Officers

Chair

Judith L. Lichtman

National Partnership for 

Women & Families

Vice Chairs

Jacqueline Pata

National Congress of American Indians

Thomas A. Saenz

Mexican American Legal

Defense and Educational Fund

Hilary Shelton

NAACP

Treasurer

Lee A. Saunders

American Federation of State,

County & Municipal Employees 

Board of Directors

Barbara Arnwine

Lawyers' Committee for 

Civil Rights Under Law

Helena Berger

American Association of 

People with Disabilities

Cornell William Brooks

NAACP

Lily Eskelsen García

National Education Association

Marcia D. Greenberger

National Women's Law Center

Chad Griffin

Human Rights Campaign

Linda D. Hallman

AAUW

Mary Kay Henry

Service Employees International Union

Sherrilyn Ifill 

NAACP Legal Defense and 

Educational Fund, Inc.

Jo Ann Jenkins

AARP

Michael B. Keegan

People for the American Way

Samer E. Khalaf, Esq.

American-Arab

Anti-Discrimination Committee

Elisabeth MacNamara

League of Women Voters of the 

United States

Marc Morial

National Urban League

Mee Moua

Asian Americans Advancing Justice |

AAJC

Janet Murguía

National Council of La Raza

Debra Ness

National Partnership for 

Women & Families

Terry O’Neill

National Organization for Women

Priscilla Ouchida

Japanese American Citizens League

Rabbi Jonah Pesner

Religious Action Center

Of Reform Judaism

Anthony Romero

American Civil Liberties Union

Shanna Smith

National Fair Housing Alliance

Richard L. Trumka

AFL-CIO

Randi Weingarten

American Federation of Teachers

Dennis Williams

International Union, UAW

Policy and Enforcement 

Committee Chair

Michael Lieberman

Anti-Defamation League

President & CEO

Wade J. Henderson

Executive Vice President & COO

Karen McGill Lawson

July 21, 2015

Office of Regulations and Interpretations

Office of Exemption Determinations

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Avenue, N.W. 

Washington, D.C. 20210

Re: Conflict of Interest Rule, RIN 1210-AB32

Proposed Best Interest Contract Exemption, ZRIN: 1210-ZA25

To Whom It May Concern:

On behalf of The Leadership Conference on Civil and Human Rights, a coalition of more 

than 200 national advocacy organizations, we are writing to express our strong support for 

the Department of Labor’s (DOL’s) conflict of interest rule proposal. In a nation facing a 

retirement crisis, people of color are among those who can least afford to have their 

retirement savings drained because of conflicted advice. This rule would provide necessary 

protections for all Americans, including people of color, who are saving for retirement, by 

guaranteeing that any retirement investment advice that they receive is in their best interests 

and free from harmful conflicts of interest. 

The DOL conflict of interest rule comprises one part of the larger framework toward 

addressing the retirement security crisis that people of color face.

Our nation is facing a retirement crisis, and people of color face particularly severe 

challenges in preparing for retirement. According to a National Institute on Retirement 

Security Race and Retirement Insecurity Report:1

 Households of color are more likely than white workers to work in jobs that do not offer

retirement benefits. Only 54 percent of Black and Asian employees and 38 percent of Latino 

employees age 25-64 work for an employer that sponsors a retirement plan, compared with 

62 percent of white employees. These racial disparities are much more pronounced in the 

private sector than in the public sector. 

 Households of color are far less likely to have dedicated retirement savings than white 

households of the same age. A large majority of Black and Latino working-age households –

62 percent and 69 percent, respectively – do not have any retirement savings, compared with 

37 percent of white households. The racial gap in retirement account ownership persists 

across age groups and income levels. 

 Households of color have substantially lower retirement savings than white households, 

even after controlling for age and income. 74 percent of Black households and 80 percent of

Latino households age 25-64 have less than $10,000 in retirement savings, compared with 49 

 

1 Nari Rhee, Race and Retirement Insecurity in the United States, National Institute on Retirement 

Security, December 2013, http://bit.ly/1cmSEtk. 
Page 2 of 5

percent of white households. Among near-retirees, the per-household average retirement savings 

balance among households of color ($30,000) is one-fourth that of white households ($120,000). 

These findings are reinforced by research by Ariel Investments and Aon/Hewitt,2 which found that across 

all ages and income levels, African Americans and Hispanics have lower average 401(k) account balances 

than similarly situated Whites. For example, in 2010:

 Within the salary bracket capturing median income between $30,000 and $59,999: AfricanAmericans had accumulated on average about $24,500 in 401(k) savings, while Hispanics in the same 

salary bracket had accumulated on average about $28,000. Both demographic groups had 

substantially less than Whites, who had accumulated on average more than $42,000.

 Within the salary bracket capturing median income between $60,000 and $89,999: AfricanAmericans had accumulated on average about $68,000 in 401(k) savings, while Hispanics in the same 

salary bracket had accumulated on average about $76,000. Again, both demographic groups had 

accumulated substantially less than Whites, who had accumulated more than $98,000.

Due to the lack of access to workplace retirement accounts and, by extension, lower retirement account 

balances, all too many people of color reach retirement without any significant savings to supplement 

Social Security. To remedy these problems, efforts must be made to improve pay for lower income 

workers, promote middle income job growth, increase both the availability of workplace retirement plans 

and the participation in those plans, and preserve and strengthen Social Security to ensure that that the 

significant shortfall in retirement security is covered and that people of color are able to meet basic 

expenses. But more immediate steps must also be taken to maximize existing savings.

African American and Hispanic workers are at particular risk when it comes to saving for retirement 

because they change jobs somewhat more often than Whites, and they are much more likely to cash out 

their retirement plan when they do. According to the Ariel and Aon Hewitt study, 63 percent of African 

Americans and 57 percent of Hispanics who left their employer in 2010 chose to cash out their balances 

rather than leave them where they were or roll them over.3 Cashing out is generally considered to be a 

worker’s worst possible option, both because it depletes retirement savings and because it can trigger 

taxes and penalties. While it is understandable that individuals facing tough financial choices would make 

this decision, it contributes to the risk that people of color will be unable to afford a secure and 

independent retirement. 

The best option for workers changing jobs is often either to keep the money in the existing plan or 

transfer it into a new employer’s plan. That is because 401(k) plans have lower costs on average than 

IRAs and employers are required by law to manage their plans in the best interest of their plan 

participants. However, financial firms’ have a strong incentive to capture employer retirement assets 

because it increases their revenues. As a result, they often encourage workers to roll over their retirement 

accounts into IRAs, regardless of whether doing so is in the worker’s best interest. Any investment advice 

that is provided to a worker should consider all the facts and circumstances and make a recommendation 

that is genuinely in the best interests of the worker. That is particularly important for those with limited 

retirement savings, including many people of color, who need to make every dollar count.

 

2 401(k) Plans in Living Color, A Study of 401(k) Savings Disparities Across Racial and Ethnic Groups The 

Ariel/Aon Hewitt Study 2012, http://bit.ly/1Ii08lV. 

3 401(k) Plans in Living Color, supra note 2. 
Page 3 of 5

However, as discussed above, financial firms have a profit-motive to capture assets and recommend 

rollovers. Under current law, firms and their advisers are allowed to make recommendations to roll over, 

regardless of whether those recommendations are in the best interests of their customers. Financial 

advisers can also take advantage of loopholes in the antiquated fiduciary investment advice rule to make 

recommendations that are not in their customer’s best interest. For example, so long as they provide 

advice that is not on a “regular basis,” they can provide advice that is in their interests rather than their 

customer’s. In addition, as long as they don’t agree that any advice that they provide will form the 

“primary basis” for the investment decision, they can provide advice that benefits them at their customer’s 

expense. These rules allow advisers to steer their clients into products that provide hefty compensation to 

them and their firms and deplete retirement savers’ retirement security. As explained above, people of 

color already are facing daunting retirement challenges; protecting against conflicts of interest from 

advisers whom they trust for objective, high-quality advice should not be one of them. 

Making every dollar count

For those who do manage to set aside a retirement nest egg, they need to make every dollar count by 

investing in products that perform well and have the lowest costs. However, like other savers with low 

account balances, African American and Hispanic workers who receive retirement investment advice are 

more likely to receive recommendations that result in their investing in products with inferior 

performance and excessive fees that deplete their account balances over time. This is because they are 

disproportionately likely to receive retirement advice from a financial professional who has financial 

incentives to steer them into high-cost investments and who is not legally required to put their financial 

interests first. According to industry’s own estimates, 98 percent of accounts of investors with $25,000 or 

less in their Individual Retirement Accounts (IRAs) were in brokerage accounts.4 Brokerage accounts are 

subject to a suitability standard, which allows financial advisers to recommend the least suitable of all the 

suitable options rather than the options that are in the client’s best interest.

Research shows that investors of all demographics lack the tools to protect themselves against harmful 

advice. According to the SEC’s financial literacy study, many investors “do not understand the most 

elementary financial concepts, such as compound interest and inflation.”5 They also do not understand 

basic ideas, such as diversification or the differences between stocks and bonds, and are not fully aware of 

investment costs and their impact on investment returns. Additionally, investors lack critical knowledge 

about investment fraud. Moreover, certain subgroups, including African-Americans and Hispanics have 

an even greater lack of investment knowledge on the average than the general population.6 This lack of 

financial sophistication makes people more dependent on professional financial advisers when saving for 

retirement and less able to detect when the advice they receive does not serve their financial interests.

While many people of color currently do not have considerable retirement assets, it does not stop them 

from seeking investment advice. A 2010 survey commissioned by Ariel Investments comparing and 

contrasting middle class African-American and White households in terms of their saving and investment 

 

4 Letter from Kent Mason, Partner at Davis and Harman, citing Oliver Wyman’s “Assessment of the impact of the 

Department of Labor’s proposed ‘fiduciary’ definition rule on IRA consumers,” April 12, 2011, 

http://1.usa.gov/1CyB9V2.

5 Study Regarding Financial Literacy Among Investors, As Required by Section 917 of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, Staff of the Office of Investor Education and Advocacy of the U.S. Securities 

and Exchange Commission, at vii-viii, August 2012, http://1.usa.gov/1fMABVZ. 

6

Id.
Page 4 of 5

attitudes and behaviors found, for example, that 42 percent of African-Americans indicated that they had 

sought advice from a financial planner or advisor, a mutual fund company, or some other financial 

professional. That represents a significant portion of the population and is only slightly less than the 49 

percent of White respondents who indicated the same.7

Furthermore, the market for providing financial advice to people of color is expanding, and people of

color are becoming an attractive business target for firms. According to Jesse Abercrombie, a financial 

adviser with Edward Jones, “African-Americans and Hispanics are an increasingly large part of our client 

base...We are seeing more and more minorities moving into the upper-middle class.”8 These changes can 

be positive if the goal is to provide access to products and services that help savers of color improve their 

retirement security. However, there is a risk that certain members of the financial industry see an 

opportunity to profit at people of color’s expense, similar to how financial industry participants viewed 

people of color when they engaged in widespread predatory lending in the mortgage and payday loan 

spaces.

The best safeguard against these risks is the fiduciary rule that the DOL has proposed. This rule seeks to 

ensure that any retirement investment advice that financial professionals provide is in their customers’

best interest. The rule would stop firms and their advisers from taking advantage of loopholes in the 

antiquated fiduciary investment advice rule to make recommendations that are not in their customer’s best 

interest. The “regular basis,” “mutual agreement” and “primary basis” loopholes would be removed from 

the rule, and rollover recommendations would be covered. These represent significant improvements over 

the status quo, particularly for people of color who are disproportionately likely today to get advice from 

a non-fiduciary adviser. 

The proposal also allows for commission-based compensation, subject to certain safeguards designed to 

ensure that sales-related conflicts are mitigated. Under the Best Interest Contract Exemption, firms and 

advisers would have to agree to provide recommendations that are in their client’s best interest, without 

regard to their financial incentives or other interest. The fees that they charge would have to be reasonable 

and clearly disclosed at the time the recommendation is made, and annually thereafter. In addition, firms 

would have to warrant that they have policies and procedures in place to address any harmful impact that 

sales-driven conflicts of interest may have on the recommendations they make. These policies and 

procedures would ensure that advisers are not being paid more to recommend products that serve them 

and their firm, at the investor’s expense. If a firm or adviser violates the terms of the contract, they could 

be held accountable for their actions. These required provisions in the contract will provide the necessary 

safeguards for retirement investors while still preserving the broker-dealer compensation model. 

Conclusion

With so much money on the line, we expect industry associations to fight hard against this proposed rule. 

To date, they have argued that the rules could hurt middle income families and people of color in 

particular by depriving them of access to advice. What they are really saying is that, if the firms can no 

longer take advantage of these workers and retirees, they may not be willing to advise them at all. In 

 

7 Ariel Investments, Black Investor Survey 2010: Saving and Investing Among Higher Income African-American 

and White Americans, July 21, 2010, http://bit.ly/1GxB6ur. 

8 Carl O’Donnell, Financial advice business grapples with diversity challenges, INVESTMENT NEWS, January 15, 

2014, 

http://bit.ly/1Ja7vdJ.
Page 5 of 5

reality, however, minority retirement savers are among those with the most to gain from new protections 

for retirement savers, precisely because they are most in need of making every dollar count. 

For these reasons, we urge the Department to finalize these rules to ensure the necessary protections are in 

place for people of color who are saving for retirement. If you have any questions, please contact Rob 

Randhava, Senior Counsel, at (202) 466-6058.

Sincerely, 

Wade Henderson Nancy Zirkin

President & CEO Executive Vice President