even harder for these efforts to succeed by deepening the divide between minority communities
and the financial representation they desire. The end result harms our diverse communities the
most by reducing access to affordable financial education and advice. The effect will likely be
fast growing communities that are even more vulnerable and less prepared for their retirement
years.

We urge the Department to withdraw and reconsider the Proposed Rule, as it likely will
significantly add to the already difficult challenge that African American communities have of
locating personal financial representatives who can help them meet their basic financial and
retirement savings needs.

Sincerely,

Chairman


will be left without tax-deferred savings options unless they are able to successfully navigate the
overwhelming and complex online universe. Unfortunately, middle-class Americans are not
comfortable using online technologies to purchase investment products or receive investment
advice, and comfort levels appear to decrease with age and be higher for college graduates than
for those without a college degree.!° In short, initiating saving for retirement through an online
provider is not something most workers are comfortable doing.” In fact, minority workers are
more likely to use advice from an affordable financial professional rather than using other means
like the Internet.?! As a result, it is critical that African Americans have affordable access to work
one-on-one with a personal financial representative that provides the opportunity to give
immediate answers to questions.” Working with a commission-based representative provides that
affordable access for African Americans, while fee-based advisers provide access to only the more
affluent.

Our final concern is that the Proposed Rule only applies to IRAs and tax-deferred vehicles but
does not apply to taxable accounts. This backs us into an unwanted corner where all we will have
to respond to the retirement savings needs of many middle-income investors is taxable accounts
instead of tax-deferred retirement accounts. Having one standard for retirement accounts and a
different standard for all other accounts will create even more confusion and complexity for
individuals than already exists.

It is important to understand that our members carry a legacy within their respective communities.
That legacy transcends the transaction of doing business. Our families have often been members
of the communities they serve for generations. As one of our members said, “My family had a
reputation to uphold, and I always told myself that I never wanted to do business in a manner
where I was walking down Main Street, and I saw one of my clients walking toward me that I felt
like because I had not done the right thing I would have to cross the road and not face them. I
always wanted to maintain a ievei of trust, a ievel of respect, and make sure that people look
favorably on my business dealings in that city.” The Department may believe the Proposed Rule
is necessary to ensure financial representatives act in their clients’ best interest. We do not have
any concerns with working under a best interest standard -- it is something our livelihood already
demands we do -- but how it is imposed matters. Unfortunately, we believe the Proposed Rule
will work against our clients’ best interests by disrupting the services we provide to the
communities that we are deeply committed to helping.

We request that the Department be sensitive to minority needs and focus its efforts on policies that
help match people to representatives. Some financial firms that provide retirement education and
advice have begun bolstering their minority outreach efforts.”>_ The Proposed Rule will make it

19 “The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings,”
Employee Benefits Research Institute (March 2012).

20 “2007 Minority Retirement Confidence Survey,” Fact Sheets 1 and 2: Investment Information and Advice;
Expectations About Retirement, Employee Benefits Research Institute (2007); Supra note 3, stating “just 4 percent
of workers report being very interested in obtaining investment education and advice online...”

21 “2007 Minority Retirement Confidence Survey,” Fact Sheets 1 and 2: Investment Information and Advice;
Expectations About Retirement, Employee Benefits Research Institute (2007).

22 “advisors Matter,” LIMRA (February 2013); Supra note 9.

23 Blacks, Hispanics Lag in Retirement Savings, Investment News, July 19, 2009.


@® PRIMERICA agi

July 20, 2015

U.S. Department of Labor

Office of Regulations and Interpretations
Employee Benefits Security Administration
200 Constitution Avenue, NW
Washington, DC 20210

Re: Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment
Advice (RIN 1210-AB32)

Ladies and Gentlemen:

I am the Chairman of Primerica’s African American Leadership Council which is a group of
licensed financial representatives devoted to empowering African Americans with the leadership
and resources necessary to establish a legacy of financial independence and entrepreneurship for
underserved communities. I write to offer our concerns that the Department’s proposed Conflict
of Interest Rule will disparately impact our members and the middle-income families we serve in
the African American community.

As the United States becomes more diverse, it is vital for product providers and policymakers to
work with all individuals’ best interests in mind when attempting to help them meet their financial
chalienges. We believe that diversity among financiai representatives is the best way for ali to
“reach their potential and maximize their contributions” to improving the financial lives of Main
Street American families.'

Saving for retirement is among the most important financial priorities for a family.? However,
confidence in achieving that priority is highly dependent on whether a family is actually saving
towards that goal.? High student loans, mortgage payments, credit card bills, and utility payments
make finding adequate emergency and retirement savings a major challenge. Along with low
financial literacy rates, this causes many to spend now and save later.

! “Diversity Management: Trends and Practices in the Financial Services Industry and Agencies after the Recent
Financial Crisis,” GAO Report, Apr. 2013, at 4&5.

2? 2010 Survey of Consumer Finances, Federal Reserve Board (June 2012).

3 “The 2015 Retirement Confidence Survey: Having a Retirement Savings Plan a Key Factor in Americans’
Retirement Confidence,” EBRI Issue Brief #413 (April 2015).

Primerica ‘Term insurance offered by Securities offered by Investment Advisory Services offered
Affitated Primerica Life Insurance Company PFS Investments Inc. through Primerica Advisors
Companies Executive Offices: Duluth, GA Member FINRA


The retirement savings challenge is especially acute in the African American communities we
serve.* Almost half of African Americans do not have the opportunity to save for retirement at
work because their employer does not offer a workplace savings plan.> Those who do have a plan
are “less likely to participate in their 401(k) plans, and when they do contribute, they save at lower
rates than whites.”® Additionally, research has shown that African Americans are less likely “to
invest in and hold high-yielding assets, such as stocks, than the average U.S. family.”’ The reality
is a savings gap exists in the African American community due to factors outside of income. ®

In the communities our members serve, basic household financial challenges usually persist unless
individuals choose to work with licensed financial representatives like us. Our experience and
commitment to these communities demonstrates that African Americans substantially benefit from
receiving financial advice. A recent study conducted by consulting firm Oliver Wyman confirms
this. Oliver Wyman determined that on average, individuals that use a financial representative have
more assets than non-advised individuals across all age and income levels examined.’ Moreover,
with respect to individuals in or approaching retirement, the differences in assets are even more
significant. On average, advised individuals ages 55-64 had 51% more assets than non-advised
individuals, and those 65 and older had 113% more assets (i.e. more than double) than the non-
advised.'° These are meaningful differences in assets for middle-income individuals that use
financial representatives, which should translate into significant improvements in their retirement
living.'' The majority of African Americans believe a financial representative can help.'? Those
who do choose to get help often improve their financial well-being. African Americans who work
with a financial representative are “significantly more likely to participate in their employer-
sponsored plan (89% v. 78%) and to have a savings account (88% v. 70%), ..., [an] IRA (43% v.
15%), ..., annuities (26% v. 6%), stocks (25% v. 10%) and mutual funds (22% v. 7%).”'3 In short,
African-Americans with a financial representative are almost twice as likely to open an IRA as
their peers without one.!*

“Iwry, J. Mark, Written Testimony Before the U.S. Senate Finance Committee, “Social Security & the Retirement
Crisis,” (February 26, 2014) (stating, “The risk of an insecure retirement is especially acute for women, minorities,
and lower-income Americans.”).

5 Rhee, Nari, Ph.D., National Institute on Retirement Security, “Race and Retirement Insecurity in the United
States,” (December 2013).

® The Ariel/Hewitt Study, “401(k) Plans in Living Color: A Study of 401(k) Savings Disparities Across Racial and Ethnic
Groups (2009) (See also “401(k) Plans in Living Color Il, which states, “... there are still significant gaps among those
of different racial and ethnic backgrounds, even when comparing groups in similar income and age brackets.”).

7 Chiteji, Ngina, and Walker, Lina, The Retirement Security Project, “Strategies to Increase Retirement Savings of
African American Households. No. 2008-4.

® Marte, Jonnelle, The racial wealth gap we hardly talk about: What happens in retirement, The Washington Post,
(February 18, 2015).

° Oliver Wyman: The role of financial advisors in the US retirement market (July 6, 2015). Oliver Wyman states that
it“... was engaged to perform a rigorous investigation of the role of financial advisors in the US retirement
market, and quantify differences in investing behavior and outcomes between advised and non-advised
individuals.”

id. at 16

41 Id, The study states that their findings hold true even when excluding survey respondents who anticipate
receiving retirement income from either an inheritance or trust fund.

22 “The African American Financial Experience,” Prudential Research, 2013-14.

Bid.

+4 Supra note 9.


We are concerned that the Department’s Proposed Rule will expand the definition of “fiduciary”
so broadly that nearly every conversation our members have with potential retirement savers will
be construed as fiduciary advice. As such, compensation in connection with the assistance we
provide will be subject to reversal and prohibited transaction penalties unless it falls within an
exemption. We understand that the Department sought to craft an exemption, designated as the
Best Interest Contract Exemption (“BIC Exemption”), that purportedly would allow the
continuation of the assistance we provide. Regrettably, the operational complexities and legal
uncertainties of the BIC Exemption are so great as to make it unworkable. The Proposed Rule will
in effect make it even more difficult for African Americans, many of whom reside in the
communities we serve, from receiving affordable individual retirement services.

In particular, the Department’s Proposed Rule targets the very popular brokerage-based IRA
pursuant to which financial representatives earn a commission for in-person education and
assistance. These are exactly the types of services our members provide the individuals we serve.
The effect will be that broker-dealers and their financial representatives like us will be compelled
to fundamentally restructure their IRA businesses. The result for millions of hard working
Americans in the middle-income market will be higher minimum account balances, reduced access
to financial professionals, reduced investor choice and ultimately, lost opportunity to accumulate
meaningful retirement savings on a tax-deferred basis. The new economic realities will favor
higher-cost investment services designed for affluent families over those that help to empower the
middle-class.

As a result of the Proposed Rule, African American families will have less opportunity to achieve
their retirement goals because the lower cost commission-based services they benefit from today
will no longer be available for IRAs. Those with higher net worth may receive assistance through
a fee-based adviser, which is the most expensive way to get retirement education and advice.
However, 80% of fee-based advisers target individuals with at least $250,000 in assets.'> In fact,
clients using fee-based advice have on average over $600,000 in assets.'° Considering the average
minority household net worth is $183,900!” fee-based financial advice is often unattainable for
many within the communities we serve.

Moreover, many of the families we serve are unwilling or unable to pay hourly fees for one-on-
one service. Hourly rates typically range between $250-500 per hour, “with the total outlay
ranging from $3,000-5,000.”!* Many of our clients start with initial investments of $250 or less.
For example, we open IRAs for as little an investment as $50 per month. Charging an upfront fee
of $250 per hour would have created an insurmountable barrier for many of our first-time
retirement savers whom we helped to take that first critical step to begin saving.

The impact will be particularly devastating for those with less than $25,000 to invest, which is the
lowest required minimum investment for a fee-based advisor we can find. These potential savers

45 Financial Planning for the Middle-Class, Kiplinger, August 2011.

16 Skinner, Liz, Investment News, Advisory fees rise above 1% after bottoming in 2013, (March 30, 2015).

7 “Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances,” Federal
Reserve Board (September 2014) (stating that average net worth for non-Hispanic white families is $705,900).

18 Light, Larry, Forbes, How Much Do Advisors Cost, (July 26, 2012).