 

59 See CFP Board Standards of Professional Conduct, Rules of Conduct 1.3 and 2.2(E), available at

http://www.cfp.net/for-cfp-professionals/professional-standards-enforcement/standards-of-professional-conduct/rulesof-conduct

26

 
Department’s proposed principles-based approach that provides Advisers with the flexibility to 

design policies and procedures that are specifically tailored to their business models. The 

principles articulated by the Department (e.g. “best interest,” duties of “prudence” and “loyalty,” 

and “reasonable compensation”) are all concepts that are well established in ERISA 

jurisprudence.

Opponents of the Re-Proposed Rule have charged that as a practical matter, level fee structures 

are required to satisfy the warranty despite the Department’s assurances in the Preamble to the 

Re-Proposed Rule that level fee structures are not required. For example, the Department 

specifically allows for variable compensation based upon neutral factors, such as the difference 

in time and analysis necessary to provide prudent advice with respect to different types of 

investments. For example, a Financial Institution could compensate an Adviser at different levels 

for advice related to the purchase of an annuity product versus a mutual fund based on the 

different level of complexity of the products, time to research the products and time to explain the 

products to the client.

The Department mandates that Financial Institutions “contractually warrant that [they have] 

adopted written policies and procedures that are reasonably designed to mitigate the impact of 

material conflicts of interest that exist with respect to the provision of investment advice to 

Retirement Investors.” The Coalition believes that this offers Financial Institutions latitude to 

adopt policies and procedures designed to mitigate conflicts that can work within various 

business models and offers the examples below as policies that would not necessarily require a 

level fee structure:

• Prohibit the use of quotas, appraisals, performance or personnel actions, bonuses, 

contests, special awards or other actions or incentives to the extent they would tend to 

encourage individual Advisers to make recommendations that are not in the best interest 

of Retirement Investors.

• Utilize an asset allocation model designed by an independent third party consultant for 

use by Advisers. 

• For product categories that are similar, develop a range of compensation amounts that 

the Financial Institution deems to be “reasonable compensation” based on acceptable 

ranges within the industry for the product category. Products can be clustered for 

determining the range of reasonable compensation by type, level of complexity, level of 

research/explanation required, risk factors, etc. 

• Refrain from providing higher compensation, or providing other rewards, for the sale of 

proprietary products or products from providers with which the firm has entered into 

revenue-sharing agreements.

• Restrict differential compensation to the Financial Institution level, with strict “Chinese 

wall” separation between firm-level and Adviser-level compensation such that there is no 

opportunity for an Adviser’s recommendations to be influenced by differential 

compensation flowing to the Financial Institution. 

27
• Avoid compensation thresholds where an Adviser can increase his or her compensation 

disproportionately after reaching a certain threshold of sales. In the context of 

compensation grids, paying an Adviser a higher percentage of gross revenue may 

legitimately reward hard work and encourage higher productivity. A conflict is created, 

however, if an Adviser’s desire to move to a higher payout level influences the number 

or type of recommendations he makes to customers.

• Link supervision and surveillance of Advisers’ recommendations to thresholds in a firm’s 

compensation grid structure. This can enable firms to detect recommendations, or 

potential churning activities that may be motivated by a desire to move up in the grid 

structure and, thereby, receive a higher payout percentage.

• Develop a surveillance program to identify spikes in Advisers’ sales of a particular 

product, so that if a significant increase is discovered, an analysis can be conducted 

regarding recommendations of that product.

• Decline to offer products where Advisers and Financial Institutions cannot effectively 

mitigate conflicts arising from product.

• Use red flag processes and clawbacks to penalize employees for not properly managing 

conflicts of interest:

o Red Flags: Develop metrics for bad behavior (red flags), assess employee 

performance against those metrics, and base compensation decisions on that 

performance.

o Clawbacks: Include a contractual clause that allows a firm to revoke some or all 

of an employee’s deferred compensation, in some cases including vested 

compensation.

6. Disclosure Obligations to the Retirement Investor

Under the BIC Exemption, the Financial Institution and Adviser must provide a series of 

disclosures including specific contractual, point of sale, annual, and website disclosures. The 

Coalition fully supports the contractual and annual disclosure requirements. These are reasonable 

and appropriate requirements that provide the Retirement Investor important protections and 

needed transparency related to the costs paid by the Retirement Investor and compensation 

received by the Financial Institution and Adviser. 

However, the Coalition is concerned that components of the point of sale and website disclosures

are overly burdensome and that the benefits of some of these disclosure requirements to the 

Retirement Investor may not justify the cost. The Coalition urges the Department to identify the 

disclosure requirements that can be removed from the BIC Exemption while still providing the 

Retirement Investor with information that is vitally needed about costs and services. As such, the 

Coalition suggests the following amendments to the proposed rule.

28
Point of Sale Disclosure: The Coalition fully supports the requirement that the “total cost” of 

investing in an asset be disclosed to the Retirement Investor at the point of sale. It is particularly 

important for the Retirement Investor to fully understand all the costs, direct and indirect, 

particularly those that will reduce the amounts received by the Retirement Investor.

60 However, 

the Coalition is concerned that requiring the “total cost” for the 1-, 5-, and 10- year periods, using 

reasonable assumptions about investment performance, raises a number of issues. While 

projected costs may be available in the mutual fund context,61 it may be much more difficult with 

respect to other investment products. We believe that projections concerning investment 

performance would not be useful to Retirement Investors if they were based on many caveats or 

grossly understate performance. For these reasons, FINRA rules prohibit the projection of future 

investment performance, including that investment performance illustrations must not imply that 

gain or income realized in the past will be repeated in the future.62

Given the difficulties involved in projecting investment performance, the Coalition suggests that 

the Department limit this disclosure requirement to information that is known or reasonably known 

at the time of the transaction. If the Financial Institution obtains updated information, it will have 

an obligation under the annual disclosure requirements to disseminate such information to the 

Retirement Investor. Moreover, we recommend that the point of sale disclosures should rely on 

information available from objective third-party providers of independent investment research

rather than on proprietary information developed by the Financial Institution that has the potential 

for conflicts of interest.

Website Disclosure: The Coalition is concerned that the website disclosures required in the ReProposed Rule may be overly broad and not needed for full disclosure of costs to the Retirement 

Investor. The rule would require website disclosure of all direct and indirect compensation that 

the Adviser may obtain on every Asset as well as disclosure in machine-readable format of all 

direct and indirect material compensation payable to the Adviser, Financial Institution and any 

Affiliate. 

The Coalition recommends that the Department modify these requirements to remove the 

disclosure requirements for Adviser-level compensation. Publication of this type of information is 

not needed by Retirement Investors, who are already being provided with their Advisers’ 

compensation. At the same time it could be used by competitors in ways that are damaging to 

Financial Institutions and Advisers. Instead, the type of information that should be disclosed on

the publicly available website should be the type that would allow investors the opportunity to 

engage in comparison shopping across Financial Institutions by identifying the range of products 

60 Other important disclosures include: name of product/recommendation; purpose of product/recommendation; 

stated charges of the product if readily available; advantages and disadvantages of product/recommendation based 

on the client’s goals and objectives; surrender charges that may exist and for how long; and the liquidity of 

product/recommendation. 

61 Mutual fund prospectuses provide 1-, 5-, and 10- year costs, but are based upon a static return. For example, the 

Vanguard 500 Index Fund summary prospectus provides a cost projection based upon a 5% return each year. See

Vanguard, Vanguard 500 Index Fund Summary Prospectus, Apr. 28, 2015, available at

https://personal.vanguard.com/pub/Pdf/sp40.pdf?2210099878. 

62 FINRA Rule 2210(d)(1)(F), available at 

http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=10648. 

29

 
offered and by disclosing the range of compensation within the assets and the asset classes 

offered. 

7. Reliance on Home Office for Disclosure

Among other things, the written contract required by the BIC Exemption must include various 

warranties from the Adviser. The Adviser must warrant that it will comply with all federal and state 

laws. It must also warrant that the Financial Institution has adopted compliance policies 

reasonably designed to mitigate conflicts of interest and that it has eliminated any incentives that 

would encourage Advisers to make recommendations that are inconsistent with the best interest 

fiduciary standard. Importantly, a huge amount of financial and investment performance 

information must be disclosed along with maintenance of a website. Compliance would be 

extremely difficult for an individual Adviser, even one associated with a large advisory or 

consultative practice. 

The Coalition suggests that the Department consider amending these extensively detailed 

requirements to allow individual Advisers to reasonably rely on documentation prepared by their 

broker-dealer, platform or custodian without penalty if the details of the contract or investment 

disclosures are made in good faith but contain minor deficiencies. The Adviser would still be held 

to the standards outlined in the warranties, as would the home office. 

8. Department’s Public Notice of BIC Exemption

Under the BIC Exemption, a one-time notice must be filed with the Department before an Adviser 

or Financial Institution may receive any variable compensation based on the proposed relief. The 

filing does not need to identify the Financial Institution or Adviser’s plan clients or IRA clients, and 

does not need to be approved by the Department. While there is no substantive approval process 

or waiting period once the notice is filed, the Coalition is concerned that the process does not 

entail any acknowledgement by the Department that the filing has been made, or any public 

transparency regarding which entities are relying on the BIC Exemption. Accordingly, the 

Department should establish a publicly accessible registry where filings can be electronically 

verified and viewed. This would allow Advisers to electronically verify and review their submission 

as received by the Department and would also have the added benefit of providing transparency 

to the public that may utilize their services.

9. Recordkeeping Obligations

Under the Re-Proposed Rule, Financial Institutions must maintain, and upon request, disclose to 

the Department, information related to inflows, outflows, holdings, and returns for six years from 

the date of a transaction subject to the BIC Exemption. Under the Re-Proposed Rule, the 

Department may publish this data to the public. 

The Coalition supports the six-year retention requirement; this is consistent with current retention 

obligations under FINRA and SEC rules.63 However, the Coalition has concerns about this 

information being made available to the public. The Coalition believes that the Department should 

63 See 17 CFR § 240.17a-3, 17 CFR § 240.17a-4, and 17 CFR § 275.204-2 (2015). 

30

 
retain this information for enforcement purposes, but should not publish it due to potential 

disclosure of privileged information and trade secrets. We are also concerned that publishing 

performance data on all Advisers will be harmful to the industry and not benefit Retirement 

Investors. Instead, the Coalition recommends that this data be protected under the Freedom of 

Information Act (FOIA) guidelines. If a Retirement Investor needs this information as part of an 

arbitration or lawsuit, he or she will be able to receive it through normal discovery mechanisms.

10. Definition of Related Entities

The BIC Exemption addresses compensation received by Affiliates or Related Entities, with the 

latter defined as entities other than Affiliates in which an Adviser or Financial Institution has an 

interest that may affect the exercise of their best judgment as fiduciaries. The Coalition believes 

this definition is vague and subject to an overly broad interpretation. For example, the Coalition 

recognizes that many Advisers have other providers with whom they prefer to work for entirely 

proper reasons, including trusting their judgment and expertise. Under the Re-Proposed Rule, it 

could be argued that such a relationship could trigger the “Related Entity” definition. 

The Coalition requests that the Department amend the Re-Proposed Rule by providing a clearer 

definition of Related Entity that might draw upon the specificity of the party in interest definition

under ERISA. The Department should provide in the final rule examples of the kind of 

compensation received by a Related Entity that would violate the exemption, but the examples 

should not be broader than what would be allowed under the prohibited transaction rules found 

in ERISA § 406.64

ii. Proposed Low Fee Exemption

The Department has asked for comment on whether the final rule should include a new “low fee 

exemption” that would allow firms to accept “conflicted” payments when recommending the 

lowest-fee products in a given product class. The Coalition does not support the creation of a low 

fee exemption.

While cost is a significant factor in a prudent process to select an investment, it is not the only 

factor and may not be the most important. The Coalition believes that the lowest cost product may 

not always be in the best interest of the Retirement Investor and that this exemption may provide 

an incentive for Advisers to recommend a lower-fee product even though a higher-fee product 

may be in the client’s best interest. Instead, the Coalition believes that when the Re-Proposed 

Rule becomes effective, the protections inherent in the best interest requirement will naturally 

favor lower cost products when they are in the Retirement Investor’s best interest. In sum, such 

a model should be left to the competition of the marketplace operating under a best interest 

standard.

64 See 29 U.S.C § 1106 (2012). 

31

 
d. Coalition Supports the Department’s Expanded Enforcement Policies With 

Proposed Safeguards for the Consumer 

The Coalition commends the Department for recognizing, as part of the BIC and Principal 

Transaction Exemptions, the right of Retirement Investors to hold fiduciary Advisers accountable 

for providing advice in their best interest through a private right of action for breach of contract. 

We believe this provision is an appropriate and necessary enforcement mechanism that gives 

teeth to the PTEs. This option is especially important for advice regarding IRA investments. Under

current law, neither the Department nor the Retirement Investor who is harmed can hold the 

Adviser accountable under ERISA for the losses the IRA Retirement Investor suffered. The threat 

of private action will provide a strong incentive for Advisers and Financial Institutions to meet their 

fiduciary obligations under the Re-Proposed Rule and have practices and procedures in place to 

mitigate conflicted advice. 

Given the significant barriers to the use of class actions to enforce the BIC Exemption, as noted 

above, the Coalition proposes the following modifications aimed at balancing the interests of 

Financial Intuitions and Retirement Investors by ensuring that class actions are a practical, 

available, and truly enforceable option for Retirement Investors.

First, we are concerned with the ability and limited resources of arbitrators and state court judges 

to enforce the protections that have developed in the last forty years of ERISA jurisprudence. 

Thus, the Coalition believes the Re-Proposed Rule should be amended to require that the BIC 

Exemption contract include pre-drafted language approved by the Department that spells out very 

clearly the Best Interest Standard. This will be as close a substitute as possible to what the BIC 

Exemption cannot do, which is to mandate the use of federal law.

Second, the rule should be amended to disallow venue selection clauses in BIC Exemption 

contracts. These types of clauses can be very detrimental to Retirement Investors looking to 

enforce their rights. A Retirement Investor should have the right to sue in any venue allowed under 

the formal court procedural rules to enforce his or her rights.

Finally, the Department should acknowledge in the Re-Proposed Rule that in certain 

circumstances, ERISA may preempt any state law contract claims available to a Retirement 

Investor under the BIC Exemption. The governing law for a claim can significantly affect a party’s 

rights in litigation. For example, parties have six years to file a lawsuit under ERISA if they don’t 

have actual knowledge of a claim, while under state law they might have ten years to bring a 

breach of contract claim. The Coalition further recommends that the Department require that the 

BIC Exemption contract disclose the potential for an ERISA preemption in specific language 

provided by the Department consistent with our earlier recommendations.

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e. The Coalition Believes that the Department’s Regulatory Impact Analysis 

Has Met the Requirements Imposed by Law

The Administrative Procedure Act (APA)65 and Executive Orders 1286666 and 1356367 require 

federal agencies to provide the public and the Office of Management and Budget (“OMB”) with a 

careful and transparent analysis of the anticipated consequences of economically significant 

regulatory actions, a “Regulatory Impact Analysis.” 

According to the Office of Information and Regulatory Affairs (“OIRA”), the OMB office that plays

a key role in coordinating the review of Federal regulations, “the purpose of the Regulatory Impact 

Analysis is to inform agency decisions in advance of regulatory actions and to ensure that 

regulatory choices are made after appropriate consideration of the likely consequences.”68 That 

is, to (1) establish whether Federal regulation is necessary and justified to achieve a social goal 

and (2) design any such regulation in the most efficient, least burdensome, and most costeffective manner. 

A comprehensive Regulatory Impact Analysis will generally include three basic elements: (1) a 

statement of the need for the regulatory action; (2) a clear identification of a range of regulatory 

approaches; and, (3) an estimate of the costs and benefits of the proposed regulatory action and 

its alternatives, and should be based on the best available scientific, technical, and economic 

information.

The Coalition believes that the Department’s Regulatory Impact Analysis has met the 

requirements of the APA and Executive Orders. 

The Department provided a statement of the need for the regulatory action. The Department 

contends that the current rule, which substantially narrowed the broad statutory language 

conferring fiduciary status on all persons rendering investment advice for a fee to a plan or an 

IRA, has been overtaken by subsequent and dramatic changes in the design, operation, and 

marketing of employer-sponsored retirement plans with a resulting increase in the need for expert 

financial advice. Additionally, the Department states that “IRAs’ important role in retirement 

security, which warrants special protections against conflicts in advice, underscores the need for 

the new proposal to ensure the broad application of these protections” and that these consumer 

protections should go beyond those applicable to other retail investment accounts.

The Department has provided a clear identification of a range of regulatory approaches. The

Regulatory Impact Analysis discusses the regulatory alternatives that the Department considered 

before settling on the Re-Proposed Rule. These alternatives include: (1) excluding IRAs in whole 

or part from the rule; (2) not issuing the PTEs; (3) adopting the statutory definition of fiduciary 

65 Administrative Procedure Act, 5 U.S.C. §§ 551-559 (2012).

66 Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735, Oct. 4, 1993.

67 Executive Order 13563, “Improving Regulations and Regulatory Review,” 76 FR 3821, Jan. 21, 2011.

68 OIRA, “Regulatory Impact Analysis: A Primer,” available at 

https://www.whitehouse.gov/sites/default/files/omb/inforeg/regpol/circular-a-4_regulatory-impact-analysis-aprimer.pdf. 

33

 
advice; (4) relying heavily on disclosure as an adequate consumer protection; (5) deferring this 

rulemaking until the SEC takes related actions; (6) treating certain ESOP valuations as fiduciary 

advice; (7) conditioning the PTEs on disclosure alone; (8) issuing a streamlined, “low-fee” PTE; 

(9) issuing a prescriptive PTE in lieu of the proposed “best interest contract” exemption; (10) 

prohibiting mandatory binding arbitration; (11) adjusting the date by which affected advisers must 

comply; and, (12) delaying the Re-Proposed Rule’s compliance date.69

The Department has provided an estimate of the costs and benefits of the proposed regulatory 

action and its alternatives. As noted above, the Department estimates that the compliance cost 

associated with the proposal will total between $2.4 billion and $5.7 billion over 10 years.70 If the 

Department adopts some of the Coalition’s proposed revisions to its rules, including the 

contracting, disclosure and recordkeeping requirements associated with exercising the BIC 

Exemption, these estimated compliance costs could be reduced. Additionally, the Regulatory 

Impact Analysis “quantifies” gains of between $40 billion and $44 billion over 10 years and 

between $88 billion and $100 billion over 20 years. Under the Regulatory Impact Analysis, the 

benefits to Retirement Investors significantly outweigh the projected costs to the financial services 

industry.

71 

V. Conclusion

The Coalition commends the Department for taking steps to enhance protections for Retirement 

Investors. We believe that there is no justification for applying different standards of care to 

Advisers who are offering the same services to Retirement Investors and that a strengthened 

fiduciary rule is necessary and appropriate for Advisers and Financial Institutions under ERISA. 

The current regulatory framework allows Advisers’ and Financial Institutions’ interests to be 

misaligned with Retirement Investors’ interests. Specifically, the current fiduciary definition under 

ERISA includes significant loopholes that allow for the sale of products that may not be in the best 

interest of the Retirement Investor. Importantly, while many Advisers seek to do what is best for 

their customers, others take advantage of regulatory gaps to steer their clients into high-cost, 

substandard investments that pay the Adviser well but eat away at Retirement Investors’ nest 

eggs over time. The Coalition believes that requiring an Adviser to work in the Retirement 

Investor’s best interest is an essential and long overdue reform. We urge the Department to move 

forward expeditiously with a final rule that incorporates proposed adjustments designed to make 

it more workable for Advisers and Financial Institutions without sacrificing provisions designed to 

protect Retirement Investors.

69 U.S. Dep’t of Labor, Fiduciary Investment Advice: Regulatory Impact Analysis, Apr. 14, 2015, available at

http://www.dol.gov/ebsa/pdf/conflictsofinterestria.pdf.

70 Id.

71 Id.

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The Coalition appreciates the opportunity to comment on the Department’s re-proposed changes 

to the definition of the term “fiduciary.” We would be happy to meet with the Department to discuss 

these important issues further. If you have any questions regarding this comment letter or the 

Coalition, please contact Marilyn Mohrman-Gillis, Managing Director, Public Policy and 

Communications, CFP Board, at (202) 379-2235 or MMohrman-Gillis@CFPBoard.org. 

Sincerely,

Kevin R. Keller, CAE

Chief Executive Officer

CFP Board

Lauren Schadle, CAE

Executive Director/CEO

FPA®

Geoffrey Brown, CAE

Chief Executive Officer

NAPFA

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