July 21, 2015

Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Conflicts of Interest Rule

Room N-5655

U.S. Department of Labor

200 Constitution Avenue, NW

Washington, DC 20210

Office of Exemption Determinations

Employee Benefits Security Administration

(Attention: D—11217)

U.S. Department of Labor

122 C St. NW

Suite 400

Washington, DC 20001

Re: RIN 1210-AB32

ZRIN: 1210-ZA25

Ladies and Gentlemen:

PlanMember Financial Corporation (“PlanMember Financial”) and its 

affiliates welcome the opportunity to comment on rulemaking proposals RIN 

121—AB32 (the “Fiduciary Rule”) and ZRIN 1210-ZA25 (the “Best Interest 

Contract Exemption” or “BICE”)(together, the “Proposals”). PlanMember 

Securities Corporation (“PlanMember”), a subsidiary of PlanMember 

Financial, is a broker-dealer and investment adviser registered with the U.S. 

Securities and Exchange Commission. PlanMember offers programs 

primarily intended to assist citizens, particularly employees of school systems 

and non-profit organizations, in investing their retirement savings. We offer 

our programs through a nationwide network of nearly 500 independent 

financial advisors; we have approximately 140,000 customer accounts, who 

have invested approximately $8 billion through PlanMember.
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July 21, 2015

PlanMember is a member of both the Financial Services Institute, Inc., and 

the National Tax-deferred Savings Association, which in turn is part of the 

American Retirement Association. PlanMember concurs with the comments 

filed or to be filed by both of those organizations.

We begin by acknowledging the efforts and good intentions of the 

Department of Labor in formulating the Fiduciary Rule and BICE. The 

encouragement, growth, protection, and access to retirement savings of 

individuals are of paramount importance to the economy and well being of 

the United States. As a participant of the financial services industry that 

assists individuals in their efforts to save for retirement, we understand the 

importance of providing these services in a cost effective, ethical and efficient 

manner. However, we also believe that it is of paramount importance that 

individuals be able to seek, choose, and obtain competent and individualized 

advice with respect to the investment programs and products that best serve 

them and their unique retirement goals and objectives. 

Unfortunately, after much study and consideration, we have reached the 

conclusion that the Fiduciary Rule and BICE, as proposed, will hinder the 

ability of independent financial advisors to provide much needed personalized 

advice and assistance to individuals (“investors”) in their efforts to 

accumulate, invest, and access their retirement savings. We believe strongly 

that this would do a great disservice to many investors who prefer to obtain 

these services from an independent business person in their community, 

rather than from an internet website that does not know these investors 

personally. Some of these investors prefer—and are willing to pay a 

premium for—the personal attention of a human being who has worked with 
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them for years and who has substantive knowledge of the investors’ personal 

and financial interests.

The PlanMember Approach

Many PlanMember financial advisors work with education professionals and 

employees of non-profit organizations to establish and use retirement savings 

accounts pursuant to Sections 403(b) and 457(b) of the Internal Revenue 

Code (“savings accounts”). While most of these accounts are not covered by 

ERISA—and are not, therefore, affected by the Proposals, many investors 

approaching retirement must decide whether to rollover their savings 

accounts into Individual Retirement Accounts (“IRAs”). At that time, these 

investors often seek the help of the PlanMember financial advisor who 

assisted them in establishing their savings account and who is familiar with 

the investments in the savings account. Typically, the initial conversation 

concerning a rollover will include a discussion of the current investments in 

the savings account and the type of investments that are likely to be 

desirable in an IRA. Such a discussion may not be concluded in a single 

conversation, but may extend over several weeks or months. 

During this discussion, the PlanMember financial advisor will explore not 

only the investor’s investment objectives, but also the investor’s financial and 

personal needs—which factors may affect the investment objectives in ways 

not immediately understood by the investor. The PlanMember financial 

advisor will guide the investor through a planning and budgeting process; as 

part of this process, the advisor and the investor will assess the investor’s 

likely expenditures during retirement—defining expenditures as essential, 

important, or discretionary. This is a detailed, complex process, which may 

involve facing up to some unpleasant truths. It is difficult to envision this 

process being guided by a software program instead of a human being.
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July 21, 2015

Some investors may desire to establish an IRA in which they can actively 

manage their retirement savings, with occasional investment advice from 

their advisor. Other investors may seek to establish an investment program 

from which they receive a periodic distribution of a guaranteed amount 

without further participation by the investor or his advisor. Some investors 

may wish to establish an investment program that preserves substantial 

capital for the care of his or her dependents or heirs; others are more 

interested in maximizing their income without the need to preserve capital. 

Many PlanMember investors find that their financial advisor is an invaluable 

assistant in determining their financial goals as well as the investments best 

suited to reach those goals. Furthermore, most investors understand that it 

is more costly to obtain this individual level of attention and assistance; they 

find these services to be worth the premium that they may pay to obtain this 

assistance. Metaphorically, it is like individuals who join a health club for 

their physical health. Some are satisfied merely to have access to the 

equipment and resources of the club—they feel comfortable mapping out 

their own work-out program; others desire or need a personal trainer to 

determine their needs, map out a program, teach them to use the equipment, 

and provide ongoing motivation to pursue the program. At PlanMember, we 

believe that investors should be able to pursue the level of service with which 

they feel comfortable.

We do not believe that individual investors or participants in small 

retirement plans will be well served by so-called “roboadvisers” that are 

willing to services millions of small accounts, so long as they can fit 

themselves into one of a limited number of investment shoeboxes. Nor do we 

believe that these investors will be well served by mega-investment firms 

that can spread the cost of compliance and regulatory disclosure over many 
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accounts, so long as the accounts can meet the multi-hundred-thousanddollar minimums. However, to the extent that the Proposals:

• institute prohibitively costly compliance regimens, or 

• make it extremely difficult to carry on sensitive discussions 

without first dealing with mountains of paperwork—much of it 

confusingly similar to (or different from) that currently required 

by other regulators, or 

• require “mom-and-pop” investment shops to engage in a major 

information technology effort well beyond their means, or 

• effectively prohibit the use of investment vehicles that are 

appropriate and suitable for many investors, 

We believe that the Proposals should be reconsidered in light of the many 

comments that have been and will be filed to ensure that the unexpected 

results of the regulatory regime will not adversely affect the very investors 

that they were intended to protect.

Specific Comments

Recognition of existing standards of conduct

The tone of the Proposals implies a conclusion that financial advisors are not 

currently subject to stringent standards of conduct. The Proposals would 

impose the Best Interest and Impartial Conduct Standards on financial 

advisors already subject to standards of conduct adopted by their primary 

regulators, such as the fiduciary standard under the Investment Advisers Act 

of 1940 and the suitability standard under the rules of the Financial Industry 

Regulatory Authority (“FINRA”). Although these standards have been much 
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July 21, 2015

maligned, a strong argument can be made that they protect investors as 

thoroughly as the standards in the Proposals.1

While the intent of the Proposals to promulgate a standard of conduct 

particularly applicable to investors saving for their retirement, the 

imposition of such new standards will also have unintended adverse 

consequences. Among these are:

• the uncertainties of interpretation of a novel set of rules;

• the likelihood of litigation until such interpretations are fully 

developed; and

• the possible conflict between the standards set by the primary 

regulators and those contained in the Proposals.

While these factors may not appear to have any direct effect on investors, 

they will have a direct effect on financial advisors that currently provide 

services in this sector—with an inordinate adverse effect on small advisors. 

To the extent that small advisors are disadvantaged in the retirement 

savings market, they may decide to withdraw from the market altogether. In 

the aggregate, the withdrawal of independent advisors will reduce the choices 

available to investors—both in terms of sources of advice, and in terms of the 

type and depth of service available. Once again, we would urge that the 

Department not take actions that will serve primarily to reduce the choices 

available to investors without providing a substantive increase in benefits.

Reconsideration of Disclosure Requirements

The financial advisors who provide services to retirement investors are 

currently subject to extensive disclosure regimes, covering both their 

																																																							 1 Steven	W.	Stone,	et	al.,	“Department	of	Labor	Retirement	Initiative	Fails	to	

Consider	Current	Regulatory	Regime...”	Morgan,	Lewis	&	Bockius	LLP,	March

2015.
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services2 and the managed investment products that they offer.3

Furthermore, the existing disclosure requirements have been developed over 

many years of trial and tribulation. While there may be a need for certain 

retirement-oriented disclosures to be made to investors upon establishing a 

retirement account, much of the disclosure envisioned by the Proposals is 

substantially duplicative and confusingly similar to that already required by 

other financial regulators. 

For example, Section III(a)(1) of the BICE calls for the Total Cost of an Asset 

for 1-, 5-, and 10-year periods expressed as a dollar amount. This disclosure 

is substantially the same as the fee table required by Item 3 of Form N-1A, 

the SEC registration statement for mutual funds, with two significant 

differences. First, the BICE disclosure must be expressed as a dollar amount, 

rather than as a percentage of offering price or assets. While the Department 

may feel that this provides potential investors with information that they 

would not otherwise be able to discern from the prospectus fee table, we 

would submit that this gives investors too little credit—after all, investors 

are bombarded hourly with advertisements for retail products that trumpet 

“10% off” without any obvious deleterious effects. 

The second difference is that at least one of the requirements of BICE is 

directly opposite the disclosure philosophy of the SEC and FINRA. Section 

III(a)(1) of BICE call for disclosure of the Total Cost “of investing in the Asset 

for 1-, 5-, and 10-year periods...assuming...reasonable assumptions about 

																																																							 2 E.g.,	Form	ADV	for	investment	advisers	and	Form	BD	for	broker-dealers.		(Form	

BD	is	indirectly	available	to	investors	through	the	Broker-Check	system	offered	

by	FINRA.)

3 Prospectuses	required	for	both	open-end	investment	companies	(mutual	funds)	

and	variable	annuities	as	prescribed	by	the	Investment	Company	Act	of	1940	

and	the	rules	thereunder	promulgated	by	the	U.S.	Securities	and	Exchange	

Commission	(“SEC”).
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investment performance that are disclosed.” The SEC and FINRA have 

repeated expressed their opposition to the use of projected performance and 

cost, preferring only the disclosure of past, actual information. Item 3 of 

Form N-1A does not permit projected or future performance to be used for 

purposes of cost determination; rather, only past costs can be used. To the 

extent that a product has not been in existence for a 5-year period, costs since 

inception of the product are given. We strongly suggest that the Department 

withdraw this requirement.

Website Disclosure

Section III(c) of BICE requires that a Financial Institution maintain a Web 

page with substantial information regarding Assets that may be or have been 

offered to IRA investors. We would note that many small financial 

advisors—who may provide services to IRA investors—do not maintain a 

website; this requirement would force a hardship on such advisers, either 

requiring them to expend a substantial amount of time, effort and money to 

create a website solely for the purpose of providing this disclosure or abandon 

their IRA investors, current and prospective. 

Furthermore, we believe that much of the disclosure called for by this section 

of BICE is duplicative of that required by the SEC and FINRA with respect to 

both services and investment products offered to IRA investors. We have 

reservations whether IRA investors would have interest in knowing this 

information with respect to products that they have no intention of 

purchasing or considering for purchase.

Finally, we believe that the cost of establishing and maintaining such a Web 

page would discourage many small and independent financial advisors from 

continuing their involvement with IRA investors—thereby leaving such 
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investors to a choice between a substantially larger firm (if they have the 

requisite account size) or a roboadviser. 

Increased Legal Risk

 As noted above, the Proposals would impose a substantial number of new 

requirements on financial advisors, including duplicative and confusingly 

similar disclosures, expansive terms and concepts without proven definitions, 

and untested contractual terms. All of these requirements provide the 

opportunity for litigation by aggressive members of the plaintiffs’ bar. Such 

litigation—whether or not genuine in intent—will have the aggregate effect 

of placing financial advisors at risk. For example, will a financial advisor 

who offhandedly answers an investor’s question about a particular security 

be held to have violated the BICE because he did not have a contract in 

place—even though it is six months later when the investor calls to open an 

IRA? Even though Department staffers may assure advisors that this will 

not be the case, it will be in the hands of the courts to make the final 

decisions—and some will not follow the advice of the Department.

Large advisory and brokerage firms may be able to take such litigation in 

stride—and may be able to afford the increased costs of errors and omissions 

insurance resulting from such litigation. However, smaller independent 

advisors operating on a narrow profit margin will strongly consider the 

additional risk—and insurance costs—they may incur when working with 

IRA investors, and decide that the risks do not justify the benefits. These 

decisions are not generally due to a single large risk, but due to a large 

number of small, incremental risks.
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In closing, we would note that Secretary Perez expressed his pleasure with 

the ability of Wealthfront, a roboadviser, to manage small accounts efficiently 

and inexpensively. But a founder of Wealthfront has stated that investors 

likely to choose his firm “aren’t in the middle of the country and they don’t 

need handholding.”4 In our experience, it is the small independent financial 

advisors who are in the middle of the country and do provide the 

handholding. 

We strongly urge the Department to consider the impact that this 

requirement may have on smaller financial advisers, and whether the cost to 

provide this information in this format outweighs the foreseeable loss of 

many small financial advisors that currently service these markets.

* * *

In closing, we again would like to express our appreciation for the 

opportunity to comment upon the Proposals. We acknowledge the effort and 

thought that the Department has expended in the development of the 

Proposals. However, we believe that the adoption and implementation of the 

Proposals in their current form would greatly and adversely affect the 

availability of financial advice to small investors as they seek to save for their 

retirement.

Respectfully submitted,

PLANMEMBER FINANCIAL CORPORATION

Byron F. Bowman

General Counsel

																																																							 4 “Wealthfront	takes	on	Wall	Street—Silicon	Valley	Style,”	Paul	Sloan,	CNET,	

December	1,	2011.